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Transitions, pt Two

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Reflections on these present times, concluding part.

I closed yesterday with, So maybe there’s a blindness with humans, and then set out the characteristics of that blindness.  One of those characteristics being,

Our obsession with how things are now prevents us from reflecting on those signs that indicate changes are under way, even when the likely conclusions are unmistakeable.  The ecological and climatic changes being the most obvious example of this strange blindness that mankind possesses.

Let’s move this on a little.  The arguments from a wide range of scientists are overwhelmingly in favour of the proposition that mankind is using vastly more resources from the planet than the planet can provide.  Take oil.  This graph show past and projected oil production for the whole Earth out to 2050, less than 40 years away.

Here’s an extract from that website which I encourage you to read in full,

The part before 2007 is historical fact. The part that comes afterward is an ASPO extrapolation.

This graph is worth careful attention as a lot of world history is written into it. Note the steep rise in oil production after World War II. Note that 1971 was the peak in oil production in the United States lower 48. There is a sliver of white labled Arctic oil. That is mostly Alaskan Prudhoe Bay oil, which peaked in 1990. Prudhoe Bay was almost big enough to counteract the lower 48 peak of 1971. The sliver is very narrow now. The OPEC oil embargo of 1973 is very visible. The oil produced by non-OPEC countries stayed nearly constant while OPEC production nearly halved. The embargo caused the world economy to slow. But the high cost of energy spurred the development of energy efficient automobiles and refrigerators and a lot of other things. Note the effect of the collapse of the Russian economy in 1990 on Russian oil production. Note the rapid increase in oil production when the world economy boomed near the end of the twentieth century. Oil was $12 a barrel at that time. Note that European (North Sea) oil peaked in 2000. Note especially what would have happened if the 1973 embargo had not occurred. It is possible that the world would now be on the steep part of the right side of the Hubbert curve.

Take population growth. Here’s a graph that shows that going through seven billion, which is due shortly, is likely to be way short of the eventual peak.  Likely peak might be in the range of  eight to ten billion!  Just take a look at that graph,

Take global warming.  Here’s a graph from NASA, from which I quote,

The five warmest years since the late 1880s, according to NASA scientists, are in descending order 2005, 1998, 2002, 2003 and 2006. (reported in the year 2007!)

No apologies for bashing you around the head with these graphs and figures – most people have a good sense about these aspects of our life on this planet.  But, in a very real sense, that’s the point.

The point that despite powerful and obvious evidence, mankind has great difficulty accepting obvious trends and understanding that whatever ‘today’ feels like, ‘tomorrow’ is almost certainly not going to be more of the same.

At the risk of hammering this point to death, here are two pictures and some text to show how quickly ‘today’ changes and becomes ‘tomorrow’.

Scientist left speechless as vast glacier turns to water

by Helen Turner, Western Mail

THESE images show the astonishing rate of break-up of an enormous glacier in north Greenland – from ice to water in just two years.

The before and after photographs, which left a Welsh scientist who led the 24-month project “speechless”, reveal the worrying effects of climate change in an area previously thought too cold to be much affected.

The Petermann glacier pictured August, 5th, 2009

Petermann glacier, pictured from same position, July 24th, 2011

Dr Alun Hubbard, a reader at Aberystwyth University’s Centre for Glaciology, returned from the Petermann Glacier in north-west Greenland a month ago, but did not see the stark images documenting the changes until this week.

He said: “Although I knew what to expect in terms of ice loss from satellite imagery, I was still completely unprepared for the gob-smacking scale of the break-up, which rendered me speechless.  It was just incredible to see. This glacier is huge, 20km across, 1,000m high.”

“It’s like looking into the Grand Canyon full of ice and coming back two years later to find it’s full of water.”

“It’s quite hard to get your head around the scale of the change.  To be able to see that, everything changed in such a short period of time, I was speechless.”

Do read the full article on the Wales Online website here.

Stay with me a little longer, if you will.

Yves Smith in her wonderfully broad and addictive Blog, Naked Capitalism, had the first part of a powerful interview with Satyajit Das published on the 7th.  Here are a couple of extracts,

 It’s amazing how much money you can make just shuffling paper backwards and forwards. Malcolm Gladwell wrote a piece praising John Paulson who made a killing from the subprime disaster as an entrepreneur. But what did he make? What did he leave behind? Paul Volcker, the former chairman of the Federal Reserve, argued: “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence. US financial services increased its share of value added from 2% to 6.5% but is that a reflection of your financial innovation, or just a reflection of what you’re paid?”

