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Agriculture

Permanent link to archive for 5/15/08. Thursday, May 15, 2008

Reposted from the May 15, 2008 edition of John Mauldin's Outside the Box.


Food for Thought

Niels C. Jensen

"There is nothing so disastrous as a rational investment policy in an irrational world."

John Maynard Keynes

You just know that something is astray when Afghan poppy growers begin to switch from opium to wheat. According to the Independent newspaper here in the UK, that's exactly what is now happening. I have no desire to enter into a pound for pound risk/reward analysis of producing wheat versus opium. However, the consequences of the rapid rise in energy and agricultural commodity prices are far reaching and perhaps not as well understood as they should be. That is the content of this month's letter.

The Silent Tsunami

My story begins with Al Gore. While most of us lulled ourselves into the belief that he was onto something when he tried to convince us that global warming (or climate change, as I prefer to call it) was the most formidable challenge facing this planet, a silent tsunami1, also known as the global food crisis, began to develop and is now threatening to undermine global political and economic stability, the latter of which has been key to the benign financial markets we have all benefited from in recent years.

According to the World Bank, just over 1 billion people live on one dollar or less per day. People in the poorest countries in the world spend 80% of their income on food. So when you and I have hardly noticed that the bread we pick up from the local bakery has doubled in price over the past year, it is because only 10-15% of our budget is spent on food items2. In many emerging economies the number is much higher. Chinese consumers spend 28% of their income on food. In India it is 33%. If you want to know how much it is in your country, go to:

http://www.ers.usda.gov/briefing/cpifoodandexpenditures/data/2006table97.htm.

There are three food staples in the world today which dwarf all other food ingredients in terms of importance. They are (in alphabetical order) corn, rice and wheat. As you can see from chart 1 below, they have all experienced rapid price appreciation since last summer. What is it that has driven this price explosion and what does it mean to financial markets? As with most things in life, there is no simple explanation; a number of factors have conspired to create a situation which is exceptional but also destabilising and hence dangerous.

Chart 1: Grain Prices in US Dollars

It Is The Bio-Fuel Policy Stupid!

The explanation given by most commentators is the bio-fuel policy currently being pursued by the Bush administration in Washington. The policy is driven by a desire to unlock the United States from its rising dependence on imported crude oil. The problem, as Bush and his government have been slow to recognise, is the stupidity of the policy in its current form. Let's back that claim up with some hard facts.

In the United States, corn (better known as maize over there) is the primary ingredient in ethanol production although wheat and soybeans are also used. According to a recent UN report, it takes 232 kg of corn to fill an average 50 litre car tank with ethanol - enough corn to feed a child for an entire year. It is estimated that almost 20% of total US corn production will go towards ethanol this year and the number is set to rise to 45% by 20153.

The problem with corn is that it is low on carbon hydrates, which is where the energy comes from. Instead, American ethanol producers rely heavily on fertilisers with the energy being extracted from the nitrogen in the fertiliser. This is an inefficient and very costly approach - in particular in an environment of rising energy prices because crude oil and/or natural gas are major ingredients in fertiliser production. 33,000 cubic feet of natural gas are required to produce just 1 ton of ammonia!

So what does all this mean? According to estimates from Goldman Sachs, the cost of ethanol from corn is now over $80 per barrel, it is about $145 from wheat and over $230 from soybeans. Other countries recognised this problem a long time ago and use crops with higher carbon hydrate content. In the Philippines they use coconut oil and the Brazilians use sugar cane. Goldman reckons that the cost of one barrel of ethanol based on sugar cane is about $35. So why not import sugar cane from Brazil instead of using corn? One simple answer: Brazilian farmers do not vote at American elections. Idaho farmers do.

Are Investors To Blame?

There is no question that the US bio-fuel policy which, by the way, is now being copied in other parts of the world including the EU, has to take its share of the blame. But it is by no means the only reason for the food crisis. The next culprit on my list is our very own industry - investors of all kinds. In recent years there has been rising demand for commodity-linked investment products from investors all over the world. Pension funds, hedge funds, mutual funds and private investors have all allocated more and more to commodities and, in recent months, demand growth has been explosive, as is evident from chart 2 below. It is estimated that the aggregate value of commodity-linked index funds now exceeds $200 billion, a very significant number in a not very large market.

Chart 2: Open Interest on Commodity Futures

For those of you following the market for exchange traded funds (ETF), you will have noticed that not a day has passed in recent months without yet another new commodity ETF being launched. Since the issuers of these ETFs do not want to take any risk on their books, all these ETFs are hedged - typically through commodity futures. In other words, every time you buy a commodity ETF, you contribute to the continued rise of commodity prices and hence inflation.

For that very reason, it is possible - but not a given - that much of the recent rise in commodity prices is based more on market technicalities than on fundamentals. If so, this could be the next bubble waiting to burst. We continue to hear stories about institutional fund managers being overloaded with commodity futures but have found limited hard evidence so far.

Water Shortages Are A Problem

Water is next on my list. Australia - one of the world's largest grain producers - suffered badly last year due to severe drought with its wheat harvest being only 50% of the prior year's output. However, water, or rather lack thereof, has played havoc in more ways than one. In China, water depletion is a serious problem and the problem is exacerbated by top soil erosion and poor fertility. China has an estimated annual water shortfall of 40 billion cubic metres. Closing that gap through artificial means (desalination, etc.) would consume the equivalent of 3% of the world's oil output.

Until recently China has been one of the world's major grain exporters. Those days are now over. By 2010 China expects to import the equivalent of 40% of US corn exports. According to estimates from UBS, China's foreign currency reserves, which are the largest in the world, could be slashed in half over the next few years if grain prices were to double again from current levels. As an aside, China has recently decided to abandon its bio-fuel programme. The reasons? A lack of water and cost inefficiencies.

In Saudi Arabia, a country of 28 million people, water depletion is a serious problem. Estimated recoverable water reserves are now less than 10 years and falling rapidly. For that reason, the Saudis have decided to wind down their domestic agricultural industry. Historically, the Saudis have been self sufficient on food. They now say that they will import 100% of their food requirements by 2016.

Have We Been Complacent?

Number 4 on my list is complacency. Al Gore (yes, him again!) seduced us all into focusing on the climate. Many a government agency around the world took its eyes off the ball and allowed food stocks to deplete. US wheat inventories, for example, are now at the lowest level since 1947/48 when the US population was only half the size it is today.

Similar problems have caused panic buying in the rice market in recent weeks where stocks are at the lowest levels since 1976. 3 billion people in Asia and Africa rely on rice as their primary food staple. Governments in India, Thailand, Vietnam, Argentina, Cambodia, China and Egypt have all imposed export controls in order to secure domestic needs. The World Bank is so concerned about the situation that it now predicts food riots in more than 30 countries around the world.

Productivity Levels Are Falling

Number 5 and 6 on my list are closely related. The total amount of arable land in the world is diminishing, primarily as a result of urbanisation. China alone has lost 3 million hectares of rice land to concrete in the past 10 years. In order to compensate for the reduced acreage, higher productivity levels are required. But higher yields require increased use of fertilisers which is not an option available to everyone given the price of oil. In some parts of the world, for example in Africa, there is now evidence of farmers planting less than in prior years as they cannot afford fertilisers. Falling yields are not a new phenomenon, though, as you can see from chart 3.

