Sunday, March 24, 2019

Italy Picked Off By China? The Folly Of It All

Historic Memorandum Has Huge Ramifications
The Italian Prime Minister and Chinese President Xi Jinping signed a historic memorandum of understanding Saturday morning in Rome that made Italy the first founding EU  member, and the first G-7 nation, to officially sign on to Beijing's "One Belt, One Road" (OBOR) economic development initiative. This was done as Washington and  Brussels which have expressed concern helplessly looked on. OBOR, one of President Xi Jinping's signature ventures, is viewed by many as China's somewhat dodgy project to re-colonize the world's poorer nations and gain leverage over them by implementing a strategy of extending cheap credit, then seizing assets. An example of this is what occurred with a port in Sri Lanka.

Along with the memorandum, China and Italy inked development deals covering everything from port management, science and technology, e-commerce and even soccer. These so-called deals reported as totaling as much as $20 billion appear to be Italy's motivation. For Italy, this appears an "any port in a storm" situation. Italy struggling with a high level of debt and a stagnating economy has found the EU less than supportive and lacking answers as to how they might kick-start growth. Still, the folly of linking up with China in hopes they will become a lifeline to prosperity comes across as an act of desperation that will not end well.

China Has Printed Money Like Crazy (click to enlarge)
The OBOR project designed to expand China's trade and influence is controversial and could become a massive problem over time. The number of problems with this union are almost too many to count. Italy which has seen its manufacturing sector debased by cheap knockoffs from China and other low wage countries will find little comfort in bringing more of these goods into their market. The high fashion houses located in and around Milan will only face more grief as China exploits Italy and uses it as a backdoor into the broader Euro-zone market. Not only has the IMF warned of the potential of many of China's OBOR funded projects going bust China's history of flexing its predatory business model should leave many Italians very concerned. If you wonder how China will pay for OBOR, it appears to many China watchers that they will simply continue printing money and expanding credit.

Much of the blame for this problematic alliance falls on Brussels and the EU for its failures to deal with worsening conditions within its borders. The U.S. National Security Council was not alone in issuing a direct warning to Italy recently for its coziness with China but was joined by a firestorm of responses from leaders such as Donald Trump, Angela Merkel. Jean-Claude Juncker, the head of the European Commission recently described China as a "competitor, a partner, a rival," terms that indicates the unease and fear at which the EU must feel when they look out at the expanding giant that cranks out products at a cost far below those at which they can compete. Yes, again trade and deficits loom large in the minds of those watching this unfold.

Port In Trieste Gives China New Access
Also, there is the issue of defense, Italy, a key member of NATO has just given a fox the keys to the hen house. Buried within the dozens of agreements signed were two port management deals between China Communications Construction and the ports of Trieste. These ports are located in the northern Adriatic Sea, and Genoa, Italy. While Genoa is a long-established port, the port in Trieste has the most potential for China, the South China Morning Post. reports the port is strategically important for China because it offers a link from the Mediterranean to landlocked countries such as Austria, Hungary, the Czech Republic, Slovakia, and Serbia. All these countries are markets Beijing seeks to reach through OBOR.

Following the signing Chinese media celebrated Italy's decision, and predicted that it wouldn't be the last western power to side with Beijing. All this flies in the face of what the European Union proposed following its review of China policy, it recommended "10 actions" to member states, including requiring reciprocity for market access, it also highlighted national security risks stemming from Chinese investment in "critical assets, technologies, and infrastructure." All in all, this is a big deal, it lends legitimacy to China’s predatory approach to investment that continues to unfold across the world and it even undermines the current trade talks between America and China.  

Consider this article an overview of the folly of all this and recognition that the world is not progressing in an orderly fashion. Still, the ramifications flowing from Italy's deal with China may, in the end, prove to be a deal with the devil that opens the floodgates that washes away much of the EU and breaks the euro. Because of China's ties with Russia, it might even strengthen Putin's ability to push back on NATO. This may also change the face of Italy forever, adding to the influx of immigrants that are now there we will most likely see an influx of Chinese workers. While many of us can sympathize with Italy for the pickle it finds itself in that lead to this turn of events

                                                                                   This blog is not written for money
                                                                                 or profit but as a way to share ideas
                                                                                 and thoughts. If you liked this post
                                                                                 feel free  to E-mail it to a friend
                                                                                 using this link. E-mail to a friend

Footnote; For more about how Italy got into it current mess see the article linked below.

Saturday, March 23, 2019

China's C919 Poses Major threat To Boeing's Dominance

Now Airborne China's C919 Will Be A Major Player
Recently Boeing's reported earnings that smashed expectations and its guidance came in far higher than consensus.  Boeing share price then soared taking out its all-time high as annual sales topped $100 billion for the first time in its 102-year history. Many analysts claimed the American airplane maker was set for even more gains in 2019 after bouncing back from production snarls with its 737 jetliners but with their airplanes falling from the sky everything rapidly changed.

The sales of jetliners are very important because they play into the bigger picture of world trade and trade imbalances and China is a massive battleground for Boeing and Airbus because of the sheer size of their market. China's air travel market is expected to surpass the United States by 2024, according to the International Air Transport Association which estimates that 927 million people will travel to or from China by air in 2025. This compares to the 904 million passengers to and from the United States. Translate that into actual orders, and you’re looking at something on the order of 2,800 new planes with a book value of $329 billion. Boeing has projected it could sell China 6,330 planes worth $950 billion during the next 20 years. Nearly three-quarters of the planes for its civilian airlines will be single-aisle with about 700 widebodies. Boeing wants to sell China as many of those airplanes as it can and beat out its arch-rival, Airbus. 

Unfortunately, Airbus won't be the only rival Boeing has to contend with because China is rapidly pushing its own aviation sector forward. The C919, being built by Chinese state-owned aviation manufacturer Commercial Aircraft Corp of China (COMAC), is a perfect example of Chinese intentions and should send fear into the hearts of Americans. COMAC has spent 11 years and $6.5 billion developing the C919, which is seen as China's answer to the Boeing 737 and Airbus 320.The C-919 has a flight range of up to 3,451 miles (5,555 kilometers), which means it can fly non-stop from Shanghai to Jakarta or from Paris to Montreal and it can fit 158 to 168 seats. This hits right at the heart of its competitors, different models of Boeing 737 can seat 85 to 215 passengers; while an A320 can accommodate 100 to 240 people.

Expect China To Rapidly Ramp Up Production
Politics plays a big role in industry and the Chinese government which has long aspired to play the "plane game" has no qualms admitting its big role in developing the country’s aviation industry. Miao Wei, vice minister of industry and information technology, has been quoted saying the government encourages the development of export-oriented aviation products. Articles that have appeared on this site over the years argue that China is not our friend and that we had better be on our toes. Several of these articles explored how China was ramping up its fledgling aviation industry and how when it hits its stride we can expect cutthroat competition. The article warns that as China's aviation industry takes flight over the next decade America and Boeing may be saying say goodbye to a big chunk of its exports in this field.