Just let that quote from Paul Volcker stay with you for a while.  Satyajit goes on to say,

Management and directors of financial institutions cannot really understand what is going on – it’s simply not practical. They cannot be across all the products. For example, Robert Rubin, the former head of Goldman Sachs and Treasury Secretary under President Clinton, encouraged increased risk taking at CitiGroup. He was guided by a consultant’s report and famously stated that risk was the only underpriced asset. He encouraged investment in AAA securities assuming that they were ‘money good’. He seemed not to be aware of the liquidity puts that Citi had written which meant that toxic off-balance sheet assets would come back to the mother ship in the case of a crisis. Now, if he didn’t understand, others would find it near impossible. And I’m talking about executive management.

Non executives are even further removed. Upon joining the Salomon Brothers Board, Henry Kaufman, the original Dr. Doom found that most non-executive directors had little experience or understanding of banking. They relied on board reports that were, “neither comprehensive … nor detailed enough … about the diversity and complexity of our operations.” Non-executive directors were reliant “on the veracity and competency of senior managers, who in turn … are beholden to the veracity of middle managers, who are themselves motivated to take risks through a variety of profit compensation formulas.”

Kaufman later joined the board of Lehman Brothers. Nine out of ten members of the Lehman board were retired, four were 75 years or more in age, only two had banking experience, but in a different era. The octogenarian Kaufman sat on the Lehman Risk Committee with a Broadway producer, a former Navy admiral, a former CEO of a Spanish-language TV station and the former chairman of IBM. The Committee only had two meetings in 2006 and 2007. AIG’s board included several heavyweight diplomats and admirals; even though Richard Breeden, former head of the SEC told a reporter, “AIG, as far as I know, didn’t own any aircraft carriers and didn’t have a seat in the United Nations.”

In other words, there is no shortage of information from all corners of the world to show, with very little doubt, that the last few decades have seen unprecedented mistakes by national governments, mistakes in corporate governance, a lack of understanding of economic fundamentals, poor financial and social management, and on and on and on.

But practically all of us, and I mean all of us, didn’t see it at the time, didn’t see where it was heading and only now, when it is full in our faces, do we get it and see it for what it has really been, a long period of over two decades where the ‘me‘ has been more important than the ‘us‘.

That me versus us even being promoted, if that’s the right word, by a British Prime Minister twenty-five years ago.  That quote from Margaret Thatcher back in 1987,  “And, you know, there is no such thing as society. There are individual men and women, and there are families.” (Margaret Thatcher, talking to Women’s Own magazine, October 31 1987)

Let me draw this all together, yesterday’s part and this concluding part.

There is significant evidence, real hard evidence, that the patterns of mankind’s behaviours of the last few decades cannot continue.  Simply because mankind will go over the edge of self-extinction.  Darwin’s evidence and all that!  We have to accept that humans will see the bleedin’ obvious before it is too late.  We have to keep the faith that our species homo sapiens is capable of huge and rapid change when that tipping point is reached, so eloquently written by Paul Gilding in his book, The Great Disruption, reviewed by me here.  We have to embrace the fact that just because the world and his wife appears to be living in total denial, the seedlings of change, powerful change, are already sprouting, everywhere, all over the world.

So let’s welcome those changes. Let’s nurture those seedlings, encourage them to grow and engulf our society with a new richness, a new fertile landscape.

Let’s embrace the power of now, the beauty of making today much better and letting go of tomorrow.

For today, I am in charge of my life,

Today, I choose my thoughts,

Today, I choose my attitudes,

Today, I choose my actions and behaviours.

With these, I create my life and my destiny.

It’s very difficult to make predictions, especially when they involve the future!

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A Presidential speech.

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A President with more speech writers than one could imagine.

Got a vested interest or a strong view?  Then draft a speech for the President of the United States of America.  Many do.  Some are clearly very tongue-in-cheek, some are pertinent.  The following from CASSE fits into the latter category. Enjoy.

President Obama’s (Hoped for) “Amaze Speech”

Speechwriter: Brian Czech

President Obama’s hoped-for speech first appeared in the Daly News on August 7. We reprint it this week in anticipation of the President’s September 8th speech.

Pres. Obama

Fellow Americans, this evening I have a special message for you. It’s an unprecedented and surprising message, but ultimately it will resonate with your common sense, good will, and patriotic spirit. It turns out that the recessionary cloud we’re under does have an extremely valuable silver lining. I know; it sounds like something only a politician would say, but wait. I think you’ll be surprised to hear my explanation.

Now before I elaborate on the silver lining, I want to make it clear that the cloud has some rain, too. As a nation, we are struggling with debt, credit ratings, and worst of all, the painful experience of unemployment. The last thing I want is to mislead you into thinking these are problems I take lightly, or problems that will be automatically solved by the markets or policy makers. These problems were many years in the making — decades in fact — and it’s going to take years of diligence and readjustment to solve them.