Chart 3: Agricultural Productivity

In one of the largest grain producing areas of the world - the former Soviet Union - the total acreage planted has dropped 12% since the iron curtain came down. The 3 largest producers in the area all suffer not only from reduced acreage but also from low yields compared to western standards. In Kazakhstan, grain yields are 1.1 tonnes per hectare, in Russia they are 1.8 and in the Ukraine 2.4. US grain yields, by comparison, are 6.4 tonnes per hectare4. The good news is that there is plenty of land available in places like Russia and Kazakhstan. The bad news? Experience suggests that it will take about 10 years to turn non-farm land into fertile farm land.

The Meat Culture Prevails

The final factor has to do with changing eating habits. This phenomenon has received its fair share of the blame in the media in recent months, but I actually think this is more of a concern for the future than a reason why food prices have exploded in recent months. Eating habits do not change overnight. At the macro level, a changing diet takes years to materialise. Having said that, there is clear evidence that Asia's growing middle classes are switching to meat based diets. If the rest of Asia were to follow Japan's example, the protein intake across Asia will explode over the next couple of decades. The Japanese are consuming almost 10 times as much protein as they did 50 years ago. Why is that a problem? Because it takes over 3 kg of corn to produce 1 kg of pork and over 8 kg of corn to produce just 1 kg of beef!

So What Does It All Mean?

There are very good reasons to believe that high food prices will stay with us for quite some time. Yes, there may be some elements of speculation behind the recent explosion in grain prices, maybe even hints of a bubble, but underlying supply and demand factors are such that we'd better get used to lofty food prices for years to come. That has implications for financial markets left right and centre (finally I get to what this actually means!).

Table 1: Food's Effect on Consumer Prices

The analysts at Goldman Sachs have calculated the effect rising food prices have had on overall consumer prices (see table 1). The conclusion is inevitable. Whereas in most OECD countries the feedback process between food inflation and non-food inflation is modest, in virtually all emerging economies the feedback is significant. Secondly, non-food inflation is most affected by high food inflation in countries with high inflation rates such as Russia, Indonesia, Argentina and Mexico (see chart 4).

Chart 4: Response of non-food inflation to first shock in food inflation

This is an important observation because the investment community is almost universally in favour of emerging markets these days. Rarely have I experienced a period where the bulls have been more plentiful and the bears fewer and farther between. Most investors seem to believe that headline inflation will gradually come back to core inflation levels over the next year or so. Few investors seem to think the unthinkable - that core inflation will gradually rise to headline levels.

Asia May Pay A High Price

Even fewer seem to realise that if oil prices and agricultural prices continue to run amok, the Asian miracle story, upon which so many investors have pinned their hopes for the next few years, may, in fact, turn into a nightmare. The reason is simple enough. Asian countries are large importers of both oil and food staples. Very large!

To give you an idea of the appetite for oil in Asia, take a look at chart 5. As you can see, over 50% of the incremental global demand for oil over the past few years has come from Asia - almost 35% from China alone. In fact, over the last 5 years, China's energy consumption has grown 5% faster than its GDP per year. Yes - per year! 

Chart 5: The Oil Guzzlers

It is now projected that China will overtake the US as the world's largest energy consumer by 2010 despite its GDP being only 1/5 the size of the US GDP. No wonder the Chinese are running around in obscure parts of the world attempting to secure long term crude oil deliveries.

Based on the current crude oil price of $112, and an estimated average price of $64 over the course of 2007, I have calculated the net gains and losses to oil exporters and importers (see table 2). Not surprisingly, the Middle Eastern producers stand to gain the most - $333 billion of incremental revenues - but African producers and Russia also stand to benefit significantly. On the import side, Asia is paying the highest price. The current level of crude oil prices should add about $278 billion to the bill over and above what Asian countries paid for their oil imports last year.

Table 2: Cru
de Oil Exporters and Importers

Rising agricultural goods prices, although significant, are not having the same aggregate wealth effect as rising oil prices. In table 3, I have estimated the added cost of rising food prices from importing the three main food staples. Again you will see that rising prices are hitting Asia the hardest. Remember table 3 only looks at the import of raw materials. The effect from rising prices on processed foods is not included.

Neither does table 3 do any justice to the damage done at the micro level. Of the 3 billion people who rely on rice as their primary source of food, over 2 billion live on $2 or less per day. The recent price jump spells disaster for these people and could potentially cause massive economic dislocation throughout Asia. Riots are now a real possibility in many of these countries.

As far as the investment story goes, here is the problem. The prevailing view today is that the western world is yesterday's story and that the best way to ensure continued high returns in your portfolio is to focus on emerging markets - in particular Asia. The argument runs approximately as follows:

The Consensus View

The OECD area (the old world) is plagued by a rapidly ageing population with all the negatives that follow - rising health care costs being the most important. Many OECD countries also have unfunded pension liabilities and large budget deficits, raising serious questions about whether the 21st century society can afford to maintain the retirement system as we know it today. Some even argue that structures such as the Euro are doomed because of dramatic discrepancies in performance within the Euro zone. Now consider the US dollar. The greenback is probably the most disliked currency in the world today (well, not taking the Zimbabwe dollar into consideration). If you buy these arguments it is no wonder that many investors shy away from the more established markets.

Table 3: Food Importers

On the other hand, emerging markets - and Asia in particular - beam with opportunities. The population in most emerging market countries is still young, savings rates are high and the optimism is there for everyone to see. In short, it is exceedingly hard to find anyone who wouldn't agree that Asia offers the best growth prospects going forward. So overwhelming is this view that it is virtually impossible to find a single brokerage house, institutional investor, commentator, punter, etc. who doesn't advocate an overweight of Asian shares in equity portfolios.

Do Not Assume One-Way Traffic

While I agree that emerging markets offer better growth prospects than OECD countries, I disagree that it is going to be one-way traffic. As demonstrated above, rising commodity prices will hit Asia much harder than any other region in the world as it is in fact the only region in the world today which is a net importer of both crude oil and food staples.

Table 4: Top 10 Foreign Exchange Reserves

In table 4 I have listed the largest holders of foreign exchange reserves in the world today. As you can see the list is dominated by Asian countries. All those investors who buy into the Asian growth story pin their a rgument either directly or indirectly on the size of these reserves. Growth requires investments; however, due to the high savings rates across Asia, and hence the plentiful reserves, the money is there to finance those investments without the countries becoming net debtors. What the argument does not take into consideration is that, at least in some countries, those reserves will be increasingly going towards paying for the rising cost of oil and food imports.

The 'haves' And 'have Nots'

Instead I believe investors will increasingly differentiate between the 'haves' and 'have nots'. And the 'haves' are those countries which control the world's resources. In fact, few countries are net exporters of both oil and foods on a large scale. Come to think about it, it is less than a handful. And no Asian country is on the list. So who is on it? In the old world only one - Canada. In the grey zone (emerging economies but not necessarily young and dynamic populations) perhaps two - Russia and Kazakhstan. And amongst full blooded emerging economies? Noone today, although Brazil has the potential to turn itself into a winner and so does Africa, if it can sort itself out.

All this is not to say that investing in Asia is doomed to fail. There are many good reasons why you want to invest there. However, the invest case is not as straight forward as it appears at first glance, and throwing in a bit of Africa, Brazil and/or Russia may not be a bad idea.

