Wednesday, August 31, 2011

Private ownership of bomb factories: of the nuclear-type

Apparently the United States has taken into its head to competitively bid out Nuclear Weapons Facilities.  This off course leads to the odd combination of a local property developer and a Chicago based builder.
I am not sure if this is particularly apocalyptic in nature, but it seems like it ought to be.
Adam Weinstein, Mother Jones, 29 August 2011 (ht: NC)
The proposed plant, a 1.5 million-square-foot, $673 million behemoth, would replace an aging facility, also in KC, where 85 percent (PDF) of the components for nation's nuclear arms are produced. The new plant would be run by the same government contractor as the old one—Honeywell—and proponents say the only major change will be more jobs and city infrastructure. But there will be another big difference: The federal government will sublease the property from a private developer, who in turn will lease it from the city for 20 years…after which the developer will own it outright.
The developer that could ultimately own its very own nuclear weapons plant, Centerpoint Zimmer (CPZ), didn't even exist until the deal for the Kansas City facility. It's the product of a union between Zimmer Real Estate, a big swinger in local properties—"Their red signs are all over town," says Ann Suellentrop, a local anti-nuclear activist—and Chicago-based builder Centerpoint, which just happens to own a new 1,000-acre industrial park across the street from the planned production facility. In what it called a "competitive bidding process," the US General Services Administration awarded CPZ a contract to build the new plant—on a soybean field that the company already owned. The Kansas City Council, enticed by direct payments and a promise of "quality jobs," approved the deal and agreed to exempt CPZ from property taxes on the plant and surrounding land for 25 years. It also agreed to $815 million in bond subsidies to build the plant and needed infrastructure.
For myself, I think, so long as the moneys earned would go toward paying off the national debt, they should start competitively bidding out the office of Presidency.

Canada's Rural Collapse

Canada has many of the usual fashion of ghost towns.  I haven’t done any sort of study of them, but a lot of them look like the usual mining towns where the seam became topped out:  No gold, no town.
But the small towns of Canada are facing a much wider demographic threat today.  The trend is similar to the one in the United States. But in a country of less people, and greater distances, the trend is easier to pick out of the noise.
Morgan Lowrie, The Canadian Press, 13 August 2011 via Yahoo News (HT: Global Guerrilla)
MONTREAL - Small Canadian towns are painfully aware of the existential predicament they face. Few are strangers to the sobering realities of declining and aging populations, young people fleeing to cities, difficulty maintaining infrastructure, and sky-high unemployment.
Some are fighting back.
They're aware of the odds stacked against them. The rural population fell to below 20 percent of the national average for the first time in the last census and, while semi-rural areas are generally faring well, the most remote parts of the country are suffering the steepest declines.
"If they're beyond easy commuting distance of a big city, overall most small communities are shrinking," said Bill Reimer, a Concordia University professor and director of the New Rural Economy project, which has been monitoring Canadian small towns for more than a decade.
"Unless they are near an urban centre or a fabulous natural amenity like a mountain, many are in trouble."
The story continues with many interesting efforts to keep these small towns going.  It concludes with:
But she bristles at the suggestion that it's a waste of tax dollars to prop up a town like hers that might be unsustainable. Keeping small towns alive is in everyone's best interest, she says.
"We are the weekend playground for the cities, for all the people who want to get away for fresh air," she says.
"We supply their food. All the natural resources are out in the countryside — mining, forestry, agricultural. And you know what?" she continued. "Someone has to be there."
Why with all of our ability to communicate and ship over distances, do the smaller towns and cities seem to be fading away.   It appears that in an interconnected system, small advantages tend to magnify themselves. This appears to be a general property of networked systems.  Added to the general economy of scale advantage of the larger cities, it tends to drain areas beyond commuting range of their people.  In North Carolina, a state that has been growing, there are still counties that are  losing people.  They tend to be counties where it is too far to commute daily to the large economic centers.  Sure the occasional employer, attracted to the lower wages, and usually with the aid of State funds, will set up something out there, but it is fighting a flood going the other way.
The concern I have with the last point, quoted from the article above, is that the value at the margin, at the edge of societies overall value if you will, is only there in a society that produces enough wealth to sufficiently maintain its core.   If the core cannot be maintained, than there does not seem to be much point in propping up the even more tenuous portions.
Canada has been riding a commodities boom and something of a property bubble as well.  This allows them the luxury of attempting to maintain these areas.   It seems like they are building sand castles against a tide of demographics.
If economies get severely depressed, people who choose to live in the far outlying areas may need to be prepared to be a little more self-reliant than they thought.  Of course, to the people that publish various home stead, small-agricultural blogs that I link to, that is likely preaching to the choir.  It is just that the sequence of collapse may be backwards of what they were anticipating.

