Tuesday, January 30, 2018

Washington Specializes On Putting Lipstick On A Pig

The Words Of George Orwell Still Ring VeryTrue
The government in Washington like those in other countries specialize in putting lipstick "On A Pig." During the Presidential campaign, Trump referred to Washington as a swamp that needed to be drained. The fact his Democratic opponent was perceived as unacceptable by many voters seems to have played more into his unlikely election than the populist message he espoused. Washington is a hotbed of deceit. Those with an agenda constantly deceive us by declaring they care about us as they go about claiming they are doing gods work. The crux of this piece is more about the Herculean task of "draining the swamp" than Trump's success or failures. More than once over the decades America's frustration with the Federal government has led to voters empowering an outsider with the responsibility of dealing with an establishment so entrenched as to usurp democracy and set an agenda designed to enrich and further their aims.

The Truth Often Lurks Beneath The Surface
Strangely, as time has passed it seems the polarizing divide that grips the nation might be planned or contrived merely to create a pathway to greater power by the forces that hold us hostage. By pitting American against American those in Washington have created an environment of gridlock where they can run free to continue exploiting the masses. It is not surprising this has left a large number of citizens feeling like pawns or slaves in a land where they have little say over their fate or the policies that shape their lives. It could be part of the reason many Americans do not even bother to vote or involve themselves in politics at any level. This may also be why people care little if the government shuts down, some almost rejoice seeing a shutdown as a method of revenge on a government unrestrained. Ironically, when a shutdown happens, most federal employees, there are about 2.8 million of them, are placed on unpaid furlough but suffer not when all is said and done. Though there "appears to be no guarantee" that they will eventually be paid, in practice they always have been, retroactively, via legislation passed by Congress, this means the time off become in effect a paid holiday.

The Media Is Stirring The Pot And Increasing Polarization
The fact the media is complicit or even guilty of stirring the pot and egging us on does little to help the country run in a smooth and orderly fashion. It could be argued that while media has a responsibility to the nation rather than serving the country they have chosen to put their interest first. Things have gotten so bad that the term "fake news" has grown common as those on different sides of issues continue to bang away at their opposition creating a very polarized nation. News continually flows from the government (some people call much of this propaganda), the media, and from those with special interest or an agenda. This has become so bad that it almost appears intentional. Could it be those in power want a divided populous so that they can do as they want with little consensus to stop them?

Part of the motivation of this article is driven by some recent thoughts about Jimmy Carter's time in office. Jimmy Carter served as the 39th President of the United States from 1977 to 1981 is a man with a mixed legacy. As president, his tenure suffered from the Iran hostage crisis and he was considered ineffective and possibly the worst President in modern history. Carter was the nation’s chief executive during a time of serious problems at home and abroad. His perceived inability to deal successfully with those problems led to an overwhelming defeat in his bid for reelection.  After leaving office, Carter embarked on a career of diplomacy and advocacy for which in 2002 he won the Nobel Peace Prize. Today Jimmy Carter is loved and respected by many for his good work.

Few of us remember back to the Carter Presidency with any great detail because we were young or not even born when the media and his opponents leveled their guns and fired criticism at him. One thing that few people debate is that he was clearly a Washington outsider and reflecting on this I have to wonder if that marked him for failure from the get-go. Possibly it was just a sign of the times. Carter was of course followed by Ronald Reagan who while also an outsider was better known to the American people because of appearing before them on television and the silver screen. Whether it is the failures of those we send to Washington or the insiders and establishment portraying them as buffoons when it suits them those inside the beltway will quickly bring out the lipstick to bolster their cause.

Sunday, January 28, 2018

Inequality Is Far Worse For Society Than We Think

Gains Of Very Top Earners Dwarf All Others
Inequality has been growing and it is far worse for society and the world than first thought or we might imagine. Sadly, the recently passed Republican tax bill will only add fuel to the fire. Like the issue of immigration how to address inequality tends to become a political football or a problem that politicians from different parties argue about and try to use in order to get an advantage for themselves by energizing their supporters. Unfortunately, the negative ramifications from inequality bore deep into the economic fabric but are also exacerbating the cost differences of living in different parts of the country.