An Afterthought

For over 30 years, the world has had to suffer the consequences of OPEC - an organisation as keen to enrich its members as we in the Western world are hooked on its main produce - crude oil. Has pay-back time finally arrived? Should we be tempted to create OGEC - the Organisation of Grain Exporting Countries - with the objective of ensuring overall resource stability, i.e. food will only be exported to oil producing countries provided they deliver oil to us at a reasonable p rice?

The largest wheat exporters today are (in order of rank) the US, Canada, Russia, the EU, Argentina, Kazakhstan and Australia. Most of these countries happen to be net importers of oil. Is it unreasonable to apply a 'tit for tat' approach? My heart (as does my bank manager) tells me yes but my gut feel says no. The world has always been a better place when government interference has been kept at a minimum. The problem we face in this particular situation, though, is that not everyone plays by the same rules. If that could be fixed, the world would indeed be a better place.

Copyright 2008 Niels Jensen

Footnotes:

[1] A term borrowed with thanks from The Economist newspaper.

[2] Our food statistics come from the US Department of Agriculture and indicate that consumers in countries such as the UK and the US spend less of their income on food than consumers in other countries. This is due to the fact that take-aways and restaurant visits are not included in the USDA numbers. Adjusted for that, almost all OECD countries spend 10-15% of household expenditures on food.

[3] Source: The Daily Telegraph

[4] Source: The Daily Telegraph


Niels Clemen Jensen has 24 years of investment banking, private banking and asset management experience. He began his career at Andelsbanken (now Nordea) in Copenhagen and was part of a generation of bankers building a new industry in Denmark, following the Central Bank of Denmark’s relaxation of rules governing investments abroad in 1984.

Niels is a founding Partner of Absolute Return Partners LLP and its Chief Executive Partner.  He is a graduate of University of Copenhagen with a Masters Degree in economics.



Permanent link to archive for 5/13/08. Tuesday, May 13, 2008

Reposted from Tomdispatch.com.


Oil Depletion pulls the plug on America's Superpower

Michael Klare

Nineteen years ago, the fall of the Berlin Wall effectively eliminated the Soviet Union as the world's other superpower. Yes, the USSR as a political entity stumbled on for another two years, but it was clearly an ex-superpower from the moment it lost control over its satellites in Eastern Europe.

Less than a month ago, the United States similarly lost its claim to superpower status when a barrel crude oil roared past $110 on the international market, gasoline prices crossed the $3.50 threshold at American pumps, and diesel fuel topped $4.00. As was true of the USSR following the dismantling of the Berlin Wall, the USA will no doubt continue to stumble on like the superpower it once was; but as the nation's economy continues to be eviscerated to pay for its daily oil fix, it, too, will be seen by increasing numbers of savvy observers as an ex-superpower-in-the-making.

That the fall of the Berlin Wall spelled the erasure of the Soviet Union's superpower status was obvious to international observers at the time. After all, the USSR visibly ceased to exercise dominion over an empire (and an associated military-industrial complex) encompassing nearly half of Europe and much of Central Asia. The relationship between rising oil prices and the obliteration of America's superpower status is, however, hardly as self-evident. So let's consider the connection.

Dry Hole Superpower

The fact is, America's wealth and power has long rested on the abundance of cheap petroleum. The United States was, for a long time, the world's leading producer of oil, supplying its own needs while generating a healthy surplus for export.

Oil was the basis for the rise of the first giant multinational corporations in the U.S., notably John D. Rockefeller's Standard Oil Company (now reconstituted as Exxon Mobil, the world's wealthiest publicly-traded corporation). Abundant, exceedingly affordable petroleum was also responsible for the emergence of the American automotive and trucking industries, the flourishing of the domestic airline industry, the development of the petrochemical and plastics industries, the suburbanization of America, and the mechanization of its agriculture. Without cheap and abundant oil, the United States would never have experienced the historic economic expansion of the post-World War II era.

No less important was the role of abundant petroleum in fueling the global reach of U.S. military power. For all the talk of America's growing reliance on computers, advanced sensors, and stealth technology to prevail in warfare, it has been oil above all that gave the U.S. military its capacity to "project power" onto distant battlefields like Iraq and Afghanistan. Every Humvee, tank, helicopter, and jet fighter requires its daily ration of petroleum, without which America's technology-driven military would be forced to abandon the battlefield. No surprise, then, that the U.S. Department of Defense is the world's single biggest consumer of petroleum, using more of it every day than the entire nation of Sweden.

From the end of World War II through the height of the Cold War, the U.S. claim to superpower status rested on a vast sea of oil. As long as most of our oil came from domestic sources and the price remained reasonably low, the American economy thrived and the annual cost of deploying vast armies abroad was relatively manageable. But that sea has been shrinking since the 1950s. Domestic oil production reached a peak in 1970 and has been in decline ever since -- with a growing dependency on imported oil as the result. When it came to reliance on imports, the United States crossed the 50% threshold in 1998 and now has passed 65%.

Though few fully realized it, this represented a significant erosion of sovereign independence even before the price of a barrel of crude soared above $110. By now, we are transferring such staggering sums yearly to foreign oil producers, who are using it to gobble up valuable American assets, that, whether we know it or not, we have essentially abandoned our claim to superpowerdom.

According to the latest data from the U.S. Department of Energy, the United States is importing 12-14 million barrels of oil per day. At a current price of about $115 per barrel, that's $1.5 billion per day, or $548 billion per year. This represents the single largest contribution to America's balance-of-payments deficit, and is a leading cause for the dollar's ongoing drop in value. If oil prices rise any higher -- in response, perhaps, to a new crisis in the Middle East (as might be occasioned by U.S. air strikes on Iran) -- our annual import bill could quickly approach three-quarters of a trillion dollars or more per year.

While our economy is being depleted of these funds, at a moment when credit is scarce and economic growth has screeched to a halt, the oil regimes on which we depend for our daily fix are depositing their mountains of accumulating petrodollars in "sovereign wealth funds" (SWFs) -- state-controlled investment accounts that buy up prized foreign assets in order to secure non-oil-dependent sources of wealth. At present, these funds are already believed to hold in excess of several trillion dollars; the richest, the Abu Dhabi Investment Authority (ADIA), alone holds $875 billion.

The ADIA first made headlines in November 2007 when it acquired a $7.5 billion stake in Citigroup, America's largest bank holding company. The fund has also made substantial investments in Advanced Micro Systems, a major chip maker, and the Carlyle Group, the private equity giant. Another big SWF, the Kuwait Investment Authority, also acquired a multibillion-dollar stake in Citigroup, along with a $6.6 billion chunk of Merrill Lynch. And these are but the first of a series of major SWF moves that will be aimed at acquiring stakes in top American banks and corporations.

The managers of these funds naturally insist that they have no intention of using their ownership of prime American properties to influence U.S. policy. In time, however, a transfer of economic power of this magnitude cannot help but translate into a transfer of political power as well. Indeed, this prospect has already stirred deep misgivings in Congress. "In the short run, that they [the Middle Eastern SWFs] are investing here is good," Senator Evan Bayh (D-Indiana) recently observed. "But in the long run it is unsustainable. Our power and authority is eroding because of the amounts we are sending abroad for energy…."

No Summer Tax Holiday for the Pentagon

Foreign ownership of key nodes of our economy is only one sign of fading American superpower status. Oil's impact on the military is another.