Tuesday, August 30, 2011

Marcus Shale is leaking

Our Marcus Shale gas fields are leaking.

They must be.  Or maybe the Chinese drilled through the core of the earth and are siphoning it off from the bottom (their top).

Only last April (of 2011) our Energy Information Agency  (EIA) was saying we had 827 trillion cubic feet (cf) of natural gas.  Now we have the U.S. Geological Survey (USGS) saying we have 84 trillion cf of technically recoverable oil and gas resources.  Technically in this case refers to the fact that we can get it out with today’s technology, but that it might be too expensive to do so.

As we currently consume 23 trillion cf of natural gas each year.  So with the original 827 trillion cf estimate we had 36 years of supply.  Now with 84 trillion cf being the new number we have 3.6 years of supply (22 years from all sources) from the Marcus Shale.

Any of these numbers are far less than the 100 years of supply that has been hyped.

Why the big swing.  The EIA took the results from a few wells (presumably the easiest to tap) and extrapolated these numbers to the entire area.  The USGS, who are the rock people, actually looked at the geology of the entire area.  Since the EIA is going to use the USGS numbers from this point, we know which ones are more reliable.

Note that Decline of Empire discusses this all in more depth.  But I found the source material (Bloomberg) to be very confusing, which tended to make that piece a bit confusing as well.  Here I am trying to break out only the most basic numbers in question, for more details I would encourage you to go to the original Declineof Empire post.

Monday, August 29, 2011

Missing Jobs

A paper over at Voxeu illustrates the continued weak position of people trying to find work.  This weakness is true even in relation to earlier downturns.

The author suggests changes in management behavior and labor bargaining power.  I don’t have a particular problem with these points, but in my mind they answer more questions than they answer.  He notes that since the 1970s the unions have been weaker, a lower real dollar minimum wage, competition from imports, and competition from low-skilled immigrants.

This all sounds an awful lot like wage arbitration, and to be more specific, wage arbitrations caused by a globally networked economy.  American labor is competing with countries where labor is much cheaper relative to the goods produced than here.

I would add to this, technology improvements that allow more work to be done by less people, and currency manipulation by many of the big exporting countries.

The effect is illustrated here, with blue being the actual number of jobs versus black the (hypothetical) number of jobs normally produced.

Robert J. Gordon, Northwestern University, Voxeu, 22 August 2011 (ht:  NC)

Thus labor’s weakened bargaining situation with changes in management behavior toward greater emphasis on cost-cutting in recessions accounts for roughly 3 million lost jobs in the current jobless recovery. The other 6.72 million would have been lost even with the earlier responses because the output gap was so large.

A change in labor market dynamics accounts for about 3 million of the over 10 million missing jobs in mid-2011. This shift can be traced to weakness of labor and growing assertiveness of management. But even with the labor-market institutions of 1955 through 1985, the weakness of aggregate demand in the recession and recovery would have cost roughly 7 million jobs instead of the 10 million jobs that are actually missing compared to normal economic conditions such as occurred in 2007.

The recession itself is usually and correctly traced to the collapse of the housing bubble and the post-Lehman financial panic. But the recovery has been unusually weak, completely unlike the economy’s rapid bounce-back in 1983-84, and this requires an explanation as well. The best place to start is the double hangover approach, which explains not just the collapse of residential structures investment but also the continued and growing weakness in consumer spending. Perhaps the most surprising result of this essay is that the spending component responsible for the largest share of the missing jobs is not residential investment but consumer spending on services.

Sunday, August 28, 2011

Low Spark of High Heeled Boys

A well played song  by the group Traffic with Steve Winwood's signature vocals, with a few lines of confusing lyrics that are associated with a nuclear apocalypse.