In 1929, before the Great Depression, Marriner Eccles described a lack of "effective demand" by saying: "The United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out the game will stop. The game stopped when players ran out of chips". Eccles later became FDR's man at the Fed and today the building in which the Federal Reserve resides carries his name, Eccles was appointed chairman (called “governor” before 1935) of the Federal Reserve Board on November 15, 1934. The important thing to take away from his statement that is still relevant today is that inequality is toxic.

CEO Compensation Has Grown Extreme
While equity bulls point to growing corporate profits as to the rationale for markets recent run-up. many other factors play into this. A great deal of growing profits flows directly from cutting back on the greatest expense businesses have to pay and that is labor. Since 2001 the amount companies spend on labor in general and many labor-related costs have not kept pace with other business expenses. Here, labor refers to wages paid to workers which reside outside the top echelon of CEO, CFO, and other corporate elite positions.

The reason for this rise in profits extends far beyond such things as advances in technology but to outsourcing, offshoring and even the cost of real estate and rents in different regions of the country. The historically low-interest rates of today that many people tout as our salvation also fuel inequality and mask many hidden costs that potentially will come back to haunt the economy. Adjusted for real-world inflation many households have seen their net incomes and wealth decline in the past decade. Despite the endless media propaganda about “growth” and “recovery,” it is self-evident to anyone who bothers to look closely that the "economic Pie" is shrinking and that the rich and powerful are increasing grabbing a larger slice. It should be noted these low-interest rates are not shared equally among society. Those with bad credit, low income or few connections pay much higher rates than those advertised, this again drives inequality.  

Inequality, Injustice, Exploitation, Corruption
It must be noted this is not just a national issue but one that rages across the world and is a large part of what drives people to immigrate in search of a better life. Whether it is inequality, injustice, exploitation, corruption or a thousand other forms of abuse the people of this world heap upon each other that lead to inequality nobody enjoys watching others move forward while they feel trapped and live in a state of anger and despair. Venezuela is a country that has recently fallen victim to this creeping malaise.

Inequality breeds resentment and anger which are large components of polarization and are often used as weapons in class warfare. A good example of this is how former President Obama often energized his supporters by referring to "millionaires and billionaires" implying a similarity that often does not exist. By creating the image that anyone with money is in a class apart it becomes easier to demonize them as exploiters and the cause of the problems and burdens faced by so many people today. The fear of slipping further down the economic ladder also fans the fears held by so many Americans plagued by an uncertain future in a fast-changing world.

Thursday, January 25, 2018

Destroying The Dollar Is Not The Solution To Trade Issues

The dollars recent tumble has moved far past where many of us predicted, of course, much of this has to do with President Trumps rather unorthodox take on "Making America Great Again."  While people can agree on a goal that does not mean their plan of how to accomplish it will take the same pathway. This was proven when none other than the U.S. Treasury Secretary Steven Mnuchin "broke with tradition" of supporting the U.S. currency on Wednesday when he told reporters at the World Economic Boondoggle in Davos that he endorsed the dollar’s decline as a benefit to the U.S. economy. "Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin said.

 Dollar Has Been Under Attack As Trump's Actions Stir Doubt
Mnuchin clarified the statement by saying "But again I think longer term the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency." Mnuchin shocked Davos participants because while it echoed Trump's own doubts about the desire for a strong currency, the Treasury Secretary's "mini QE" came as U.S. officials confront the global elite with their "America First" agenda, Mnuchin continued this line on Thursday in a panel appearance at Davos, where he mostly repeated his previous comment, stating that "a weaker dollar is good for us as it relates to trade and opportunities," and in terms of trade imbalances.