Every day, the average G.I. in Iraq uses approximately 27 gallons of petroleum-based fuels. With some 160,000 American troops in Iraq, that amounts to 4.37 million gallons in daily oil usage, including gasoline for vans and light vehicles, diesel for trucks and armored vehicles, and aviation fuel for helicopters, drones, and fixed-wing aircraft. With U.S. forces paying, as of late April, an average of $3.23 per gallon for these fuels, the Pentagon is already spending approximately $14 million per day on oil ($98 million per week, $5.1 billion per year) to stay in Iraq. Meanwhile, our Iraqi allies, who are expected to receive a windfall of $70 billion this year from the rising price of their oil exports, charge their citizens $1.36 per gallon for gasoline.

When questioned about why Iraqis are paying almost a third less for oil than American forces in their country, senior Iraqi government officials scoff at any suggestion of impropriety. "America has hardly even begun to repay its debt to Iraq," said Abdul Basit, the head of Iraq's Supreme Board of Audit, an independent body that oversees Iraqi governmental expenditures. "This is an immoral request because we didn't ask them to come to Iraq, and before they came in 2003 we didn't have all these needs."

Needless to say, this is not exactly the way grateful clients are supposed to address superpower patrons. "It's totally unacceptable to me that we are spending tens of billions of dollars on rebuilding Iraq while they are putting tens of billions of dollars in banks around the world from oil revenues," said Senator Carl Levin (D-Michigan), chairman of the Armed Services Committee. "It doesn't compute as far as I'm concerned."

Certainly, however, our allies in the region, especially the Sunni kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) that presumably look to Washington to stabilize Iraq and curb the growing power of Shiite Iran, are willing to help the Pentagon out by supplying U.S. troops with free or deeply-discounted petroleum. No such luck. Except for some partially subsidized oil supplied by Kuwait, all oil-producing U.S. allies in the region charge us the market rate for petroleum. Take that as a striking reflection of how little credence even countries whose ruling elites have traditionally looked to the U.S. for protection now attach to our supposed superpower status.

Think of this as a strikingly clear-eyed assessment of American power. As far as they're concerned, we're now just another of those hopeless oil addicts driving a monster gas-guzzler up to the pump -- and they're perfectly happy to collect our cash which they can then use to cherry-pick our prime assets. So expect no summer tax holidays for the Pentagon, not in the Middle East, anyway.

Worse yet, the U.S. military will need even more oil for the future wars on which the Pentagon is now doing the planning. In this way, the U.S. experience in Iraq has especially worrisome implications. Under the military "transformation" initiated by Secretary of Defense Donald Rumsfeld in 2001, the future U.S. war machine will rely less on "boots on the ground" and ever more on technology. But technology entails an ever-greater requirement for oil, as the newer weapons sought by Rumsfeld (and now Secretary of Defense Robert Gates) all consume many times more fuel than those they will replace. To put this in perspective: The average G.I in Iraq now uses about seven times as much oil per day as G.I.s did in the first Gulf War less than two decades ago. And every sign indicates that the same ratio of increase will apply to coming conflicts; that the daily cost of fighting will skyrocket; and that the Pentagon's capacity to shoulder multiple foreign military burdens will unravel. Thus are superpowers undone.

Russia's Gusher

If anything demonstrates the critical role of oil in determining the fate of superpowers in the current milieu, it is the spectacular reemergence of Russia as a Great Power on the basis of its superior energy balance. Once derided as the humiliated, enfeebled loser in the U.S.-Soviet rivalry, Russia is again a force to be reckoned with in world affairs. It possesses the fastest-growing economy among the G-8 group of major industrial powers, is the world's second leading producer of oil (after Saudi Arabia), and is its top producer of natural gas. Because it produces far more energy than it consumes, Russia exports a substantial portion of its oil and gas to neighboring countries, making it the only Great Power not dependent on other states for its energy needs.

As Russia has become an energy-exporting state, it has moved from the list of has-beens to the front rank of major players. When President Bush first occupied the White House, in February 2001, one of his highest priorities was to downgrade U.S. ties with Russia and annul the various arms-control agreements that had been forged between the two countries by his predecessors, agreements that explicitly conferred equal status on the USA and the USSR.

As an indication of how contemptuously the Bush team viewed Russia at that time, Condoleezza Rice, while still an adviser to the Bush presidential campaign, wrote, in the January/February 2000 issue of the influential Foreign Affairs, "U.S. policy… must recognize that American security is threatened less by Russia's strength than by its weakness and incoherence." Under such circumstances, she continued, there was no need to preserve obsolete relics of the dual superpower past like the Anti-Ballistic Missile (ABM) Treaty; rather, the focus of U.S. efforts should be on preventing the further erosion of Russian nuclear safeguards and the potential escape of nuclear materials.

In line with this outlook, President Bush believed that he could convert an impoverished and compliant Russia into a major source of oil and natural gas for the United States -- with American energy companies running the show. This was the evident aim of the U.S.-Russian "energy dialogue" announced by Bush and Russian President Vladimir Putin in May 2002. But if Bush thought Russia was prepared to turn into a northern version of Kuwait, Saudi Arabia, or Venezuela prior to the arrival of Hugo Chávez, he was to be sorely disappointed. Putin never permitted American firms to acquire substantial energy assets in Russia. Instead, he presided over a major recentralization of state control when it came to the country's most valuable oil and gas reserves, putting most of them in the hands of Gazprom, the state-controlled natural gas behemoth.

Once in control of these assets, moreover, Putin has used his renascent energy power to exert influence over states that were once part of the former Soviet Union, as well as those in Western Europe that rely on Russian oil and gas for a substantial share of their energy needs. In the most extreme case, Moscow turned off the flow of natural gas to Ukraine on January 1, 2006, in the midst of an especially cold winter, in what was said to be a dispute over pricing but was widely viewed as punishment for Ukraine's political drift westwards. (The gas was turned back on four days later when Ukraine agreed to pay a higher price and offered other concessions.) Gazprom has threatened similar action in disputes with Armenia, Belarus, and Georgia -- in each case forcing those former Soviet SSRs to back down.

When it comes to the U.S.-Russian relationship, just how much the balance of power has shifted was evident at the NATO summit at Bucharest in early April. There, President Bush asked that Georgia and Ukraine both be approved for eventual membership in the alliance, only to find top U.S. allies (and Russian energy users) France and Germany blocking the measure out of concern for straining ties with Russia. "It was a remarkable rejection of American policy in an alliance normally dominated by Washington," Steven Erlanger and Steven Lee Myers of the New York Times reported, "and it sent a confusing signal to Russia, one that some countries considered close to appeasement of Moscow."

For Russian officials, however, the restoration of their country's great power status is not the product of deceit or bullying, but a natural consequence of being the world's leading energy provider. No one is more aware of this than Dmitri Medvedev, the former Chairman of Gazprom and new Russian president. "The attitude toward Russia in the world is different now," he declared on December 11, 2007. "We are not being lectured like schoolchildren; we are respected and we are deferred to. Russia has reclaimed its proper place in the world community. Russia has become a different country, stronger and more prosperous."

The same, of course, can be said about the United States -- in reverse. As a result of our addiction to increasingly costly imported oil, we have become a different country, weaker and less prosperous. Whether we know it or not, the energy Berlin Wall has already fallen and the United States is an ex-superpower-in-the-making.