An article in USA Today in the fall of 2009 focused on the planned C919, called the "big plane" project, designed to directly challenge U.S. plane-making giant Boeing and European rival Airbus. The article reported the first flight wasn't scheduled until 2014, and the jet wouldn't be available commercially until 2016. But even back then the Chinese manufacturer claimed the twin-engine, narrow-body design of the C919 is superior to its competition the Boeing 737, the best-selling jetliner in the world, and its competitor, the Airbus A320. COMAC is yet to release the price tag of the jet, but a report by China National Radio predicted that it would likely to be sold for around $43 million. This is much cheaper than a Boeing 737 or an Airbus 320 which each cost around $80 million $100 million respectively.

At the end of 2018, the third C919 completed its maiden flight at the Shanghai Pudong International Airport. Footage of the flight released by Chinese state broadcaster China Central Television Station. COMAC said the plane completed 21 test points during the flight but did not reveal more details of the maiden flight, such as the plane's altitude or speed but in May of 2018, the first C919 during its maiden flight reached 10,000 feet with a maximum speed of 170 knots or 196 miles per hour. The first two C919s took to the skies just last year and are undergoing flight tests in order to obtain flying certification. Three other C919s are currently being assembled and are expected to complete their first flights next year.

The Chief Designer of the ARJ21, Wu Guanghui, says that COMAC has turned to new, lightweight carbon composites in place of steel for the plane's construction to gain the 12% to 15% in fuel efficiency. Boeing, which is the pioneer in composite design, has had difficulty in bringing its first composite plane, the 787 Dreamliner, to market, however, once a company pioneers the way we find those following in their footsteps have an easier path. Boeing and Airbus have delayed plans to build more fuel-efficient, narrow-body planes to replace the 737 and A320 because it cost billions to create a new plane and adding composites won't contribute enough fuel-efficiency savings to justify the move. Price isn't the sole factor for airlines in buying a plane, overall quality, reliability, maintenance, and readily available replacement parts, as well as the pilot and mechanic training that manufacturers provide, are also important.

Building commercial aircraft has never been a consistently profitable business, manufactures risk several billions of dollars every time they try to develop a new type of aircraft. The Communist government, however, is playing by a different set of economic rules and using the C919 as a springboard to develop a nationwide aviation industry involving more than 200 companies, 36 universities and hundreds of thousands of personnel. Some free trade optimist claim China's airline industry has become a private-sector industry and ignore the government's influence saying, just because the C919 will be made in China doesn't mean all the Chinese carriers will stop buying 737s and A320s to buy only C919s. They also claim it will be decades before the Chinese will be able to produce anything close to the numbers of planes that the Chinese market will demand.

This is not China's first jet, at the end of 2015, COMAC delivered its first new "Advanced Regional Jet for the 21st Century," dubbed ARJ21. The buyer, Chengdu Airlines contracted to buy 30 of these new planes and across China, more than 300 orders from various airlines and airplane-leasing firms have been placed. The ARJ21 is tailor-made for the Chinese regional market, it is capable of carrying as many as 90 passengers on trips as far as 1,300 miles allowing it to make direct flights to just about any point in the country. Currently the plane is built with about 50% U.S.supplied parts, including avionics from the well-respected Rockwell Collins and engines from General Electric. The ARJ21 is the result of a trade delegation led by President Obama back in 2009. This does not impact Boeing which doesn't play in the 90 passengers and below market but it directly competes with models from Brazil’s Embraer and Canada’s Bombardier.

So where is this going? China is investing big in this vision with its State media touting the "advanced technologies" that will be used throughout the plane, from new avionics to the plane's frame partially made of light composite materials. COMAC is also developing a wide-body plane, the C929, in cooperation with Russia's United Aircraft Corp. Another company, Avic, is currently working on China’s first helicopter factory. The bottom-line is that it would be incredibly naive to underestimate China's resolve in rapidly becoming a player in a field that will move it up the manufacturing food chain. Expect competition in this field to rapidly intensify as new Russian and Brazilian jets also hit the market.

With China's experience of building cities from scratch and government-backed financing, why build just one factory when you can build twenty? This means we should not expect China's aviation industry to grow organically but to be engineered by an aggressive government with a mission. All this is part of a plan to take China a huge step closer to its trillion-dollar aviation dream of replacing all 6,000 to 6,800 of its western aircraft will its own planes. This translates into a cost of around $1 trillion dollars, with most of the replacements expected to be this single-aisle made-in-China jet. This makes China's C919 a big deal.

Friday, March 22, 2019

India Tightens Noose On E-retailers And We Should Too!

India Understands Importance Of Brick And Mortar
India has tightened the noose on E-retailers and America should too. According to Quartz India, the country's new foreign direct investment (FDI) rules for the e-commerce industry could result in a massive set back for existing players. This means companies such as Amazon and Flipkart may lose up to 40% of their revenues. by 2020 due to the tightening of FDI norms, according to CRISIL Ratings. Anuj Sethi, senior director at CRISIL said, “The impact on e-retailers would be largely in the electronics and apparel segments, which account for a bulk of their revenues.”

Near the end of December, the Narendra Modi government announced several restrictive changes in its FDI policy for online retailers. The new rules are aimed at safeguarding the interests of offline retailers were first floated in 2016 and include restricting e-commerce companies from entering into exclusive deals to sell at deep discounts. The new policy also bars them from procuring over 25% of the inventory from a single vendor, especially from sellers in which the companies own a stake. Launching products exclusively on their websites and apps has been a major money spinner for online retailers, but the practice has left small traders and sellers upset because they could not match the deep discounts that online companies offered.

The top two e-commerce companies in India, Amazon and Flipkart account for about 70% of the online retail industry revenue generate and about half of their sales through group companies. this means following the new restrictions on equity ownership in sellers, e-retailers will need to make changes in their supply chain and may be forced to rapidly alter business model in several ways. It is reported that Amazon and Walmart-owned Flipkart will not be compliant with the new FDI rules by the deadline and have urged the government for an extension of the deadline by at least six months.

The government’s move to tighten FDI rules for e-commerce companies comes after sellers listed on e-commerce marketplaces complained to the Competition Commission of India that Flipkart and Amazon were indulging in predatory pricing and deep discounting, destroying the business of smaller vendors. The rock-bottom prices offered by online retailers have taken a toll on brick and mortar stores. Between fiscals 2014 and 2018, e-retail in India grew at 40% a year. Still, this does not mean anyone is writing off the e-commerce industry and the long-term growth potential for Indian e-retail companies continues to remain strong due to increasing internet penetration, and the convenience of online shopping, and the growing purchasing power of households.