While it is still unclear if this has become the new U.S. policy Mnuchin's comments crashed the sagging dollar bringing it to a new three year low. This made many of us suspicious as to whether this government filled with Wall Street insiders made a fortune by being tipped off in advance about his intentions to trash the dollar. It also is another signal that not only is the Trump administration militarily aggressive but also willing to engage in heating up the currency wars. This comes after several years where behind the curtain central bankers seemed busy manipulating currencies to trade in a narrow range that would create stability and not rock the boat. Over the years countries have become very adept at coordinating policy and using currency swaps. It appears this has even extended to include investing in stocks.

We cannot, of course, underestimate the important role currency valuations play in the global economy. When the dollar began to soar back in late 2014 the fear index began to rise and concerns were heard about the stress it was causing in countries that owed a great deal of debt that would have to be paid back in dollars rather than their own currency. Considering just how destabilizing currency swings can be it is easy to see how a strong dollar could obliterate the global economy and the emergence of bitcoin and cryptocurrencies have become a new wild card to the landscape. IMF Managing Director, Christine Lagarde, noted the dollar is a "floating currency" where value is determined by markets and geared by the fundamentals of U.S. policy is determined by the market. Lagarde suggested that Mnuchin should explain his comments which appeared to back a weak dollar, adding that U.S. tax cuts will probably cause the world’s reserve currency to rally.

The bottom-line is currencies are being promoted to play a bigger role in the trade wars and this is dangerous. Currencies should be viewed as an economic tool and using them as a toy or a weapon raises the risk of an economic misstep that will bring down a global economy dependent upon stable relationships between its various parts. Derivatives and the carry trade are often highly leveraged and can implode if stressed too much, in such a case the contagion can rapidly spread causing massive defaults. Fighting a trade war with currency as a weapon can bring about some rather self-defeating results and is akin to "Cutting off the nose to spite the face" is an expression used to describe a needlessly self-destructive over-reaction to a problem. This is a warning against the stupidity of pursuing revenge in a way that damages America and its wealth more than the object of our anger.

Footnote; Below is an article delves into the complex world of currencies and how the failure of any of the world's four major reserve currencies will destroy the myth that major currencies are immune to the same fate that has haunted so many currencies throughout history. It also reinforces how we must not underestimate the advantage the dollar has as the world's reserve currency or the size of debt floating across the globe comprised in dollar-based agreements.
  http://Currencies Are Trading In A False Paradigm.html

Saturday, January 20, 2018

How Great Empires Collapse

The Collapse of empires is a subject that has fascinated mankind for centuries, when looking at the decline or collapse of great empires we find that it is often hard to predict exactly when or how their demise will occur. Many lessons can be learned from the study of past failures and while the rate of decline and the empire's remaining strength are debated history confirms no matter how great the empire the way it falls and the timing is always hard to correctly gauge. One common thread and sign the end is near is a massive growth in crony capitalism and corruption. Even when the signs of decline may be everywhere that does not guarantee the end is near. As the foundation crumbles away it is not uncommon for those in power to extend their rule by many tricks and changing the rules in order to gain a new lease on life.

Empires Often Die From Corruption And Weakness Within
Decline and collapse can be sudden or slow. In our modern world with communication so important, I suspect that the process is generally accelerated, however, that is not always the case. Sometimes a system morphs or evolves towards its end and in other situations, a single event can act as the catalyst to bring a system to its knees. Looking back to the economic crisis that gripped the world in 2008 we find an excellent example of shifting and adjusting just enough to delay the day of reckoning. Central Banks across the world joined with politicians to pull rabbits out of their hats and used unprecedented actions to halt and avert the collapse of the system.

Now for the more interesting question, have those in power only delayed the last scene of a bad play, have the last nine years all just been an extend and pretend scenario? Sadly, few solid changes and actions have taken over the last few years to repair and set right many of the problems and issues that plagued us. We were given time to change our evil ways such as spending money we didn't have and dealing with growing debt loads and unfunded promises, but in truth, we have failed to address the many structural problems before us. We printed money to build a new future but unfortunately looking back we have little to show for how it was spent.