The high heeled boys can be associated with the change in times: specific to the song, the new popularity of the Glam Rock bands.  It is the first verse has been taken to be a reference to nuclear missile warfare, but fits very well with the noise levels generated by the new glam bands (T-Rex, et al) that were threatening to displacd older style groups such as Traffic

It also has connotations of the drug culture of the day with cocaine being the girl, and heroin the boy.  Boy + Girl = Speedball.  The gun that makes no noise would be a syringe.

In retrospect it is rather versatile song: 

You follow the crowds to the new glimmering bright lights.  There is a moment of hesitation, but the cast-off, the price to be paid are ignored.  As the car is ready to slam into the rocks at the bottom of the cliff, you question whether you went the right way.  At the bursting fireball consumes you, you curse the people who gave you such lousy directions….. Ok, the last part I added.

I flipped the order of the last two verses.

If you see something that looks like a star
and it's shooting up out of the ground
and your head is spinning from a loud guitar.
And you just can't escape from the sound
don't worry too much, it'll happen to you
We were children once, playing with toys.


If I gave you everything that I own
and asked for nothing in return
Would you do the same for me, as I would for you?
Or take me for a ride
and strip me of everything, including my pride
But spirit is something that no one destroys


If you had just a minute to breathe
and they granted you one final wish
would you ask for something, like another chance.
Or something similar as this
don't worry too much, it'll happen to you
as sure as your sorrows are joys.


And the thing that disturbs you is only the sound
of the low spark of high-heeled boys.

The percentage you're paying is too high priced
while you're living beyond all your means.
And the man in the suit has just bought a new car
from the profit he's made on your dreams.
But today you just swear that the man was shot dead
by a gun that didn't make any noise.
But it wasn't the bullet that laid him to rest
was the low spark of high-heeled boys.

Video Link2 (Steve Winwood more recently)

Saturday, August 27, 2011

Australian bubbles with Dutch Disease

We just discussed Australia as a candidate for being the latest housing bubble candidate.  And we have previously discussed the curses of the Dutch Disease in Argentina and the Soviet Collapse (part1, part2).  The Dutch Disease is when a countries commodity has an commodity export that is so large that it begins to dominate the country economies.  It’s countries money goes up in value, making imports cheaper, but its own exports more expensive.  It tends to injure not only other export businesses, but also businesses working within the local market that will have to compete with the cheap imports.

Peter Smith, Financial Times, 24 August 2011 (ht: MR) Note that FT website links do not always work well- using their search box and the article title will often get you where you need to go.

[T]he breakneck expansion – and an accompanying surge in the Australian dollar, seen in world financial markets as a proxy for the commodities boom – has forced painful structural change on the non-mining parts of Australia and led to a fierce debate about the “dark side” of the [iron ore] boom. Paul Cleary, author of the recently published Too Much Luck: The Mining Boom and Australia’s Future, says it is irreversibly changing the country – and not necessarily for the better.

“Surging demand for our dirt and gas has revived the euphoria of the ‘rush that never ended’,” says Mr Cleary. “But unless we manage this extraordinary boom more effectively, our good fortune will curse future generations.” …

The [iron ore] boom has also exposed the mixed blessing of Australia’s China addiction. The Asian powerhouse’s insatiable demand for iron ore has made it Australia’s dominant trading partner, accounting for 26 per cent of all exports. But in the words of Saul Eslake at the Grattan Institute, a Melbourne think-tank, no other nation in the developed world is at greater risk from a China slowdown.

Spurred by China, Australia may be entering a particularly dangerous resources trap known as Dutch disease, from the effects of the Netherlands’ 1960s discovery of North Sea natural gas: a surging exchange rate propelled by a commodities boom leads to other parts of the economy becoming hollowed out.

So Argentina is simultaneously hollowing out its economy through over developing an export resource, and overdeveloping its housing market through a self reinforcing bubble.  Likely the bubble is helping to conceal some of the problems caused by the Dutch Disease.