Yet none of these problems can deny us the silver lining, which is this: the economic turmoil we experience today will change the course of history in such a way as to secure the future for American posterity, starting with our children and grandchildren. Let me reiterate, our own kids and grandkids — the most precious American treasure — will have a secure future as a result of the problems we face today. Here’s why…

Far from the trading floors of Wall Street and the policy meetings of the Federal Reserve, crucial discoveries have been made by scientists, economists, anthropologists, historians, and others collaborating under a broad umbrella called “sustainability science.” No, they haven’t discovered an unlimited energy source, a pollution-free car, or a method to stabilize our climate at optimum conditions. They’ve discovered something far more important and exciting: the key to permanent economic security.

For the past few years, as time has allowed, I and my economic advisors, with the assistance of numerous scholars, have studied this key to economic security. The theory and evidence for it is absolutely irrefutable. The only reason this key to security hasn’t broken into public dialog is because it serves no short-term vested interests; no wealthy corporations, think tanks, or political parties that would stand to profit before the next shareholders meeting or election cycle. But that’s also the beauty of it: the key to security is a non-partisan, scientifically sound approach to the long-run interests of all, especially our kids and grandkids. Fortunately for us, it’s surprisingly simple as well.

What is this key to a secure future? We could coin a new phrase to get credit for the idea or to improve its political flavor, but I believe the clearest term is what the scientists already call it: the “steady state economy.” Political advisors think it’s a bit on the dry side, but after what we’ve been through – stock market crashes, insurance crises, banker bailouts, panic over the debt ceiling, having our credit downgraded — doesn’t a “steady state economy” sound like just what the doctor ordered?

In the coming weeks and months, I and my Cabinet will be helping to introduce fellow Americans to the basics of steady state economics, especially what it means for producers, consumers, and public policy. We’ll do this through a series of public announcements, publications, and townhall meetings. Meanwhile, this evening, I’ll provide a brief summary, first by noting what a steady state economy is not.

A steady state economy is not communism, Marxism, or anything at odds with the Constitution of the United States. A steady state economy is not a stagnant, flat-lined economy but is rather continuously dynamic and creative. A steady state economy is not established overnight with draconian policies; instead it evolves as a matter of consumer preference and prudent policy. Most importantly, a steady state economy is in no way opposed to jobs and full employment. To the contrary, a steady state economy is the only economy that can ensure full employment, for your kids and theirs.

The most fundamental feature of the steady state economy is stability. The idea is to stabilize good conditions; stable agriculture, stable manufacturing, stable services, stable production and consumption, stable currency, stable markets, stable international trade, stable impact on the environment, stable air and water, stable climate… You get the picture, and remember, all this stability is at a good level — a level that ensures life, liberty and happiness for us and future generations. At this point in history, the steady state economy is the right goal, and the first step in getting there is recognizing it.

Perhaps you find this amazing. I think you should be amazed. After all, I haven’t said a word about economic growth; in fact I’ve called growth into question. The closest thing to this in presidential history is when President Carter encouraged Americans to consume a little less after the OPEC oil embargo. But President Carter was before his time, and his speech was maligned as the “malaise speech.”

Well, at this point in history, we can no longer afford — literally or figuratively — to pull out all the stops for economic growth. Therefore, tonight you’re hearing the “amaze speech,” the speech that introduces our nation to steady state economics, the alternative to growth.

I understand the adjustment in thinking that this will entail. I’ve gone through it myself. With the exception of President Carter in 1979, my predecessors for over 50 years have prioritized economic growth in their speeches, campaigns, and policies. None even mentioned steady state economics in a speech. Yet with every new president, the pursuit of economic growth has become less realistic, less sustainable, and even less desirable.

Earlier I mentioned the profound developments in sustainability science. Among the sustainability scholars are behavioral scientists and psychologists who have found compelling evidence that economic growth stopped contributing to a happier United States somewhere from the 1950′s to the 1970′s. After that, our gross domestic product continued to rise, but our happiness did not. If you’re like me — meaning old enough to remember — this probably resonates with you. Somewhere along the line the brighter lights, bigger houses and fancier cars stopped making us better off. In fact, all the new “stuff” started working against us. Now we struggle to find enough oil, water, “green space,” solitude, free time, and the peace of mind that comes with a stable climate. It’s all the sign of an economy grown too big.

They say the definition of insanity is doing the same thing over and over again and expecting a different result. I think we’ve all done some crazy things in life, but I don’t want to go down in history as the insane president who kept trying every trick in the book to “stimulate the economy,” when stimulating the economy was neither bound to work nor even desirable by that point in history. I don’t want to oversee more banker bailouts, more stimulus spending, more loosening of environmental protections in a vain attempt to increase GDP growth. That would be insane. Instead, I’m going to tell it like it is: the pursuit of economic growth has become a dangerous obsession that we must overcome. I say this with the backing of sound science, the lessons I’ve learned, and the concern I have for the future of America.