As stated earlier, America also needs to investigate ways to level the playing field and protect brick and mortar retailers that provide jobs and are so important to the fabric of communities. By far the worst abuser of the current e-commerce system is Amazon which has developed strong ties with the government and has even incorporated a complacent United States Postal Service in expanding their advantage over businesses by delivering Amazon packages at a discount and even on Sunday. To make matters worse state and local governments have put special packages together with incentives aimed at luring Amazon to build in their areas oblivious to the damage it will cause in coming years.

Prices are important to consumers but so are jobs, and removing the advantages e-retailers have comes down to achieving a balance between what is best for communities in the long run and giving consumers good value. While people hate new taxes something has to be done and while an online transaction fee can be seen as a tax its goal is to be "revenue neutral" taking pressure off communities need to raise local taxes on real estate and such. The revenue from such a fee would be sent to local governments in the area where the sale originated or goods are shipped, to offset lost tax revenue from retail closings. Still, rather than getting stuck on the details of something that will most likely never happen we should instead think about what kind of community and world we wish to live in and how best to preserve the nature and quality of the life we seek.

2018 store closures
2018 Retail Store Closings (click here to enlarge)
The ugly reality that store closures are set to accelerate is a cancer on America. Large retailers as a group are collectively set to lock the doors for the last time at thousands of stores this year. Across America stand a sea of empty and under-leased buildings that once housed thriving businesses that provided Americans with jobs. The damage Amazon is inflicting upon America when combined with the true nature of our so-called recovery spells big trouble in the future. As we take a closer look at what is driving the economy forward we find auto sales, student loans, and our ballooning national deficit. Today roughly a third of those buying cars are taking out sub-prime loans stretched out far longer than ever before and sadly, many young people are facing huge student debt that will affect their disposable income for years to come. Then there is the issue of massive deficit spending, this alone acts as a giant stimulus package but comes with massive negative ramification.

Local businesses, both large and small are often viewed as the bedrock of our communities and with the closing of each one, a little bit of us goes with them. The brick and mortar stores suffer several expenses not fostered upon online companies. Whether it is the cost of maintaining landscaping, ensuring safe ingress and egress or providing a parking lot for customers these costs rapidly add up. Staffing for longer hours for the convenience of customers often results in being open when foot traffic would indicate a store should be closed and even dealing with security and shoplifters is another expensive burden.

Adding to there problems, stores such as Target and Macy’s have even had to face a slew of dishonest shoppers trying to sneak defectives products purchased online back as exchanges and trading them for a fresh unbroken product. The fact is the assault on our brick and mortar retailers coming mainly from Amazon with it engulf and devour strategy comes at a great cost and will be levied in many forms such as reduced property taxes for local communities. We can also expect a slew of empty buildings blighting our landscape and driving down property values across the nation. With many traditional brick-and-mortar retailers having very heavy debt loads and looking at nearly $1 trillion of debt coming due over the next 3 to 5 years if the economy turns south this might only be the tip of the iceberg as retailers default on loans and bonds as well.

Washington lawmakers have shown little interest in addressing the issue of how online shopping plays into the overall economy other than initially granting it some rather large advantages. The fact is store closures are set to accelerate, this comes with a hidden cost to society that the average person fails to internalize. An "Online Transaction Fee" could go a long way to level the playing field between online retailers and brick and mortar stores. A charge on all online purchases of just a few percentage points would add a bit of competitive fairness to retailing while halting the demise of many of the brick and mortar stores that line the streets of American communities. 

While like most Americans I'm not a lover of any kind of tax, but an online transaction fee may be needed to halt the damage flowing from this shift in how consumers shop. It could make the difference of whether many small businesses across America remain in operation. These businesses pay a massive amount of real estate taxes which flows directly into the support of local police and fire departments as well as maintaining our roads. Not only are these stores where we go when we need something really fast or that has to fit just right but they also employ our friends and neighbors. As a final argument as to why we should support local stores, it should be noted that "we the people" will suffer and be forced to pony up more dollars in local real estate taxes as their contributions drop and local services are cut.

Monday, March 18, 2019

Tesla's Cars Are Just Not That Good!

Tesla's Quality Is A Problem
Simply put, "Tesla's Cars Are Just Not That good!" There I said it, someone had to. While many people have tried to put Elon Musk on a pedestal the factors that brought him to where he is today seem to be on the wane. The recent unveiling of Tesla's new Model Y was considered by many as an event aimed at distracting analysts and the company's critics from its cash balances but the fact that the car won't be delivered to customers until the fall of 2020, has instead become a cause for concern. Beside the fact the car has no "Wow factor," several analysts and some in the media, such as Bloomberg's Dana Hull, rushed to point out this is later than some analysts expected.

Of course, Musk predicts the Model Y will sell better than the Model S, Model X and Model 3 combined saying, the crossover will have “the functionality of an SUV, but ride like a sports car.” The long-range version of the Model Y, with a battery range of about 300 miles, will have a starting price of $47,000. A less-expensive standard-range model will be available in spring 2021 for about $39,000. Some Tesla watchers speculate the new model could further weigh on current Model 3 demand as some consumers may decide to wait a little longer so they can purchase a Tesla crossover vehicle. This comes as the introduction of a cheaper Model 3 could also dent Tesla’s overall margins.

Tesla Appears On A Mission To Self-destruct
This is being taken by many as a sign that Tesla is increasingly becoming "liquidity-constrained." The company is slated to start taking pre-orders, at $2,500 per car, more than twice the $1,000 it asked to reserve a Model 3 but few people are predicting a huge rush to pony up cash for Tesla's new vehicle. The Model Y was originally supposed to be an add-on product with the Model 3 which was expected by now to be rolling out at 10,000 units a week. The fact is Tesla has been plagued by production problems resulting in quality issues at the same time that demand doesn't seem to be where it needs to be in order to handle even that many cars. This translates into confusion with Tesla currently losing money, cutting jobs, and closing stores.

While his vision and what many people still see as "top-notch" engineering had merit, Musk has failed to execute his mission to build a quality vehicle. This has been particularly true when it comes to the lower end of the price spectrum. Mass producing an automobile is no easy or small task. Many large experienced companies have failed to stay competitive in this cut-throat industry where any misstep has massive ramifications. One of the biggest problems Tesla faces is that it is poorly managed and seems to be making up its business plan on the fly and missing deadlines. This means broken promises to those buying their cars.