Friday, August 26, 2011

Solent Green solutions to path dependent problems

The quoted article following brings up the problem of our solution orientated mindset from the perspective of how we manage our foreign affairs.  At a sort of sideways angle, it relates to an issue that I have complained about in the past:  path dependence.
Saad Hafiz, Counter Punch 24 August 2011 (ht: NC)
 “America suffers from ‘solutionism’”, an ex-Marine running a Washington law practice resignedly remarked to me at a Conference in Vermont recently…
Solutionism means that for every intractable problem there is logical and available answer. H.L. Mencken, the American journalist and humorist said “for every complex problem, there is a solution that is simple, neat, and wrong”. Increasingly, in the last few decades, the buzz word in America has been “solutions”.  Every problem has an easily attainable outcome that is nicely packaged and sold to the public—little attention is paid to the problems.
His emphasis is on over simplistic solutions that ignore the deep reality of the situation.  He notes that we take the simplistic tip of the solutions that we used within a familiar setting and try to apply it to settings with very different background parameters.
While being shallow in your assessments is certainly a problem, I would take the issue further.
Solutions are often applicable within a certain time-frame.  For instance, to avoid driving your car over a cliff that you are approaching at 60 miles per hour, apply the brakes at least 140 feet from the cliffs edge.
Now as the author notes, this is a simplistic solution to what may be much more complex situation than at first meets the eye.  Maybe your sweet Aunt Mable is behind the wheel and she is having convulsions with her foot sitting on the accelerator.  Maybe your brakes don’t work.  All of these would of course modify or change your proscribed solution.
However, there is another issue at hand.  At a certain point, from the point to where you are within say 100’ to where you have gone over the edge, the proscribed solution is no longer a solution.  In fact, not only is it not a solution, but most likely, somewhere along the way, there is no longer any viable solution (turning car, jumping out of car, rolling car over, flap your arms like wings, etc.) to the problem.  Something really bad is going to happen.
So if you are in China with its uninhabited cities, Australia with a burgeoning house hold debt-to-income ratio fueled by a housing bubble, or the United States with its …same thing as Australia but worse, you have to figure that at some point you drove off the cliff.  There are no solutions.  Whether you cut back spending to try and resolve the debt issue, or boost spending to try and keep a complete collapse of demand, you are going to be in really big trouble.
If you look back at the Great Depression in the United States, analogues  in some ways to China’s situation today, you can see that all sorts of different solutions were tried:  We were on the gold currency, we were off the gold currency, we loosened money, we tightened money.  None of them worked in a consistent fashion.  Sometimes they would work for a while, but then they would bring on complications that would curtail their effectiveness and we would come crashing back down to earth again.
The eventual approach was for Europe to start its own consumption bubble in the form of pre-World War 2 military spending.    The Europeans went to so far with this production bubble, that they even began taking orders from us.  Then they blew up much of the surplus capacity.  For the United States this entailed the death of 400,000 various citizens, but was a bargain considering that the world total was at least 48 million (likely closer to 75 million with better more complete  Russian and Chinese numbers).
So when the United States ran the car off the cliff in the binge of the 1920s, they met the British halfway down (falling at a slower pace) , and the British then handed the United States their own car-sized parachute.  So the United States, after starting a fatal plunge, landed safely at the bottom, while everyone else crashed and burned.
So to pull off the same solution today, adjusting for a larger world population, we are going to need blow up some enormous amount of world productivity (ours), and have something like 1-1/2 billion people die.  Since we were the primary benefactors in the first purging, it seems only fair that we take the hit this time.  But after we Solent-Green everyone in the United States for the greater good, we still have almost a billion more volunteers to find.

Thursday, August 25, 2011

Food Stamp Nation

I have commented on the disappearance of the unemployed draft horse (discussed here) when technology made them uncompetitive.  On the plus side people of course have more alternatives than horses. On the negative side, the unemployed are not going anywhere, and they are going to expect some sort of productive work.

Food stamps are starting to act as a prop at the lower end of the market.  Corporate profits have been getting larger, so it is not as if in total the corporations are getting squeezed. Although clearly there is gaming of the system by the employers, the prevalence of the need for food stamps by working people indicates that there is a problem with the dollar value wage equilibrium at the lower end of the employment market.
Kristina Cooke, Reuters, 22 August 2011 (hat tip: NC)

NEW YORK (Reuters) - Genna Saucedo supervises cashiers at a Wal-Mart in Pico Rivera, California, but her wages aren't enough to feed herself and her 12-year-old son.

Saucedo, who earns $9.70 an hour for about 26 hours a week and lives with her mother, is one of the many Americans who survive because of government handouts in what has rapidly become a food stamp nation.