Copyright 2008 Michael Klare


Michael Klare is a professor of peace and world security studies at Hampshire College and author of the just-released Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books). A documentary film based on his previous book, Blood and Oil, is available from the Media Education Foundation and can be ordered at bloodandoilmovie.com. A brief video of Klare discussing key subjects in his new book can be viewed by clicking here.


Permanent link to archive for 5/11/08. Sunday, May 11, 2008

On this holiday to celebrate Mothers, it seems especially appropriate that today's author calls on us to preserve the greatest mother of all, Mother Nature. Of course Mother Nature is much more than simply the mother of all life on the planet, she is the very basis for  continuing life on our planet. ... Reposted from Tomdispatch.com.


Dusk on Planet Earth

Bill McKibben

Bill McGibben Even for Americans, constitutionally convinced that there will always be a second act, and a third, and a do-over after that, and, if necessary, a little public repentance and forgiveness and a Brand New Start -- even for us, the world looks a little Terminal right now.

It's not just the economy. We've gone through swoons before. It's that gas at $4 a gallon means we're running out, at least of the cheap stuff that built our sprawling society. It's that when we try to turn corn into gas, it sends the price of a loaf of bread shooting upwards and starts food riots on three continents. It's that everything is so inextricably tied together. It's that, all of a sudden, those grim Club of Rome types who, way back in the 1970s, went on and on about the "limits to growth" suddenly seem… how best to put it, right.

All of a sudden it isn't morning in America, it's dusk on planet Earth.

There's a number -- a new number -- that makes this point most powerfully. It may now be the most important number on Earth: 350. As in parts per million (ppm) of carbon dioxide in the atmosphere.

A few weeks ago, our foremost climatologist, NASA's Jim Hansen, submitted a paper to Science magazine with several co-authors. The abstract attached to it argued -- and I have never read stronger language in a scientific paper -- "if humanity wishes to preserve a planet similar to that on which civilization developed and to which life on earth is adapted, paleoclimate evidence and ongoing climate change suggest that CO2 will need to be reduced from its current 385 ppm to at most 350 ppm." Hansen cites six irreversible tipping points -- massive sea level rise and huge changes in rainfall patterns, among them -- that we'll pass if we don't get back down to 350 soon; and the first of them, judging by last summer's insane melt of Arctic ice, may already be behind us.

So it's a tough diagnosis. It's like the doctor telling you that your cholesterol is way too high and, if you don't bring it down right away, you're going to have a stroke. So you take the pill, you swear off the cheese, and, if you're lucky, you get back into the safety zone before the coronary. It's like watching the tachometer edge into the red zone and knowing that you need to take your foot off the gas before you hear that clunk up front.

In this case, though, it's worse than that because we're not taking the pill and we are stomping on the gas -- hard. Instead of slowing down, we're pouring on the coal, quite literally. Two weeks ago came the news that atmospheric carbon dioxide had jumped 2.4 parts per million last year -- two decades ago, it was going up barely half that fast.

And suddenly, the news arrives that the amount of methane, another potent greenhouse gas, accumulating in the atmosphere, has unexpectedly begun to soar as well. Apparently, we've managed to warm the far north enough to start melting huge patches of permafrost and massive quantities of methane trapped beneath it have begun to bubble forth.

And don't forget: China is building more power plants; India is pioneering the $2,500 car, and Americans are converting to TVs the size of windshields which suck juice ever faster.

Here's the thing. Hansen didn't just say that, if we didn't act, there was trouble coming; or, if we didn't yet know what was best for us, we'd certainly be better off below 350 ppm of carbon dioxide in the atmosphere. His phrase was: "…if we wish to preserve a planet similar to that on which civilization developed." A planet with billions of people living near those oh-so-floodable coastlines. A planet with ever more vulnerable forests. (A beetle, encouraged by warmer temperatures, has already managed to kill 10 times more trees than in any previous infestation across the northern reaches of Canada this year. This means far more carbon heading for the atmosphere and apparently dooms Canada's efforts to comply with the Kyoto Protocol, already in doubt because of its decision to start producing oil for the U.S. from Alberta's tar sands.)

We're the ones who kicked the warming off; now, the planet is starting to take over the job. Melt all that Arctic ice, for instance, and suddenly the nice white shield that reflected 80% of incoming solar radiation back into space has turned to blue water that absorbs 80% of the sun's heat. Such feedbacks are beyond history, though not in the sense that Francis Fukuyama had in mind.

And we have, at best, a few years to short-circuit them -- to reverse course. Here's the Indian scientist and economist Rajendra Pachauri, who accepted the Nobel Prize on behalf of the Intergovernmental Panel on Climate Change last year (and, by the way, got his job when the Bush administration, at the behest of Exxon Mobil, forced out his predecessor): "If there's no action before 2012, that's too late. What we do in the next two to three years will determine our future. This is the defining moment." In the next two or three years, the nations of the world are supposed to be negotiating a successor treaty to the Kyoto Accord. When December 2009 rolls around, heads of state are supposed to converge on Copenhagen to sign a treaty -- a treaty that would go into effect at the last plausible moment to heed the most basic and crucial of limits on atmospheric CO2.

If we did everything right, says Hansen, we could see carbon emissions start to fall fairly rapidly and the oceans begin to pull some of that CO2 out of the atmosphere. Before the century was out we might even be on track back to 350. We might stop just short of some of those tipping points, like the Road Runner screeching to a halt at the very edge of the cliff.

More likely, though, we're the Coyote -- because "doing everything right" means that political systems around the world would have to take enormous and painful steps right away. It means no more new coal-fired power plants anywhere, and plans to quickly close the ones already in operation. (Coal-fired power plants operating the way they're supposed to are, in global warming terms, as dangerous as nuclear plants melting down.) It means making car factories turn out efficient hybrids next year, just the way we made them turn out tanks in six months at the start of World War II. It means making trains an absolute priority and planes a taboo.

It means making every decision wisely because we have so little time and so little money, at least relative to the task at hand. And hardest of all, it means the rich countries of the world sharing resources and technology freely with the poorest ones, so that they can develop dignified lives without burning their cheap coal.

That's possible -- we launched a Marshall Plan once, and we could do it again, this time in relation to carbon. But in a month when the President has, once more, urged us to drill in the Arctic National Wildlife Refuge, that seems unlikely. In a month when the alluring phrase "gas tax holiday" has danced into our vocabulary, it's hard to see (though it was encouraging to see that Clinton's gambit didn't sway many voters). And if it's hard to imagine sacrifice here, imagine China, where people produce a quarter as much carbon apiece as we do.

Still, as long as it's not impossible, we've got a duty to try. In fact, it's about the most obvious duty humans have ever faced.

A few of us have just launched a new campaign, 350.org. Its only goal is to spread this number around the world in the next 18 months, via art and music and ruckuses of all kinds, in the hope that it will push those post-Kyoto negotiations in the direction of reality.

After all, those talks are our last chance; you just can't do this one light bulb at a time. And if this 350.org campaign is a Hail Mary pass, well, sometimes those passes get caught.

We do have one thing going for us: This new tool, the Web which, at least, allows you to imagine something like a grassroots global effort. If the Internet was built for anything, it was built for sharing this number, for making people understand that "350" stands for a kind of safety, a kind of possibility, a kind of future.

Hansen's words were well-chosen: "a planet similar to that on which civilization developed." People will doubtless survive on a non-350 planet, but those who do will be so preoccupied, coping with the endless unintended consequences of an overheated planet, that civilization may not.