 Today the massive growth in inequality has become a major issue. Many people see this as a clear sign and the undeniable confirmation that America's financial and political systems are broken. Those who look closely understand that it is not the 1% at the top stealing the icing off the cake, but the much smaller .1% or .01% that are skewing the numbers and overreaching. Few argue that the recent "Tax Reform Bill" recently passed and signed into law will not cause this trend to increase and line the pockets of the elite. It is not by accident that this goes hand in hand with the massive growth in crony capitalism and corruption. Much of this can be attributed to the ability of those in control "changing the rules" and positioning themselves to benefit at every corner. In our busy and complex world, we have found it impossible to watch all the moving parts.

History is full of tales where countries go to war and use propaganda or "fake news" as a way of diverting the eyes of the people away from its failures. To address growing discontent and opposition most empires develop an apparatus to silence criticism. When in decline it is not unusual for that part of the government to rapidly expand. What might be called the "Deep State" definitely exists and it often works in plain sight and not how it is depicted in the movies. It is not a complex conspiracy but the gut of a system laced with ever-growing corruption and relaxed morals. In reality, human beings are generally too incompetent, lazy and inept to carry out schemes on a grand scale. People are generally bad at keeping secrets and insider knowledge is almost always passed around, even in secretive organizations, often recklessly so. Doling out secrets and insider information confers status, tactical advantage, and sometimes even financial gain.

Corruption and crony capitalism are cancers on society that grow if not constantly treated. Empires and successful endeavors are built on strength and a sound financial foundation. This can erode very quickly in a fast-changing world. Debt is an often no more than a glorified  IOU  and we must try to remember that bills can go unpaid and promises left unfulfilled when those pledging assurances gain from not following through. Faith is often the glue that holds all of society together and while it is most likely the economy won't fall apart or collapse today it is that faith that will allow a new economy to rise from the ashes.

A question everyone should be asking is, what happens when the current economic momentum ends?  The whole concept of economic growth is based on an ever-growing trend of year over year increased production. We must remember the influx of monetary stimulus from QE and massive government deficit spending has created the illusion of more pent-up demand then exist or can be substantiated. This discounts the need for quality economic growth and allows quantity or any type of growth to be substituted. This results in an elevated baseline for comparing year on year growth, in short, we have to move forward faster next year just to keep growing. Such an economy encourages leverage and a multitude of tricks to mask the weak foundation on which it is built.

When looking through the eyes of modern monetary theory things get fuzzy. The denial of inflation and worries of deflation still exist even as ever larger amounts of money are being printed. These "interesting times" play havoc with the value of things and what they are worth. Like some of the cruel games children play you don't want to find yourself without a chair or holding the "hot potato" when the game ends. In the same way that corruption and crony capitalism are cancers on society and empires they also are huge factors in the economy. The bottom-line is all this is intricately linked and the game will end and start anew, but questions remain as to when and what the new rules will be.

Wednesday, January 17, 2018

The Three Reasons America Faces A Difficult Path Ahead

Three major obstacles that will create a difficult economic future are solidly carved into our path forward. Regardless of record new highs in the stock market and the positive predictions being made by the media, there is no guarantee as to how long this growth trend will go. When easy money is the fare of the day leverage is generally growing at a rapid pace. While leverage tends to drive a market higher when it is on the rise it also has exactly the opposite effect when the market is falling only it often works faster and magnifies the fall. Below are three key challenges that America must confront and deal with or their impact will bode poorly upon our ability to maintain our position in the world.

1.   The Low Job Participation Rate; Today America has a very low civilian labor force job participation rate because many people have left the workforce. The work ethic has taken a hit over the last few decades as many people adopted the attitude that often the reward for going the extra mile was just not there. The longer someone is out of the workforce the more difficult it is to return. Expensive job retraining programs will not solve the issue of creating new jobs in a world where higher mandated wages push employers to replace workers with robots that can perform repetitive tasks.
A Smaller Percentage Of Americans Are Choosing To Work

It should be noted that globalization has elevated the importance of creating jobs and a balanced economy that supports a strong middle class. A huge difference exists between creating a valuable and worthwhile product that benefits society and breaking a window then praising the jobs replacing it yields.  It is difficult to envision a larger share of Americans rushing to find jobs when society has come to accept not working as acceptable.