Altogether, there are now almost 46 million people in the United States on food stamps, roughly 15 percent of the population. That's an increase of 74 percent since 2007, just before the financial crisis and a deep recession led to mass job losses…

"It's kind of sad that even though I'm working that I need to have government assistance. I have asked them to please put me on full-time so I can have benefits," said the 32-year-old.

She's worked at Wal-Mart for nine months, and applied for food stamps as soon as her probation ended. She said plenty of her colleagues are in the same situation…
About forty percent of food stamp recipients are, like Saucedo, in households in which at least one member of the family earns wages. Many more could be eligible: the government estimates one in three who could be on the program are not…The maximum amount a family of four can receive in food stamps is $668 a month.

Over the past 20 years, the characteristics of the program's recipients have changed. In 1989, a higher percentage were on benefits than working, but as of 2009 a higher percentage had earned income…"SNAP is increasingly work support” …6 percent of the 72.9 million Americans paid by the hour received wages at or below the federal minimum wage of $7.25 an hour in 2010. That's up from 4.9 percent in 2009, and 3 percent in 2002, according to government data.

Bolen said just based on income, minimum wage single parents are almost always eligible for food stamps.

I feel like I need to say more.
But with so many moving pieces, I am not sure exactly where the problem lies.  Our earlier discussion on the increased number of people on disability I believe is also symptomatic of our problem.  I have strong suspicion that wage arbitration caused by the combination of an ever interlocked global economy combined with a general level of world overpopulation are the primary culprit. But they are easy words to say, and difficult to prove

Wednesday, August 24, 2011

Collapse of Newfoundland

National debt can kill a democracy.  In fact in the case of Newfoundland, they can get desperate enough to vote themselves out of existence.

And we are all about existential terminal ideas here.

transcript of Michael Crummey:  “Galore” from Diane Rehm show, NPR, Rebroadcast 23 August 2011.

Michael Crummey:

Newfoundland joined Canada in 1949, so both of my parents were born Newfoundlanders and became Canadians in 1949. And the vote to join Canada, the referendum, was a very, very close one. The original vote, there were three options, one was joining Canada, one was joining the United States and one was returning to independence, which Newfoundland had given up when it went bankrupt in the 1930s.

Diane Rehm:

It simply gave up?


The only democracy in history, I think, to have voted itself out of existence. And there were lots of reasons for that, the Depression had a huge impact, but Newfoundland also was hugely involved in the First World War. It was a British colony for a long time, so it jumped into the war, borrowed a lot of money from Britain in order to finance its part in the war. And it was one of two countries ever to pay back its war debt to Britain and that had a huge impact.

So in the '30s, it was -- the place was destitute and they sort of had a vote in which they gave up control to a panel appointed by the Brits. And the Brits, I think, were quite anxious to get rid of Newfoundland. They really wanted Newfoundland to join Canada so they wouldn't have to be in this position again, so there's a lot of talk that the vote, the Confederation vote, was rigged.

The final -- in the first vote, independence won, joining Canada came second, joining the States came third and there wasn't a clear winner. So they decided to have a runoff between the top two. The final vote was, I think, was 51 percent to join Canada, 49 percent for independence. And a lot of people still to this day think that that was rigged somehow.


A rigged vote?


And who knows? But the fact that people feel that strongly about it still speaks to how strongly they felt about that. So there were a lot of people who I think never felt like Canadians. And I think that's waning now, but it was very strong for a long time.

Newfoundland has tangled roots with both France and Britain with parts of it being originally French, and then resettled by the British after what we in the U.S. call the French and Indian War, and the Europeans refer to as the Seven Years war.

They were given self government, by the British 26 September 1854, and Dominion Status in 1907.

The rough sketch of what came to pass is noted by the author above.  For a more detailed description, we turn to Wikipedia:

The Collapse

Newfoundland's economic crash in the Great Depression, coupled with a profound distrust of politicians, led to the abandonment of self-government. Newfoundland remains the only nation that ever voluntarily relinquished democracy.

Economic collapse

Newfoundland's economy collapsed in the Great Depression, as prices plunged for fish, its main export. The population was 290,000, and the people and merchants were out of money. Since there was relatively little subsistence farming, people depended heavily on the meager supply of government relief, and it is much emergency help with their friends, neighbors, and relatives could spare. There were no reports of starvation, but malnutrition was widespread.