High-profile Tesla Crashes Have Been Noticed
Circling back to the crux of this article which is Tesla simply has not been able to produce a constantly quality product, articles of high-profile Tesla crashes do little to improve the company's image. The tales of owners being jerked around when it comes to having their cars serviced also detract from the brand and as time goes by more and more of these are surfacing. Fickle consumers, when asked to spend a great deal of money on a product, have little tolerance for a product straight off the production line that is chalked full of flaws and defects.

Government subsidies may have caused buyers to be a little bit more forgiving in the past but as they end and competition picks up those who have supported Elon Musk and Tesla seem to be leaving in droves. With over 100 different electric cars expected to hit the market by 2025, Tesla's problems are about to become overwhelming. Many of these "Tesla crushers" are just months away from hitting showrooms. These new introductions into the rather small electric car market add to the long list of the problems nibbling away at Tesla's credibility and affecting future sales.

Ironically up until now, Musk's greatest strength may have been that so many investors doubt his ability to perform. This means that a slew of impatient clowns have shorted Tesla stock in search of quick profits. Like Musk, these bearish investors have continually shot themselves in the foot at every opportunity. They do this by constantly finding reasons to rush to the exits in short covering panics that invariably brings the share price back up. Each time this happens Musk rushes to claim the stock price as proof all is well, however, after his run-ins with the SEC this also may be about to end. Over time it is likely both Elon Musk and the value of Tesla will continue to dwindle, decline and diminish.

Saturday, March 16, 2019

Hyperinflation Seldom Occurs But Can With Rapid Speed

 A Wheelbarrow Of Money Can Be Worth Little
Life is full of facts we don't know or have simply forgotten. In a comment, a writer recently encouraged the curious to search "hyperinflation during the Weimar Republic." Some of what I discovered was surprising. Germany had come out of the first World War with most of its industrial power intact, the speed at which inflation suddenly destroyed the currency dovetails with some of my thoughts on currency trading today. It confirmed that inflation can stem from a growing lack of faith in a currency, or all currencies, rather than just a lack of available goods. As inflation takes root the goods available for sale often contracts as sellers retreat from the market awaiting higher prices which creates a self-feeding loop.

Hyperinflation Hit At A Startling Pace
It was amazing how quickly inflation took root in Germany during the 1920s, we must consider how fast it could happen now that we live in an age of instant communication. History shows the German currency was relatively stable at about 60 Marks per US Dollar during the first half of 1921. But the demands in May 1921 for reparations in gold or foreign currency to be paid in annual installments of 2 billion gold-marks plus 26 percent of the value of Germany's exports was crushing. The first payment was paid when due in June 1921. That was the beginning of an increasingly rapid devaluation of the Mark which fell by November 1921 to approximately 330 Marks per US Dollar. The total reparations demanded was 132 billion gold-marks which were far more than the total German gold and foreign exchange.

In August 1921, Germany began to buy foreign currency with Marks, this increased the decline, the lower the mark sank in international markets, the more marks were required to buy the foreign currency demanded by the Reparations Commission. During the first half of 1922, the Mark stabilized at about 320 Marks per Dollar because of international reparations conferences, including one organized by U.S. investment banker J. P. Morgan. After these meetings produced no workable solution, the inflation shifted to hyperinflation and the Mark fell to 8000 Marks per Dollar by December 1922. The cost of living index increased more than 15 times in just six months.

Click Here To Enlarge!
In today's world, many people have developed a false belief in financial stability because of claims by central bankers they have "controlled" inflation to where the economy will grow at a managed pace. A recent article on this site explored how the manageable inflation goal of 2%. has become the "holy-grail" of central bankers but this target central banks have deemed optimum is not economically valid and is "based only on their opinion" of what conditions will best allow the economy to flourish. For a long time, the ECB and other central banks have claimed deflation drives or allows their QE policy to remain and is central to their ability to stimulate. The moment inflation begins to take root and become solidly entrenched to where it becomes a self-feeding loop the flexibility of central bank policy is lost.

What makes this debate over future inflation very relevant is that the average American has witnessed in the last 30 years, a growing gap between government reporting of inflation, as measured by the consumer price index (CPI), and the actual cost of living. What the central bankers have conveniently brushed aside is that the formula that generates the numbers governments pump out was skewed in the 1990s when political Washington moved to change the nature of the CPI in an effort to reduce the federal deficit so nobody in Congress would have to register a vote that would harm the image of Social Security. For proof as to the real cost of inflation just look at the surging replacement cost resulting from recent storms and natural disasters. I contend that inflation would be much greater if more money had flowed into tangible goods rather than paper investments and promises over the last several decades and this has masked the rate central banks have debased our currency.

It might be wise not to become too trusting or complacent to the idea that inflation can be contained at 2% especially while deficits explode, debt builds, and central banks continue to stimulate the economy by printing money or that the economy looks good for the next year or so. In the past, I have put forth the theory that inflation could rule the day even if central banks are unable to keep the wheels on the bus and the economy suddenly collapses which is in truth beyond their control. If inflation does not become the flavor of the day it is also very possible the future may unleash, its sister, the powerful force known as stagflation.  which is also a threat to the average citizen and will devastate those improperly invested for its arrival.

The mindset of investors and of the "money people" often shifts into overdrive when opportunities for speculation arise. The distortion caused by easy money from Federal Reserve policy coupled with political and social compassion for affordable housing, medical care, has obvious implications as debt and promises continue to rise. Most economists agree the Central Banks are not in a position to tighten the money supply at this time. Remember, so many of the things we invest in such as pensions and stocks are merely paper promises but hard assets are rare. A word of caution, while hyperinflation does not often occur, when it hits, and the speed at which it can hit is a massive game changer that can make bonds and many other investments nearly worthless.

                                                                                   This blog is not written for money
                                                                                 or profit but as a way to share ideas
                                                                                 and thoughts. If you liked this post
                                                                                 feel free  to E-mail it to a friend
                                                                                 using this link. E-mail to a friend

Footnote; This is the first of a two-part series, the next part will be published within a few days.

Thursday, March 14, 2019

Passenger Rail Needs Huge Makeover To Be Competitive

We Must Reinvent Trains As People Movers
Railroads must be redesigned if they are going to be economical people movers. The fact is we need to totally rethink what is needed to efficiently transport people, the wide heavy tracks and stout passenger cars we use are overkill. A much lighter and smaller style pod would work, it could even be equipped with an undercarriage that would move the wheels in or out to adapt to a narrow "public transportation" or the wider standard rail tracks now in use. Some of the things I have seen over recent years are cause for concern and proof that regulators are still too involved and poor decisions are being made as to the direction and future development of this important national resource which should be an alternative to flying. 