2.   Exploding National Debt; During recent years the national debt has soared and all indications are that it is about to get bigger as the bill for entitlements increases. The myth that a scenario of growth coupled with a falling deficit will allow us to outgrow many of the problems we face brings with it a false optimism and hope. In all truth, we have allowed those we have sent to Washington to spend money we don't have and continue to ignore the ever-growing debt being created.

Click Here To View The National Debt Clock
Our recently passed tax reform bill and a rash of natural disasters coupled with the call for military and infrastructure spending is setting us up for higher deficits. The fact is our trillion dollar deficits will become commonplace before long.The deficit during the Obama years ran at over twice the nosebleed levels that had been projected. As things stand America continues to rack up a deficit each year of nearly $2,500 for every man woman and child in the country, such deficits were unheard of in the past unless it was during a major war.

Currently, the costs of entitlement programs are slated to rise in coming years. When we couple that with the recently passed tax reform bill that is expected to add to the deficit with the cost of paying over 100 billion dollars for a slew of natural disasters plus increased military and infrastructure spending it is not difficult to see deficits grow larger, Trillion dollar deficits will become commonplace in coming years unless taxes or raised. Sadly, this massive deficit is what is propelling the economy forward, and it is not sustainable.

America Remains A "High-Cost Producer"
3.   Jobs Will Not Come Rushing Back; The truth is the recent tax reform bill that President Trump signed into law may slow jobs from leaving America but is not enough to cause them to return. The cost to produce goods in American remain higher than in many other parts of the world because of things like healthcare and regulations governing things such as liability and pollution.

Many people have mistakenly surrendered to the idea America is too small to lead based on population numbers do not understand that quality beats quantity hands down. Sadly, the spirit of, "I will gladly pay you Tuesday for a hamburger today" is alive and well in many of those advocating free trade and the expansion of globalism. Those advocating free trade would have been wise to remember that countries such as China that export goods at slightly below cost in exchange for manufacturing jobs are not stupid they are predatory and we in America are their prey.

Trade policy has massive long-term ramifications on the strength of a nation's economy. Often people fail to note the difference between free and fair trade. In many ways, the global economy has become an ill-regulated business model tilted to favor big business and giant conglomerates. We should not lose sight of the fact that while free trade is important, fair trade is far more so and should be the main issue. Balanced trade instead of huge deficits or surpluses between various countries would contribute to both global cohesion and the world economy.

The combination of the three obstacles listed above constitutes a grave problem with no easy fix. The bottom-line is that the longer we go before making a real effort to mitigate our problems and change our current policies the larger the negative ramifications will become. Clearly, America is not the only nation to face such problems or imbalances which means mankind and society, in general, will see economic challenges unfold in coming years.

Saturday, January 13, 2018

News and Talk Shows Obsessed With Trump Bashing

While my time to view news and Sunday morning talk shows is limited it is difficult to ignore that shows that discuss the Washington beltway and current events continue to bash President Trump and pile it on. Much of the hoopla last week centered around a newly released book by Michael Wolff, titled, “Fire and Fury.”  The very polarizing book is really more of the same thing we have heard Trump detractors spouting. It paints a picture of a dysfunctional White House and an administration led by a buffoon with a short attention span.  Trump's reaction to cutting comments made in the book instantly raised the book to "best seller status" by the media.  Even as the so-called media experts are quick to mention that while the book does not live up to journalistic standards such as checking facts and that it is full of unsubstantiated allegations they teased those with inquisitive minds to purchase a copy and because of this all copies were said to have quickly sold out.

....to President of the United States (on my first try). I think that would qualify as not smart, but genius....and a very stable genius at that!