The depression was hard on both the fishermen and merchants in Battle Harbour, Labrador, and they almost came to blows. The Baine, Johnston firm had to cut winter credit, whereupon poorer fishermen threatened the company with violence. Government relief payments were too scanty.

Political collapse

The government was broke. It had borrowed heavily to construct and maintain a trans-island railway and to finance the country's regiment in the World War. By 1933, the public debt was over $100 million compared to a nominal national income of about $30 million. Interest payments on the debt absorbed 63% of government revenue and the budget deficit was $3.5 million or over 10 percent of the island's GDP. There was no more credit; a short-lived plan to sell Labrador to Canada fell through. The Richard Squires government was ineffective and when Squires was arrested for bribery in 1932 he fell from power.

A royal commission under Lord Amulree examined the causes of the financial disaster and concluded,

"The twelve years 1920-1932, during none of which was the budget balanced, were characterized by an outflow of public funds on a scale as ruinous as it was unprecedented, fostered by a continuous stream of willing lenders. A new era of industrial expansion, easy money, and profitable contact with the American continent was looked for and was deemed in part to have arrived. In the prevailing optimism, the resources of the Exchequer were believed to be limitless. The public debt of the island, accumulated over a century, was in twelve years more than doubled; its assets dissipated by improvident administration; the people misled into the acceptance of false standards; and the country sunk in waste and extravagance. The onset of the world depression found the island with no reserves, its primary industry neglected and its credit exhausted. At the first wind of adversity, its elaborate pretensions collapsed like a house of cards. The glowing visions of a new Utopia were dispelled with cruel suddenness by the cold realities of national insolvency, and today a disillusioned and bewildered people, deprived in many parts of the country of all hopes of earning a livelihood, are haunted by the grim specters of pauperism and starvation."

In return for British financial assistance, the newly elected government of Frederick Alderdice agreed to the appointment by London of a three-member royal commission, including British, Canadian, and Newfoundland nominees. The Newfoundland Royal Commission, chaired by Lord Amulree, recommended that Britain "assume general responsibility" for Newfoundland's finances. Newfoundland would give up self-government in favor of administration by an appointed governor and a six-member appointed Commission of Government, having both executive and legislative authority. The solution was designed to provide "a rest from politics" and a government free of corruption. The legislature accepted the deal, formalized when the British Parliament passed the Newfoundland Act, 1933. In 1934, the Commission of Government took control; its six appointed commissioners, who administered the country without elections. It lasted until 1949.

We noted earlier, that the climate for small countries can vary considerably.  The breakdown in trade after World War 1, would have left a more hostile environment for small countries. 

Alberto Alesina and Enrico Spolaore

Small countries have a particularly strong interest in maintaining free trade because so much of their economy depends on international markets. Indeed, we could think of two possible worlds. One world of large and relatively closed economies, and another of many more smaller and more open economies.

Newfoundland still had the advantage of the protective umbrella of a larger military, so that ongoing military expenses could be curtailed, but the cost of living had gone up for them.

It came to the point, where the continued system became too miserable.  Having options, the key power elite in the country – the voting population in this case, abandoned the structure.

Russia has back tracked on their democratic reforms, and Hungary appears to be headed that way as well.  They don’t really have the option to vote themselves out of existence, but without too much argument, they are coming close.

It should be also noted, that if global trade breaks down, it will be the smaller countries that will become most vulnerable.