To anybody that has given the subject much thought, it is perfectly clear mass transit in America is broken and to make things worse the system is a big money loser. Passenger railroads must be redesigned or "Reinvented." Railroads have much to be desired when it comes to efficiently moving people. While rails are viewed and hailed as an energy efficient way to move freight they could also be a great way to move people, but to do so we need to take a fresh look at what is really required and what is not. Most likely it will mean doing a lot of retrofitting the parts of the current rail system that could still be used. Sadly, the future of rail travel is only elevated to making headlines or being discussed when Amtrak has an accident or when Elon Musk refers to it in one of his futuristic rants.

During the last 250 years, the train industry transformed itself from its simple beginnings into one of the most influential transport industries in the world. That period of time was marked with countless train designs of all types and sizes. By the beginning of the Civil War in 1861, there were 30,000 miles (more than 21,000 of them in the North), and lobbyists were clamoring for a transcontinental system across the nation. The number of railroad miles continued to climb until hitting its peak in 1916. That year there was more than 250,000 miles of track—enough to reach the moon from Earth. Over 1 million people worked for the railroads back then and the train was the main way to travel and move freight on land.

Automobiles, trucks, and airplanes coupled with bad government rules took passengers and freight from the rails in the 1950s and 1960s as better roads and the interstate system was built. Many railroads went out of business or merged. In 1971 the federal government created Amtrak to take over from the railways what had become a massive money-losing passenger service. During the 80s the government changed many rules related to trains and the whole railroad business began to grow again. Currently, railroads carry about 40% of all freight, more than any other mode of transportation.

Click To Enlarge
I'm not a big fan of Elon Musk, I admit
when he unveiled his idea for the Hyperloop in August of 2013 it created quite a stir.  The Tesla Motors and SpaceX CEO dropped a 57-page alpha white paper on us. With his predictable flair Musk noted he didn’t really have the time to build or give us such a revolutionary transit system that would shoot pods full of people around the country in above-ground tubes at 800 mph. The reason this is important is that it was one of the few moments in America when people discussed an alternative way to move people about. For futurist and those who enjoy picking apart complicated plans, it was a godsend.

Years ago the abilities of trains were limited by many factors that no longer apply today. Improvements in materials and advancements in technology have cast the door wide open to rethinking the whole people moving process. In doing so the 80/20 rule leaps out at me if we can meet 80% of our objectives and achieve the bulk of what we want for 20% of the cost why complicate things. I contend the alternative to our current passenger trains neither be so drastically different or as expensive as the Hyperloop plan. Also, in the background of this debate the KISS principle screams out to be heard, "Keep It Simple Stupid" is the voice of reason in a situation like this.  

We must remember that bigger is not always better, and everything does not need to be ramped up and put into operation by tomorrow afternoon. When it comes to creating or changing something like the existing passenger rail system several big factors come to mind such as trying to utilize current rails and routes. Today even trying to run new rails and procuring new easements or corridors is cost prohibiting in areas of high population. This would mean adapting any system we develop to utilizing existing routes and most likely in a way that would coexist and not interfere with other forms of transport.

We Need To Think About Lighter Passenger Movers
We must overcome the existing definition or idea of what most people think a passenger train must be. New people transports need not be limited to using only one style or rail width but could adapt and mechanically adjust to narrower or different tracks in much the same ways as cars now go from two to four-wheel drive. Lighter cars would also not need the heavy duty roadbed or rails needed to hold up under hundreds of tons of weight that are placed upon current tracks. In addition to using existing tracks additional light duty and thus less costly tracks could be run where necessary. One place where right of way issues are not a big factor might be within the current confines of the Interstate Highway corridors.

Passenger cars do not need to be as high as those for moving freight which would greatly reduce their center of gravity nor for that matter would they need to be as wide. They could also be equipped with a system that wrapped around a lip on the track making it impossible to derail. The lighter weight people mover could sport its own motor or drive system allowing it to move without being pulled by an expensive and heavy conventional locomotive. It does not require a great deal of horsepower to get a much lighter weight car moving and once rolling little to maintain or achieve greater speeds. If each car has its own drive system it allows far more flexibility in scheduling and cars no longer have to be bunched together allowing for more departing times.

Features such as GPS would tell us exactly where cars are and adjust their travel while security cameras would assure passenger safety. The idea of smaller, lighter and faster people movers translates into much smaller tunnels and lighter weight rails and guides that cost much less. even the idea of standardizing the cars and simply modifying how they actually attach to the rails would reduce cost. It is important to acknowledge that what works in one city or region may not work in another as an article on the failed bus systems in my city points out that many mass transport systems are money bleeding nightmares with few riders.

A contest to create a prototype that would meet our needs or stir a conversation as to what a new modern passenger system should do might go a long way to move this debate forward. The speed and time of travel from point to point is a big factor in developing a system, but it is important to remember that at some point you are paying a lot of money to save only a small amount of time. Remember currently a great deal of time is already spent in getting to airports miles from our city centers and going through security checks for relativity short flights. When put in the proper context it seems a system to move people at a reasonable cost between "city centers" at an average speed of  125 miles an hour or more would eliminate the need for most smaller airports and be a superior alternative for many trips.

Those of us who have traveled across Europe on its trains often praise the system without looking at the economics that support it. We should be aware of both the cost and the overall benefits to society when it comes to planning such a system that would have such a large impact on how our culture develops. A well planned train system has the potential to influence future development on a scale similar to how the interstate highway system has changed life in America. The fact is a totally new passenger rail design could be introduced by private companies renting time on current tracks. Sadly, it is likely such ideas will be blocked by old laws on the books and a federal government busy debating such important issues as what constitutes a hate crime.

                                                                                   This blog is not written for money
                                                                                 or profit but as a way to share ideas
                                                                                 and thoughts. If you liked this post
                                                                                 feel free  to E-mail it to a friend
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Monday, March 11, 2019

Euro-zone Banking Deception Continues Unabated

Source: ECB, Federal Reserve Bank of St. Louis.
To say the Euro-zone banking system deception is continuing understates the size of the fraud occurring before our eyes. In many ways, it has been allowed to continue only because other central banks and financial institutions fear that shining a spotlight upon it would undermine world currency markets and bring about a collapse in confidence that light really does exist at the end of the tunnel. The chart to the right speaks volumes as to the size of this charade.

A huge problem before the region is envisioning exactly from where its next economic renaissance might flow. The source certainly won't be from a well tuned and responsive political system or because of its growing ability to produce goods for a fraction of the cost of competing nations. Unfortunately for the Euro-zone, much of its problem can be viewed as one of "stagnation." Figures show that as of 2017 not a single European company ranked among the top fifteen technology companies in the world. It was mainly North American and Chinese companies that are driving the world forward. Still, more troubling is that of the top 50 global technology companies, only four are European and even those are slowing losing their edge.