I’m going to test your common sense now. Do you think there is a limit to economic growth? Remember, economic growth is increasing production and consumption of goods and services. It means more and more people, more and more stuff. It takes more energy, water, space to operate in, and places to put out the trash.

Now as a politician, I can assure you that, in the coming days, well-paid pundits will conjure up magical concepts of perpetual growth based on “dematerializing” the economy. Well when they’re ready to dematerialize it, maybe they can beam us up. Meanwhile, the rest of us in the real economy know what perpetual GDP growth would take: evermore people, evermore stuff. And we know we’re running out of evermore room, resources, and patience for unreal notions of evermore growth.

I know that for some, and perhaps for many, this is hard to swallow. For decades we Americans have been encouraged to believe in the notion of continual economic growth. But look at it this way: to think there is no limit to economic growth on Earth is like thinking we could fit a stabilized economy into a perpetually shrinking area. For example, with computers, robots, nanotechnology and the like, we could squish the $70 trillion global economy into North America, then the United States, then Iowa, then into the foyer of the Des Moines Chamber of Commerce, leaving the rest of the world as a designated wilderness area! It’s a ludicrous notion, and it’s precisely as ludicrous as thinking there’s no limit to economic growth in Des Moines, the United States, or Earth.

Now, let’s consider some of the problems we will face if we continue pulling out all the stops for economic growth. The first is inflation. Typically we use monetary policy — such as increasing the money supply — to stimulate growth. But when the real economy isn’t meant to grow as easily as increasing the money supply, the result is inflation. Nothing could be more harmful to our economy at this point than inflation, which is like a devastating tax on the nation.

Another problem is debt. As you know, my Administration injected a major fiscal stimulus into the economy. It helped somewhat and spun off some jobs, but it did not produce the wave of jobs we’d get in an economy with plenty of room to grow. Meanwhile, it added to our deficit and ultimately our debt. Now our credit is coming into question, as with so many nations in a global economy bumping up against the limits to growth.

Of course, there is no shortage of special interests to pounce on the news of faltering fiscal policy. The answer, they say, is to turn over as much as possible to Wall Street. “Take care of national security,” they say, “and let the markets take care of the economy.” The problem with that approach is that national security is about more than having the biggest military. National security starts with a sustainable economy, which requires a stable environment to support the agricultural, fishing, logging, mining, and ranching activities that have always been and always will be the foundation of the American and global economy. Our manufacturing and service sectors — the best in the world — are the best because we have the biggest and best agricultural and extractive sectors. And we have those because we have protected the environment from overuse, pollution, and displacement.

Consider what will happen if we take an unbalanced approach and prioritize economic growth even more over environmental protection. Does anyone really question whether we will have more environmental problems, including devastating problems? More oil spills in the Gulf of Mexico and Gulf of Alaska, more mountaintop mining in the Appalachians, more scraping for shale oil in the Rockies, more nuclear waste, more endangered species, more greenhouse gas emissions, and all the while less water, less fish and wildlife, less wilderness, less nature, less beauty. Does anyone question whether such trends diminish the quality of life for future generations? No, the problems caused by economic growth are unquestionable. It’s just that, for much of American history, the benefits of increasing GDP outweighed the costs. That’s no longer the case, and I’m confident that most of us can sense it.

In fact, the more I thought about this speech, the more amazed I became. Why did it take us so long, in America, to have an open discussion of limits to growth and alternatives to growth? The principles are irrefutable. Neither growth nor recession is sustainable in the long run; a steady state economy is the obvious policy for long-run security. Yet based on the politics of the past 50 years, you’d think economic growth had supplanted apple pie as the companion to motherhood.

Well, now we’re entering a new era of dealing squarely with sustainability. It turns out that economic growth was not a good companion to motherhood, not in the long run. We want apple pie back. We want loving homes for our children, quality time with family and friends, the occasional escape to the great outdoors, and peace. That’s the American dream in a nutshell, and it’s too valuable to sacrifice for economic growth.

So let’s roll up our sleeves and wash our hands of the dirty business of growth at all costs. We know what the right goal is, and malaise won’t get us there. We have work to do to stabilize the economy for our children and grandchildren. Our decisions — what we eat, what we drive, what we build, and frankly how many kids we have — all these will determine the quality of life for the kids that we do have. Meanwhile, those of us privileged to hold public office are responsible for developing the policies to help you thrive in a steady state economy, and for avoiding the policies that force us onto an unsustainable pathway of evermore growth. You could say we are tasked now with “steady statesmanship.”

To conclude, my fellow Americans, do stay tuned. In the coming days and weeks we’ll be discussing the details of transitioning from growth to a steady state. We’ll be talking with you about employment, population growth, stock markets, the banking system, and more. Don’t fear any shocks to the system; you’ve seen most of the shocks already as the policies of economic growth have failed. One by one, we’re going to turn these “failures” into steady state successes.

Meanwhile, good night, and God bless America.

 

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