Tuesday, August 23, 2011

Military Grapes and Hops

In an Op-Ed in the Wall Street Journal, retired Rear Admiral Robert James notes that the Air Force and Navy, to very heavy users of fossil fuels have been on a renewable fuels  quest for a number of years now.  He notes that it can take $400 dollars to transport $1 of fuel to the front in Afghanistan, and thus agrees with the motivation.  But he questions the heavy reliance on biofuels as the method to take.
How to you hide from the enemy if your camp runs on a giant windmill
Robert James, Wall Street Journal Opinion Section, 2 August 2011
The military's flirtation with green energy began a decade ago when the Department of Defense started taking advice from environmental guru Amory Lovins. In his 1976 book, "Soft Energy Path," Mr. Lovins proposed getting one-third of our fuel oil from domestic crops. We could do this, he said, by building a distillery complex only 10 times the size of the combined beer and wine industries' complexes….
Through all this work, however, Mr. Lovins has never bothered to calculate how much land would be needed to grow these crops. Using the figures he proposed with the grape and hops industries, it's easy to estimate.
We would need an area three times the size of the continental United States to replace one-third of our oil requirements. These figures are confirmed in that we now employ one-third of the corn harvest—our biggest crop— to replace only 3% of our oil consumption. In "Winning the Oil Endgame," by the way, Mr. Lovins predicated his scenario on inventing cars that get 125 miles to the gallon.
…The Marines are exploring . . . a small-scale, truck-based biofuel plant that could transform local crops, like illegal poppies, into fuel."
But how many acres of poppies would be required? Lester Brown, the renowned environmentalist who has turned against biofuels, offers a vivid estimate. "The grain required to fill a 25-gallon SUV gas tank with ethanol will feed one person for a year," he notes.
Since the M1A2 Abrams tank and variants has been a notorious gas hog from day one, using open sources, let’s look at the M2A2 Bradley Armored Fighting Vehicle - A light tank that transports troops. It has a fuel capacity of 175 gallons and gets .7 gallons to the mile (1.43 mpg).  So for the food equivalent of feeding seven people for one year,  It can travel about 250 miles: a little less than the 300 mile range of your typical passenger vehicle.
He goes on to note that while, laptop computers, or tent heaters can be recharged by fold up solar panels, almost anything else requires a very large array setup on some sort of (mobile or otherwise) platform.  These platforms would take up an enormous amount of space, be very vulnerable to enemy action.   How large of array and battery pack you would need to move a 66,000 pound M2A2 Bradley is open to question.  There are such things as electric tractors, but of course while they do tow plows, they are not armored or armored.
The author is very careful not to come out and directly say it, but his position is one that denies the relevance or existence of peak oil issues.  He does not even bring up the problem of increased competition for resources driving up costs – even if the flow of oil were unlimited, more people trying to make use of that flow would greatly increase prices.  While he enjoys his absurdist comparisons, he fails to bring up the comparable comparison that if the whole world starts to use oil the way we do, we are going to need to find 9 more Saudi Arabias to keep up.,
The author’s solution is to stop wasting time on renewable fuels, and start using energy efficiently.  Given the number of gas hogs in service, there is obviously a lot of room for improvement.
What is odd is that he does not comment on non-renewable alternatives – at least as a mid-term solution.  Although nuclear fuels have their own limits, they are certainly an alternative.  The Germans in World War 2 made heavy use of liquid fuels made from coal.
He notes that the military’s job is defending the nation, but is a little unclear how our current military is exactly set up to defend us versus being a power projector for our government and whatever parties interests you might believe that our government represents.
The United States has an enormous number of (by one count 727) bases scattered around the world.  Most of these bases have value within a rapid-reaction air mobilization context.   Pulling back from a large number of bases will likely have to be one consideration when economizing. This air response is very heavy on oil usage versus the more tradition naval transport.  
Of course the United States no longer has a dedicated Merchant Marine to service its needs, and must rely on contractors, but that is a different problem.  Re-expanding the Merchant Marine will not solve any fossil fuel issues. 
He carefully avoids noting that much of our Army is still mechanized and equipped to fight on either European Central Front hard surface roads, or the open desert.  The armored fighting vehicles we possess are extremely heavily armored and gunned.  The Bradley AFV we noted above is a linear outgrowth of the light half-tracks (via the M113) that fought in World War 2.  They have turned a relatively light, inexpensive transport vehicle into a tank that carries troops.   Our tanks are essentially German King Tiger tanks on steroids.  They are insanely fast for such a heavy vehicle, and use up fuel correspondingly.  That major problems with the Tigers (all versions) was their weight, lack of operational range, and difficulty of servicing has been pretty much ignored.  That a 60mm guided round from a man portable mortar (should we bother to make such a round) landing on the rear deck of one of these monsters would likely put it out of action is beside the point.  We want ours to be the biggest and fastest.  That the availability of reliable mobile radios did as much to revolutionize mid-20th century warfare as panzers and the Luftwaffe seems to be a lost concept.  The armor and airplanes were the first beneficiaries, but  by the end of the WW2, German tanks were often met coordinated defensive boxes of fire from every gun within a 20 mile area.  The Western Allies may have been plodding at times, but they did win.  The Israelis were to relearn this lesson when their heavily armored Merkavas (tanks) were stymied by barrages Hezbollah light missiles:  coordination trumps weight of armor.
Modern firepower and communications is pushing toward smaller lower visibility weapons platforms, and continues the trend of greater concealment and dispersion.  That we will not be able to easily fuel a tank or armored infantry brigade at some point in our future makes this change away from heavy forces imperative.  The U.S. tactic of building large compounds in “Indian Territory” so that we can maintain our fat tail even when fighting an insurgency, is not going to work against any reasonably equipped force.
These trends in smaller more dangerous platforms also threaten the large surface assets of our navy.  Navies historically were important because they controlled the only reliable method of transporting large amounts of men and material.  The Roman Republic was a very compact Empire because it was a donut sitting on the edge of the relatively gentle waters of the Mediterranean Sea.  The Romans fought naval actions against the Carthaginians, but they did not use their boats for shore bombardment.  Except against the very small and undefended, that is where our own navy is headed.  Although for some reason he forgot to mention it, the early sail powered navies had an enormous operational range compared to the latter oil fueled ones.
Our military has the unenviable task of being required to serve as the intervention force for a global empire.  Call it an empire of benevolent interdiction if you will – see Libya- but an empire none-the-less.  At the same time many of the technological changes and resource constraints are working against the big box solutions we have been using.  It is getting more expensive at the same time as it is becoming less effective.  However, it is odd that the same people that argue that technology will solve our way around the “peak oil” issue, don’t allow that technology may make some of the alternative fuel solutions more viable.   I share the Admirals skepticism, but the more fuel flexibility we have in the future the more options we will have.