Civilization is what grows up in the margins of leisure and security provided by a workable relationship with the natural world. That margin won't exist, at least not for long, this side of 350. That's the limit we face.


Copyright 2008 Bill McKibben


Bill McKibben, a scholar in residence at Middlebury College and the author, most recently, of  The Bill McKibben Reader, is the co-founder of Project 350, devoted to reducing carbon dioxide in the atmosphere to 350 parts per million.


Permanent link to archive for 5/6/08. Tuesday, May 6, 2008

Today's essayist trys to make sence of our current economy.


The Risk Economy

James Howard Kunstler

As the West's industrial regime sputters toward a cheap-energy-crackup conclusion, there have been attempts to recast what our economy is actually about, how to account for whatever wealth we manage to produce, and project what our society will actually be organized to do in the years ahead.

       For a while in the 1990s, the idea was a "service economy," kind of like the old fable of the town whose inhabitants made a living by taking in each other's laundry -- only in our case it was selling hamburgers to tourists on vacation from their jobs making hamburgers elsewhere, or something like that.

     Then came the idea of the "information economy" in which making things of value would no longer matter, only the processing and deployment of information (sometimes misidentified as "knowledge"). This model seemed to suggest a yin-yang of software engineers who made up games like "Grand Theft Auto" serving the opposite cohort of people who bought and played the game. If nothing else, it certainly explained how lifetimes could be frittered away on stupid activities.

     That illusion yielded to the housing bubble economy, which actually did produce a lot of things, but not necessarily of value -- for instance, houses made of particle board and vinyl 38 miles outside of Sacramento. It was a tragic and manifold waste of resources, as well as an insult to the landscape. But the darker side of the housing bubble lay in the world of finance, where a vast empire of swindles was constructed to support the Potemkin facade of production homebuilding.

     Now we are in a strange period when those swindles are unwinding. The people who run the finance sector -- the Wall Street investment banks, hedge funds and ratings agencies, the Federal Reserve, and the US Dept of the Treasury -- in desperately trying to prevent the unwind, have rapidly ramped up another new economy based entirely on the buying and selling of risk. Risk, as a pure abstraction unconnected to any real capital activity, is all that's left to buy and sell after all other plausibly practical vehicles for finance have failed.

     While a lack of transparency in the individual risk vehicles has been an object of complaint over the past year, the system as whole is transparently absurd. The system is also abstruse enough to prevent most mortals (including many employed in the system) from understanding its operations. But the general public and the news media are virtually helpless to intervene in this last gasp racket, so the probability increases that it will do tremendous damage to whatever remains of the US economy.
    
     One feature of the risk economy is the Federal Reserve's new willingness to absorb any sort of crap collateral in exchange for massive cheap loans to insolvent companies and institutions. The Fed has, in effect, made itself the world's largest financial shit-magnet. It has already taken in a few hundred billion in securities based on non-performing real estate loans, and has now opened the window to securities based on non-performing credit card debt, car loans, and other miscellaneous IOUs still drifting un-hedged in the banking ether.

      It's a mark of our collective desperation to avoid the consequences of so much reckless behavior that no credible authorities have stepped up to denounce this racket -- no Fed governor, no politician of standing (including the candidates for president), no newspaper-of-record. The Attorney-general of New York, Andrew Cuomo, may be quietly cooking up some cases in the deep background, but the SEC and the federal banking regulators hung up their "out-to-lunch" signs on this long ago.

       Meanwhile, the basic situation is this: the world is awash with bad investment paper. The standard of living in the US can't be supported on debt anymore. The people of the US don't produce enough real value to service their debts. Institutions can no longer be supported on debt gone bad. Something's got to give -- meaning something has to bring the US standard of living down to a level consistent with our declining actual wealth.

      Everything else going on right now is a dodge. The Fed maneuvers, the "coordinated actions" of the western central banks, the postponements of default, the non-disclosure of contents in bank portfolios, the pretense that risk alone is a kind of fungible resource that can be endlessly traded to generate fees -- all this fucking nonsense will only make the eventual unwinding much worse.

     Personally, I doubt that it can go on more than a few more months. The velocity of everything is going up past the "red line" where things really fly apart. The increased velocity of non-performing mortgages and deadbeat credit card accounts is one thing that can't be hidden or escaped. America will feel and see very vividly when the repossession teams rush families from their homes, when the pickup truck is taken away, and when the pink slip appears in the pay envelope. Meanwhile all the higher-end banking shenanigans will only debase the dollar and make it more difficult for people already in distress to buy gasoline and food.

     If the bankers and treasury officials collude to prop up one more failing big bank a la Bear Stearns, the political fallout for Wall Street could be lethal. In any case, I think we will have a way different sense of ourselves as a society by the time the election comes.


Read Kunstler's newest novel  World Made by Hand.  

Visit his Website.

Permanent link to archive for 5/1/08. Thursday, May 1, 2008

This is a transcript of a talk presented at the House of Delegates Meeting of the Pennsylvania Assoication of Staff Nurses & Allied Professiohnals on April 29, 2008. It is reposted from the Energy Bulletin.


Energy & the Future of Health Care

Dan Bednarz, PhD

Hello, it’s nice to be with you today. My intent is to give you a realistic take on the future of your profession by explaining why healthcare and nursing will be transformed by rising energy costs. Is there danger ahead? You bet. It’s going to be difficult, probably life-changing for all Americans. Here’s why: the scale of our energy predicament is enormous, unprecedented and grossly misunderstood by institutional leaders and most of the media.

I know some of you may be wondering, Energy scarcity? That’s someone else’s problem; put this guy in touch with geologists and politicians.

So let’s step back for the big picture.

Overview

A few numbers to set the context:
  • The amount of crude oil pumped out of the ground has been on a bumpy plateau since May of 2005. Until then oil production was steadily increasing about 2% a year –with periodic declines - and the world had a daily surplus, or emergency cushion. That surplus is gone, everything produced, supply, is immediately purchased, demand. Whether or not the world has reached “peak oil” –the point at which yearly total worldwide extraction cannot be increased - this 3 year plateau indicates that the era of cheap energy is over.

  • Oil is now over $100.00 a barrel. It was $10.00 a barrel in November 1998.

  • Oil powers 90% of all transportation and it is essential to food production and distribution; it is the primary ingredient in many products –think plastics, petrochemicals, and clothing. It is fair to say that all our institutions, especially medicine, are dependent upon oil, the lynchpin resource that keeps the economy humming and allows it to grow.

  • And it’s not just oil that’s getting scarce. Natural gas in Pittsburgh went up 30% on April 1st, to $12.50 per MCF (thousand cubic feet); it was $2.50 in 2001. Typically, the cost of natural gas drops after the winter but here we are facing higher prices during the summer.

  • Coal is becoming scarce in many countries and more expensive here; its price has about doubled in the past year. It is our main source of electricity. In about 15 years the world may hit a peak in its production, and this combined with the fact that natural gas –the secondary source of electricity generation - simultaneously will be at or past its peak, poses a threat to our supply of electricity.

  • To put a human face on this, a polling agency found in December 2007 that 12% of Americans planned to put their winter energy bills on their credit card –no wonder Christmas spending was down. An article in this past Saturday’s New York Times details the rising number of people unable to pay their winter utility bills and now facing service cutoffs1. Many hospitals in California are on the verge of bankruptcy; rising energy costs –in tandem with other increasing costs - could be a breaking point for them. Further, we are merely at the beginning of what some of you recognize as Jim Kunstler’s poetic phrase “The Long Emergency.”