Challenged and crippled by political instability, cursed by a lack of political cohesion and strikes, many countries within the zone are struggling just to continue functioning on a day to day basis yet move forward economically. In France Marcon remains under attack from the yellow vest movement which has now disrupted business and impacted tourism for several months. In Italy where its massive national debt adds to the unfolding political drama, many issues remain unsettled. Also, there is the issue of Brexit and the possibility the United Kingdom (UK) may just walk from an unbending European Union and simply let the chips fall where they may.

All this raises the question of not if but when the value of the euro will begin to show the stress which has been masked-over and greatly ignored until now. I tend to agree with John Mauldin, chairman of Mauldin Economics, he thinks the flashpoint for the next crisis is likely to be in Europe, with much of the focus on Italy. The choice of Europe is whether to put a lot of bad debt on the balance sheet of the European Central Bank or deal with defaults and the contagion that flows from them. If not addressed the Euro-zone breaks apart and we’re going to get a 50% valuation collapse. “Greece,” he said, “is a rounding error. Italy is not" The bottom-line is Brussels and Germany are going to have to continue buying Italy's debt. It seems that until now, a program known as "Target 2" has been the salvation of the euro and responsible for preventing countries from collapsing.

Since 2015 we have been again witnessed capital fleeing to the north as a result of Draghi starting QE in 2015 and the Bundesbank starting to buy back bonds on the market. The Italian central bank is dependent on the ECB and has to buy Italian government bonds. German investors have to exchange these bonds for euros in Italy and transfer the money via Target 2 to their German bank. The growing differences in the Target 2 balance sheet are the result of the Germans, who own the Italian bonds dissolving them in Italy and transferring the money to Germany. Italians have also added to the capital flight as they liquidate their bonds and send their money abroad. This translates into enormously huge debt claims on the German side that are not covered by any securities.

If Italy or Spain withdraw from the Euro-zone, the Germans will be left holding worthless paper. This has not generated much unrest in Germany only because the Germany people have great confidence in the Bundesbank. At a press conference on 26 July 2017, Draghi said about Target 2: “It has nothing to do with the movement of capital from country to country” and the clearing balances cannot be overdrawn as long as no one leaves the Euro-zone. This translates into, Italy must not leave the Euro-zone! Italy's debt amounts to 2.3 trillion euros and its liabilities in Target 2 rose in June 2018 to 481 billion euros from 164.5 billion euros in 2015. This means that Banca d’Italia owes the Bundesbank almost half a trillion euros!

To be perfectly clear, there are many German economists who criticize Target 2 and see it as a check that cannot be cashed. This coupled with the slowing of the Euro-zone economy means the ECB appears once again to be on auto-pilot as Draghi recently announced a new round of long-term loans to banks and promised interest rates won’t be lifted from record lows until 2020. The ECB is safe for now hiding in plain sight even as the ECB president prepares to leave office in October after spending his entire eight-year tenure crisis-fighting. Still, if the Fed moves even a bit higher all bets are off. Weakness in the euro almost certainly will result in a stronger dollar which could be the catalyst for the emerging market crisis to spread to the rest of the developed world and evolve into a global deleveraging event. Again it is difficult to ignore the fact the euro remains very vulnerable.

                                                                                   This blog is not written for money
                                                                                 or profit but as a way to share ideas
                                                                                 and thoughts. If you liked this post
                                                                                 feel free  to E-mail it to a friend
                                                                                 using this link. E-mail to a friend

Friday, March 8, 2019

Economic End Game Set To Be Very Ugly!

Edvard Munch, The Scream
Sooner or later all great Ponzi schemes must come to an end. When the markets finally succumb to the fact that current economic policies have failed all will collapse and the "end-game" will have arrived. Following the financial Armageddon and I do mean following, as by "several" months, central banks will be forced to unleash such a massive amount of new currency into the system to combat a scourge of deflation that it will stagger the mind. This will in effect clear the deck of deadwood through hyperinflation and pave the way forward to introduce a new or a "batch of new" currencies. Call it a "re-alignment" if you wish, but in reality, it will be the recognition that our path was an unsustainable illusion and that a new start will be deemed the best path out of the legal morass that contagion and collapse has rendered. The debts that are not written off will become a moot point in that most will be devalued and paid off in worthless paper. The issue will not be what is fair but how to get from here to there with the least damage to the institutions and wealth those in power seek to protect.

We must recognize that we are but pawns in the giant game known as the global economy. Please excuse the tone of this article, it is rooted in the idea that on occasion it is good to vent or say what is on our mind. Sometimes we have to simply concede things are what they are and find solace in the thought that things could be far worse. You can expect promises to be rewritten and broken. Rules will change as we go through the wash. Most people will see their assets rinsed away as society is put through the wringer. For example, expect the cost of living adjustment on social security to be modified reducing payments to the elderly. Adding to the woes of retirees is that many pensions will be forced to reduce payouts and break promises as the returns on their investment fail to meet expectations. Many of the guarantees and paper promises granted over the past decades will prove to be less valuable than the paper they are printed on.

Venezuela Stands As Another Recent Example
Recent revelations showing the Fed has been in collusion with Goldman Sachs and complicit in allowing them to do damn well as they please garnered little attention. The scheme to transfer wealth to the large banks is intact and most Americans know something is wrong but are too busy with their day to day existence to react. Eyebrows should be raised over the revolving door between large financial institutions and government that allows former employees with connections and strong ties to policies to flow freely back and forth between the two and the conflict it raises. It is not illogical to consider this growing wave of crony capitalism will soon sweep us off our feet. This is something that has inflicted pain upon people throughout history and closely related to what we know as government corruption.

With big business increasingly exerting its power over small enterprises it is not surprising that many people feel trapped in a world where their options are rapidly vanishing. In many ways, those in control have paved over economic reality masking and covering a multitude of sins against the laws of supply and demand. It is impossible to deny this has also taken its toll on "true price discovery" that allows our economic system to adjust and properly function. As pawns in this game, we can either choose to sacrifice ourselves or fight. In this case, fighting means to undertake a strategy that protects what we can of the life we have created within the power we have been granted. The fact you are reading and thinking about this subject puts you in a far better position than the masses who see before them blue skies and unicorns grazing upon a hill.

Make no mistake, we cannot and should not look for a white knight to come riding in to save the day, no such leader exists to lead us out of the economy hell we have created. Predictions of  "lost decades" are not uncommon as we recover and struggle to find a path forward. Here in America, the political system we have created often ask a majority of voters to cast their ballot for the candidate they "hate the least" or in more politically correct terms the "least of two evils".  Adding to our woes is the constant reminder that even if we garner up the enthusiasm to go to the polls rather than disengaging from the process the poorly crafted electoral college will soon strip us of any illusion that all votes are created equal.