Monday, August 22, 2011

Roubini and our economic mess

It is hard to make an easy summation of what is ailing or economy, and why we are facing further problems.  Nouriel Roubini makes a fairly brave stab at it, and even brings back the name of Karl Marx (as explanation, not as an ideal to be achieved) into the mix.

He notes that the reckless and excessive debt of the private sector caused a crises in 2008, with that debt now being shifted to the public sector with the financial bailout.

He notes that:
  • Current government cut backs, and likely increased taxes, are a drain on the economy.
  • World Governments are too strapped for cash to allow another round of bank bailouts.
  • Monetary policy is running into the headwind of increased inflation in Europe.
  • Countries need a weak currency to subside exports and grow their way out difficulties. But weakness is relative, and everyone cannot be simultaneously weak.
  • Large European countries (Italy and Spain noted) are at risk of losing their access to the bond market.  Without that market, the only way they can support deficit spending is through printing money- something they cannot do within the Euro.  It is both an implosion of government spending, and an implosion to those holding the debt.

Nouriel Roubini, Project Syndicate, 17 August 2011
New York - The massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and sub-par in most advanced economies given painful deleveraging.
Now a combination of high oil and commodity prices [partially fueled by a Chinese construction bubble], turmoil in the Middle East [fueled by issues of global overpopulation], Japan’s earthquake and tsunami, eurozone debt crises [partially caused by demographic (aging) issues], and America’s fiscal problems - and now its rating downgrade - have led to a massive increase in risk aversion. Economically, the United States, the eurozone, the United Kingdom, and Japan are all idling. Even fast-growing emerging markets (China, emerging Asia, and Latin America), and export-oriented economies that rely on these markets (Germany and resource-rich Australia), are experiencing sharp slowdowns…
So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
I would put Marx’s conundrum slightly differently:  in most climates, the fuel of capitalism is expansion.  The obstacles to expansion can be structural (Marx’s point), or they can be a matter of external restraints to growth (peak oil, global warming, resource constraints, etc.).   Internal obstacles can be sometimes by met by “fixes” within the system; external restraints must be removed, overcome, or bypassed.  There is no logical construct that I am aware of that proves all obstacle, of either type, can be overcome.  So if you see an obstacle down the road, you would be advised to avoid it before you get there.
Mr. Roubini’s proscription is a sort of hazy middle of the road path.  It is not particularly inspired, but popular modern writing requires at least some pro forma solution to all problems.  It is called path dependence; We started down a path, and now we are where we are.  The solution was to choose another path.