  • The total amount of energy the world gets from fossil fuels is predicted to peak in 2010, so we’ve probably got about two years before systemic disruptions and breakdowns become commonplace and then worsen. Even now we see the airlines struggling, food prices soaring, and we have a fiscal/financial crisis of unknown scope that is connected to the price of oil in numerous ways I cannot delve into today.

Energy in Hospitals

Now let’s look at energy use in hospitals and then use the issue of record keeping, a biggie for nurses, as one small but significant example of how energy scarcity will shape the future of healthcare. Then we’ll close with some comments on where medicine is heading and my claim that nursing stands to become a force in reforming the healthcare system.

The EPA estimates that hospitals use twice as much energy per square foot as do office buildings. Until recently hospital administrators have not paid attention to the cost of energy because they think –mistakenly - that it represents less than 2% of their operating expenses. Therefore, they have considered rising energy costs a nuisance, not a threat. However, a few weeks ago a former AMA (American Medical Association) official told me hospital administrators are getting worried about energy costs because sharp increases are eating into profits. For example, all energy costs in the US rose 17% in 2007, with the cost of oil climbing 57%. The first quarter of 2008 shows no change in this trend. How many years can our society –and hospitals - absorb these increases?

We should look a bit closer at that alleged 2% because it ignores hidden oil-related costs - also, this percentage is from 2005, when oil was $48.00 a barrel. Virtually every item consumed in a hospital is to some extent connected to fossil fuels, primarily oil. In medicine petrochemicals are used to manufacture analgesics, antihistamines, antibiotics, antibacterials, rectal suppositories, cough syrups, lubricants, creams, ointments, salves, and many gels. Processed plastics made with oil are used in heart valves and other esoteric medical equipment. Petrochemicals are used in radiological dyes and films, intravenous tubing, syringes, and oxygen masks. This could be a much longer list.

Finally, as the cost of oil, natural gas and coal rise in tandem their impact is surpassing that 2% of operating expenses just mentioned.

Now let’s consider our example of how nursing will be changed.

Recently, I read a report which estimates the amount of paperwork (communication, medication administration, admission, discharge, transfer, supplies, equipment, and so on) is so burdensome that the average nurse devotes only 31% of the workday to direct care.

The American Academy of Nursing is pushing for fully electronic records. I won’t get into whether or not this will increase patient contact hours. What is salient is that this is a solution based on an increasing amount of energy flowing into hospitals. Indeed, all across our society planning takes for granted an ever increasing supply of cheap and uninterrupted energy. My colleague, Gail Tverberg, an actuary with a good deal of experience in the medical industry, has been studying the economic ramifications of peak oil and notes:

”I expect that electrical interruptions will become more common in the next 20 or 30 years. These may even become a problem early on, for a whole host of reasons, including lack of water for cooling, lack of fuel for power generation, and poor upkeep of the electrical grid. Healthcare providers would be wise to plan for the day when elevators and electronic records may not be available.”

Wow. Imagine doing your work under these conditions. Needless to say, the healthcare professions have no inkling of - let alone are preparing for - this astonishing future. In fact, a recent study showed that the electricity used exclusively for medical records is rapidly increasing, by 400-800% in the past four years. Also, MRI usage is increasing, as are many technologies that rely on electricity. Add to this the inevitable shortages of other supplies and medicines that will simultaneously result from peak oil.

I would not be surprised if some of you are now thinking, “this is crazy; this simply cannot happen.” To which I’d like to be confrontational and assert, Fossil fuel costs will continue to rise and eventually the healthcare system will be forced to downsize –just as the Baby Boomers and (possibly) climate change effects - inundate the system. Let me just mention our perilous national economic status and note that some commentators are claiming that the government has in effect nationalized Wall Street by bailing out Bear Stearns. Further, anyone who thinks the health sector is recession or nationalization-proof is confusing health-care, which is indispensable, with the current system, which is unsustainable.

This is a lot to lay on you in a few minutes of exposition, and I’m tempted to apologize; however, nursing –unlike, say, public relations - is where the rubber meets the road. So let me make a few closing comments and then take your questions.

Summary

  1. I feel safe observing that the vast majority of insurance companies, medical associations, HMOs and other hospital associations will resist facing the stark consequences of peak oil because they are benefiting from the status quo. On the other hand, those hospitals with a mission for stewardship of the earth and charitable activity are likely to be among the first to recognize the need for radical change in medical care.

  2. In the same vein, it’s obvious that nursing is not prospering even though it is in some ways the backbone of the system. Your profession’s main themes for reforming the healthcare system should center –I hate to use the word “should” - around radical resource conservation and efficiency, and the elimination of wasteful and environmentally harmful practices. In other words, reduce, reuse, recycle, and repair.

  3. Simultaneously, there will be a political struggle for the soul of healthcare: We will look to other nations with decent health systems where three core values predominate:

    1. no one goes bankrupt due to medical status;
    2. no one is denied treatment for any reason, and
    3. preventive and treatment medicine are integrated.

    This means one response to energy downturn leads to healthcare for all. The alternative to this is medicine becoming something for the wealthy few, with the rest of society receiving what amounts to triage –or, alternatively, home care or “folk medicine.” In some respects these alternatives represent the familiar themes of the Jeffersonian/egalitarian and Hamiltonian/elitist traditions.

  4. By forming a coalition with public health and even some of the growing number of doctors2 who favor a “single-payer” system, nursing can shape the transformation of our healthcare system.


Notes

1 Eckholm, Erik. “Cutoffs and pleas for aid rise with heat costs.” New York Times, April 26, 2008.


2 Cocco, Marie “More Doctors Prefer Single Payer As Health Care Worsens.” AlterNet, April 3, 2008. (digg).

Permanent link to archive for 4/25/08. Friday, April 25, 2008

Read Kunstler's newest novel  World Made by Hand. It was great. --TKW


Blind Spot

James Howard Kunstler

      I happened to be flying into Minneapolis the very day that Northwest Airlines announced its merger with Delta --Delta to be the more senior (more equal) partner -- in effect, to absorb Northwest and run its operations. Many observers are not optimistic that the merger will rescue these companies in any case, since both airlines are financial basket-cases, but it's a sort of last-ditch effort to save them both.

    It was less than great news up around Minneapolis, Northwest's corporate headquarters. A lot of people I talked to were anxious that Delta would cut service to a lot of little cities in the upper Great Lakes and northern prairie region, places like Duluth, Grand Forks, Green Bay, Traverse City and many other towns. Instead of one or two flights a day, they may end up with one or two a week, or none at all, they feared.

     The Northwest pilots were none too pleased, either, because Delta was making noises about their own pilots seniority counting for more than Northwest's pilot's seniority in terms of preferred assignments and scheduling. In fact, the Northwest pilots were so pissed off they threatened to scuttle the merger.

     That part of the country is a big region of wide open spaces Things are very far apart. You wouldn't want to drive a car from Des Moines to Rapid City, even if gasoline was a good bit less than the $3.50 a gallon it is now. Driving around the prairie is especially tedious -- and dangerous because of the tedium. The landscape is boring. The roads are dead straight and mostly dead flat.