As the global economy moves forward it is difficult to ignore that it is constructed on a weak foundation of imbalances, lies, and excesses. We only need to look towards China with its ghost cities and the fact its massive factories continue to crank out far more steel than is needed. Across the world, debt has exploded as wages stagnate. Countries have borrowed against the future by running up huge deficits. Good jobs based on creating and doing a real task that can be economically justified are in short supply. The situation has become dire and the numbers do not work, borrowing money to merely pay the interest on past debt and NIRP is not a prescription that leads to economic nirvana and bliss. The option to what you have just read is a war so nasty and devastating it will make the above look like a walk in a rose garden. 

Wednesday, March 6, 2019

Trends Point To Rents Edging Higher In The Future

You Can Count  On Death, Taxes, And Higher Rents
Several trends point to the reality we should expect rents to edge higher in the future. While many economy watchers tout the line any economic crisis will result in massive defaults and deflation hidden forces may prove them very wrong. Over the last few decades, a great amount of wealth flowing into paper promises rather than tangible assets has masked true inflation but it is everywhere. One place it is most obvious is apparent in the replacement cost of buildings and infrastructure destroyed or damaged by natures fury.

Local, state and national governments need revenue and this translates into higher taxes plus a slew of new fees are about to be unleashed upon their citizens. These will take many forms but it is clear that we will see more taxes assessed upon wealth, income, and property as well as soaring utility cost often driven by government mandates. When push comes to shove we can expect the government to suck wealth out of the private sector using the "greater good" as their justification.

Most people do not realize big government acts as a wall against deflation. Over the years as the government has grown it has created a wall of rising resistance to a pullback in prices. Today with more employees guaranteed their wages will not fall and governments committed to buttressing their economies during "hard times" people have less to fear when it comes to seeing their incomes slashed. In this way, big government is more aligned to creating inflation or stagflation than adding to a self-feeding deflation loop. All these factors mean we should all begin to prepare for higher rents and expect the cost of a place to live and do business to edge ever higher with any reprieve due to high vacancy rates as only temporary.

It Comes Down To What You Can Afford
Rising property taxes and fees, utility bills, as well as increased maintenance cost, must be passed on or the supply of housing will substantially decrease. This translates into housing simply becoming unavailable which is what happens under price controls. Ever higher rents are already driving people away from expensive-coastal-cities expensive coastal areas such as New York City and San Francisco into Sun Belt cities where relatively cheap rents, nicer weather, and good job opportunities await.

A recent monthly report from RentCafe, a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States, indicates this trend is already beginning to lift the cost of living in what were often considered inexpensive areas to live. While across the nation average rents climbed only just 3.3.% year over year according to  Rent Cafe's Yardi Matrix, in January rents rose most rapidly in smaller cities such as the suburb of Henderson outside Las Vegas, Nevada. Of large metro areas, Las Vegas stood out as the city where rents saw the fastest growth (+8.3%)  with rents in Phoenix, Arizona, also seeing a large (+7.6%) increase. Still, even larger increases occurred in smaller cities like Midland, Texas (17.7%), Odessa (14.2%) and Reno (10%).

Click On this List to Enlarge!
Add to the issue, demographic trends will continue to support housing demand as older less expensive units come offline and are replaced by newer more expensive units the cost will be passed on. In the future, higher interest rates will be of little help in bringing down housing cost because the financing cost to build new rental units will rise. While this may impact what rental units sell for it does little to lower the monthly debt service of landlords which is part of their expenses that feed directly into rents as the overall cost of doing business.

As you read this article it is important to realized rising rental and housing cost is in part being driven by America's frustrating housing policy that allows or is complicit with watching roughly 80% of new apartment construction flowing into the high-end luxury market. The government holds huge responsibility for a rising share of our housing problems in low-income situations because its policies avoid dealing with the growing number of tenants that are poor. Irresponsible government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the rest on the private sector. The best way to address or level the playing field would be to move away from public housing and give those needing housing aid "rent only vouchers" that could be used with any landlord rather than putting these people into a quasi-government run project. 

Not only is all this discombobulating enough, even when our government funds low-cost housing it is often squandered. Fort Wayne, the city where I live, has announced another incestuous boondoggle to be built "low cost " housing using government money. Fort Wayne is on the list of least expensive places to rent and it should be noted that a slew more new apartment projects are already under construction which will pressure rents even lower. We can now add to these, Posterity Heights, a multi-phased development designed to provide net-zero housing, electric car sharing, an on-site early childhood learning center, education and job opportunities, healthy food and other amenities for traditional and single parents on a path to self-sustainability. 

The $42 million development will indeed be a monument to governments inability to act responsibly. Let me be clear, these residential units are not "plain Jane" in nature but an "over the top" effort to build an expensive monument to "affordable housing" that can act as a model for other communities. This is a cutting-edge experiment so inclusive that it even provides an electric car-sharing program for residents. This is exactly the type of project that raises the ire of hard-working taxpayers who wonder why their lower-income neighbors are enjoying new side by side refrigerators and have trash compactors while they don't. 

In the long run, rather than pouring money into the hands of those needing housing in areas that are very expensive to live, the government would be wise to encourage many of these people to relocate to where housing is both plentiful and less expensive. Over the long run, this would be a "win-win" in that it would lessen the cost of housing low-income people while supporting housing values and encourage renovation of the housing stock in these areas. The amount people pay in rent for a small apartment over three to four years in an area like New York City or San Francisco is often less than the cost of a home in some cities.

Many people that have tried out the role of being a "landlord" will testify that it really is not all that fun and the risk to reward ratio is totally out of whack. We live in a society that is becoming more progressive and bending over to protect the rights of what they call the "most vulnerable." This means the rights of property owners are often thrown under the bus for the "greater good." A difficult and expensive court system coupled with a lack of desire on the part of society to protect the rights of landlords has driven many small and private providers of housing from the market. Many of the judgments ordered paid by the courts are never paid and impossible to collect. When considering all the above it is difficult to see lower rents in our future.  

                                                                                 This blog is not written for money
                                                                                 or profit but as a way to share ideas
                                                                                 and thoughts. If you liked this post
                                                                                 feel free  to E-mail it to a friend
                                                                                 using this link. E-mail to a friend

Footnote: The article linked below sheds a bit of light on this issue of evictions that result in people becoming homeless. I have found the reason many people are evicted is because they do not follow the rules. This often means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people. It must be noted, the unintended consequences of government policy that sidesteps responsibility for the dysfunctional poor only add to America's housing woes.

Saturday, March 2, 2019

Nuclear War Still Atop List Of World's 10 Worst Problems

Threat Of Nuclear War Grows Larger
Generally, we see little movement in the list of the "Worlds 10 Worst Problems" as counted down from least to most crucial. In fact little has changed until now from late 2013 when this list was first composed, and when it was last updated. In August of 2017, however, some serious reshuffling occurred to reflect the drumbeats of war flowing out of Washington and the capitals of other nations. this resulted in the leap from fourth to first place for "Weapons of war and mass destruction." This is extremely significant because it can be very difficult to get this particular genie back in the bottle once it is out. Of course, when composing this list the term "most crucial" is very subjective, meaning that it depends greatly on an individual's interest and priorities. 

In some ways, it is ironic that angst between President Trump and North Korean leader Kim Jong-un had a great deal to do with moving nuclear war into first place. That was replaced by a budding  "bromance" between the two boys and two face to face meetings. Sadly, the most recent in Vietnam has broken-down, still, those daily threats of lobbing bombs at each other have been replaced by promises of turning a more friendly North Korea into an economic growth machine. Unfortunately, other problems have recently intensified. Along the border between Pakistan and India, the potential for major war to break out continues to build as the disputed border region of Kashmir again becomes an issue. Both countries have nuclear bombs which elevate fears of a major conflict. last but not least tensions remain very high in Ukraine where warmongers continue to push Russia and Putin which has no intention of backing down.

Like many people, I do not find what is known as the concept of Mutual Assured Destruction, or MAD to be reassuring and see little potential in thinking we will peacefully resolve these issues by starting a new arms race. What the world would look like following a nuclear war is very murky, yet many people now consider nuclear weapons as just another tool or option for us to use in our defense if we are attacked. The nuclear deterrent America holds is a hundred times larger than needed to stop anyone sane or rational from attacking America, and for anyone else, an arsenal of any size will be insufficient. The sad fate that conventional warfare unleashed upon Mosul and Aleppo where death and destruction turned once proud cities into rubble stands as a monument of man's inhumanity towards man, however, this pales to the devastation a nuclear attack would wreak.

Future Generations Depend On Us
The greatest problems faced by mankind impact the shape of our lives' and our very existence. Most of these are issues that center on our sustainability which means we must begin to address these many problems with long term solutions. Sadly, politicians do not deal well with such things leaving mankind without a great deal of direction. As we look at the human condition we can let fate take us where it may choose or we can take control of our future by proper planning and by guiding it as best we can.

Below is a list of the world's ten most crucial problems. Remember the position a problem holds on this list can shift from time to time as events take place, but expect most of them to remain on the list. Unless a black swan event such as a meteor heads our way this is what you have. Some problems have been grouped with the collateral issues associated with them, this may include the current "buzz words" used to describe their importance. Different people would group these issues in a variety of other ways and move about their priority. As always your comments are welcome.

10.   Demographics of an aging population;   As the population grows older euthanasia and the quality of life will become an issue. This must be handled in a fair, honest, humane, and compassionate way. The alternative is to simply let many older people wither and die hungry while existing in pain and squalor.

9.  Creating an environment that allows and encourages people to develop fulfilling lives;  This means improving the educational system and having an opportunity to find fulfilling work, seek happiness and express their individuality. It also means ending corruption and extending equal protection and fairness under the law.

8.   Hunger and starvation;    Severe malnutrition can make life unbearable and because of it many people only go through the motions of being alive. People that are starving cannot learn and take a role in society. Starvation and addressing the need of basic sanitation must be addressed.

7.   Income inequality and economic stability;   The uber-rich should not become exempt from all common woes and untouchable. The uber-rich and political elite should not comprise a special class who are immune and able to ignore the rules of society. Nor should the masses be placed into a situation where they are deemed deserving of what fruit society creates merely by being born. Fairness in handling the world's economic systems and currencies that allow for a solid way to exchange goods and services is necessary or other world support systems will suffer or fail.

6.   Man's inability to take control of his future by creating responsive and responsible governments;   The masses have been lulled into complacency, in many ways we are all slaves, this is not a new role for man. But we can think and should make an effort to do so, we must push our chosen leaders to do the right thing and make long-term plans that are sustainable. We must shape our future and the values of the society in which we live. Sadly, a sharp rise in Orwellian trends which lead to police states is threatening the concept of freedom in countries across the globe.

5.   The last few years stand as proof of man's cruelty to man. Strife between religions and tribes must end;   We need to develop a new tolerance that allows people to live in peace. A safe place to live for a person and their family is one of man's most basic needs. The political elite must not be held harmless for the grief and death they cause over large swathes of mankind. War crimes cannot be tolerated. While this is easy to say deciding exactly who is responsible for these crimes is often easier said than done.

 4.    Wasting Earth's limited natural resources by not conserving and the continued destruction of our environment;   I contend that many of the "green solutions" being proposed such as ethanol fuel are not a solution at all and just ways for business to profit. A solution is not truly green unless the environmental cost of "maintaining" it is very low.

 3.    Pollution and the resulting climate change it may bring;   This is showing up in oceans that are sick and being depleted of life. This also may result in rising oceans and crop failures. Either scenario will mean massive suffering across the world and could tear the social fabric and alter our day to day lives.

 2.    Overpopulation;   This is the overriding problem facing Earth and the most difficult to address. If the problem of overpopulation is not addressed all the other problems on this list will most likely become much greater. Many people still rejoice in the idea that we should be "fruitful and multiply" ignoring or oblivious to the problems it creates in the long-run. The quality of life in many ways is more important than quantity.

 1.    Weapons of war and mass destruction;   This not only includes nuclear bombs and chemical weapons but drones and the killer robots now being developed. One big mistake or going down the wrong path in developing new weapons could change life as we know it!

While people and their families go about life each day having children and doing the things we all associate with our day to day existence most people concede that something is wrong with a world where many people lack even basic sanitation and watch their children die before the age of five. I'm not saying developed countries should give everything away or bring all the people of the world up to an American standard of living. It is not our responsibility to do so and probably impossible.

In my book, Advancing Time I highlight and bring focus to the massive changes that have taken place over the last two hundred and fifty years. History viewed in the framework of man's time on Earth forms the crux of my perspective. The oldest fully developed humans based on DNA research supports the theory that Africa was the area man first inhabited between 200,000 and 140,000 years ago. In 1800 the population of the world was around 900 million, by 1900 it had soared to 1.6 billion since then it has exploded to over 7 billion.

When you chronicle the journey from the beginning of man to our current state it becomes clear that the world has never before experienced such rapid change. This perspective helps us make sense of our fast-changing chaotic world while illuminating and clarifying the responsibilities society faces. It is important we recognize this ever-quickening pace of change and keep in mind that if these problems are not addressed there may be no future for mankind or it may be much shorter and difficult than many people expect.