     It happened, also, that I got a little guided tour of Minneapolis from the author-shlepping service that my publisher engaged. We rode past the old Minneapolis central train station. He said no trains stop there anymore (there's a dinky afterthought of a station next door in St. Paul). Anyway, the only train that comes through the Twin Cities is the pokey once-a-day Amtrak to Seattle.

     In other words, this region of the country has next-to-zero railroad service. Can we pause a moment here to ask: exactly how far does America have its head up its ass? Do you get the picture? Can you connect the dots? The airline industry is dying and absolutely no thought is being given to how people will get around this big country -- except to make the stupid assumption that we can just drive our cars instead. Even during the several days I was around Minneapolis, no news media or politician raised the subject of reviving passenger railroad service.

      In point of fact, these are exactly the kind of trips that would be better served by rail, anyway -- the towns that are less than five hundred miles apart. The travel time between trains and planes would be comparable, considering the two hours or so that you have to add to every airplane trip because of all the security crap, not to mention the delays. As a matter of fact, USA today ran a front page story two days after the Delta / Northwest announcement saying "Air Trips Slowest [now than] in Past 20 Years." Subhead: "Trend likely to persist as congestion worsens."

     One big reason for the airport congestion, of course, is that the runways are cluttered up with planes making trips of only a few hundred miles. This has been a problem for quite a while. Periodically, it gets so bad that the media gets all excited and sometimes (last summer, for instance) the President makes a statement deploring it. Since the current president is a knucklehead, it apparently hasn't occurred to him to get behind a revival of the passenger rail system. But Mr. Bush is apparently not the only elected knucklehead in this country, because absolutely nobody is talking about this.

     Now get this: we are sleepwalking into a transportation crisis. As I already said, the airline industry is dying. The price of petroleum-based aviation fuel is killing it. And forget the fantasies about running it on bio-diesel or used french-fry oil. Driving cars will not be an adequate substitute, either. It's imperative that this country gets serious about restoring the passenger rail system. We can't not talk about it for another year. We must demand that the candidates for president speak to this issue. If you who are reading this are active reporters or editors in the news media, you've got to raise your voices behind this issue.



Visit James Howard Kunstler's Website


If you are new to synergic science, the basics are covered here: We Can All Win! (PDF) See in html: 1) Understanding Life, 2) Three Ways of Relating, 3) The Relationship Continuum, 4) Three Classes of Life, 5) Human Neutrality, 6) INTERdependence is the Human Condition, 7) What is Wealth? 
Permanent link to archive for 4/18/08. Friday, April 18, 2008

The UnMONEY Convergence was a great meeting, more on that later. Today, Kunstler's latest rant is worth reading. I finished reading his new novel  World Made by Hand. -- a great read.


Slip of the Tongue

James Howard Kunstler

     Barack Obama caught hell last week for daring to tell the truth about the ragged thing that the American spirit has become. He said that small-town Pennsylvania voters, bitter over their economic circumstances, “cling to guns or religion or antipathy to people who aren’t like them” to work out their negative emotions. He might have added that the Pope wears a funny hat (see for yourself this week), and that bears shit in the woods (something rural Pennsylvanians probably know). Nevertheless, in the manner lately prescribed for those who slip up and speak truthfully in public (and in contradiction to the reigning delusions), Obama was pressured to apologize for his statements.

      The evermore loathsome and odious Hillary Clinton, co-owner of a $100 million personal wealth portfolio, seized the moment to remind voters what a normal, everyday gal she is -- who would never look down on the small-town folk of Pennsylvania the way her "elitist" opponent had -- forgetting, apparently, that the Clinton family's consigliere, James Carville, famously described the Keystone State as a kind of redneck sandwich with Pittsburgh and Philadelphia as the bread, and Alabama as the lunch meat in between.

     As I mull over all this, I begin to think that Hillary is exactly what the USA deserves and, that should she manage to winkle away the nomination and get elected president, the outcome would be instructive and salutary. For one thing, she will be buried under an avalanche of political woe, beginning with the basic financial insolvency of everything in the nation except the Clinton family. Then she would proceed straight into an oil-and-gas clusterfuck that could take this society back to the eighteenth century economically.

      This would have the positive effect of forcing the American public to look elsewhere for governance than the usual parties in Washington, D.C. It's time for a national purgative, anyway. In fact, it's way overdue. Are the Democratic and Republican parties anymore necessary than the Whigs? Neither of them can really articulate the problems we face (and when their honchos slip up and come close to the truth, they're persecuted for it).

      A President Hillary will also go a long way to defeating the popular delusion that a world ruled by female humans would be heaven-on-earth. (It would be more like one of those chaotic single-parent households in Section-8 housing, ruled by a harried and distracted mom, with a shadowy man in the background molesting the little ones while she was off working at the WalMart.)

      I'm very sorry that Barack Obama apologized for his remarks. It compromised his authority. They were truthful and correct. He might have added that the anxious and bitter lower classes were also neurotically hung-up on cars, and that his first act as president would be to shut down the Nascar tracks by executive order in the interest of national energy security.

     It's been illuminating to see how almost nobody has come to Obama's defense in this matter -- hardly anyone in the press, anyway. It shows what the mainstream media's interest in the truth is (close to zero).

     In the background of these sad and sordid campaign doings, the financial sector -- and the dog's-body economy that the wagging financial tail used to be attached to -- is whirling steadily down a big wide culvert, along with the rest of the debris shaken loose by the spring rains. Congressman Barney Frank and Senator Chris Dodd have been putting together mortgage rescue schemes that are gut-bustingly hilarious because they don't seem to take into account the basic fact that nobody knows who the lending parties to all those distressed mortgages really are. (Hint: they're not the "servicing" companies who send out the default notices.) So when they say that the government will "negotiate down" the principal owed on a house hemorrhaging dollar value, who exactly did they have in mind as the negotiating partner?

      These are issues that would, in a more mentally-healthy republic, occupy center stage of the political conversation -- not whether a cohort of Cheez Doodle addicted rural Pennsylvania morons prays out loud for God to shoot all the Mexicans.


James Howard Kunstler's Website


If you are new to synergic science, the basics are covered here: We Can All Win! (PDF) See in html: 1) Understanding Life, 2) Three Ways of Relating, 3) The Relationship Continuum, 4) Three Classes of Life, 5) Human Neutrality, 6) INTERdependence is the Human Condition, 7) What is Wealth? 


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This means we are synergic humans. Synergy means working together, operating together as in Co-Operation, laboring together as in Co-Laboration, acting together as in Co-Action.
 
The goal of synergic union is to accomplish a larger or more difficult task than can be accomplished by individuals working separately. We are committed to a world where I win, you win, others win and the Earth wins. Win-Win-Win-Win.
 
We have a choice in how we go about trying to make the world safe. If we see the world as half evil, we can hate that part of the world and try to hurt and kill it. If we see the world as half good, we can love that part of the world and try to help and support it.
 
One human once said that the end justifies the means. If I intend good than my use of evil means is forgiven. Jesus of Nazareth said: "No, the means become the ends. If I use evil in search of good, I become evil."
 
Life is nothing but choices. What will you choose to do?

We believe that you should, "Do unto others as you would have them do unto you." What is it that most of us want others to do unto us? Synergic scientists answer this question as follows: Help others as you would wish them to help you.  Or "Treat others the way they want to be treated."
 
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