Saturday, January 6, 2018

Much Talk About Market Sweet Spot But Nothing Different

Currently, we are hearing a great deal about how the market is in a sweet spot while nothing is really all that different on the ground. When it comes down to the economy and how it impacts the average American in middle America little has changed during the last year but what we are seeing is an extension by many investors into very speculative investments. In reality not only are we and nations around the world continuing to run huge deficits central banks are still printing money and keeping interest rates artificially low.

Costly Fires In California - Now A Polar Vortex
Ironically this is occurring at a time when America has been under a costly assault by mother nature. First, it was hurricanes, then fires in California, and now much of the country is suffering record-breaking cold temperatures caused by a freezing polar vortex. All these natural disasters are different, however, what they have in common is the fact they are very costly. The point is just in how breaking a window and replacing it with a new one creates economic growth, such action does not really result in great benefit to the country in general. All growth is not equal and growth does not always result in increased economic strength.

Of course, it is not strange that the argument cheap money only masks a weak economy has gained no traction. The low-interest rate environment put in place by the Federal Reserve, European Central Bank and Bank of Japan and money pouring out of China has driven cash into real estate, commodities and speculative whimsies such as bitcoin and other cryptocurrencies. A Market Watch article last week only added to the enthusiasm by informing us that well-respected investor Jeremy Grantham, who is credited with calling the 2000 and 2008 downturns warned investors on Wednesday to be prepared for the possibility of a near-term “melt-up.”

Debt Has Soared Compared To GDP
The negative part contained in Grantham's note that many seemed to discount were his feeling that "this would likely set the stage for a burst bubble and a stock-market meltdown in the future." Nobody can deny that the positive trading mood that drove global stock markets higher in 2017 and early 2018 continues. Our current "trumped-up" upbeat sentiment is buoyed by several factors such as the recently passed tax package in the U.S., rising commodity prices, robust corporate earnings. Solid economic data and low bond yields have also been cited as contributing factors. Central banks have even joined in making true price discovery impossible. The fact is it is difficult to predict how far a market will overextend before crashing in ruins and during the mania warnings of excess are ignored and naysayers ridiculed. That seems to be a constant indicator of such economic blow-offs.

We are constantly being told workers are not seeing big increases in wages while consumers are spending more, saving less, and taking on more debt. Logically this would lead to the conclusion consumers are reaching the point where they are taped out and with huge heating bills as well as rising gas prices at some point a retrenchment in discretionary spending should occur. This conflicts with the idea all is well and the constant upgrading of stock prices to "strong-buy" that has become the daily fare for analyst across the land. A great example of the strength or rather the insanity that is occurring is reflected in the price of Tesla's stock that dropped a mere one percent on confirmation of their inability to produce their newest car the Model 3.

Returning to the MarketWatch story, Grantham states, “I recognize on one hand that this is one of the highest-priced markets in U.S. history. On the other hand, as a historian of the great equity bubbles, I also recognize that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market,” The well-respected investor did this in a 13-page note where he emphasized this reflected his very personal view. Grantham, a value investor, co-founder and chief investment strategist of Boston-based asset manager GMO compared the present market setup with the run-up to past bubbles, including the 2000 tech boom and the precursor to the 1929 crash.

Grantham emphasizes that bubble calls shouldn’t necessarily rely on price alone. Instead, he puts emphasis on price acceleration, which captures “the importance of a true psychological event of momentum increasing to a frenzy.” Grantham refers to an academic paper published last year that concluded that the strongest indicator of a bubble in the U.S. and almost all global markets was price acceleration. Grantham points out that “just recently, say the last six months, we have been showing a modest acceleration, the base camp, perhaps, for a final possible assault on the peak. He wrote. “A range of nine to 18 months from today and a price rise to around 3,400 to 3,700 on the S&P 500 would show the same 60% gain over 21 months as the least of the other classic bubble events.”  

Other bubble factors cited by Grantham include increasing concentration on certain stock market “winners,” the outperformance of quality and low-beta stocks in a rapidly rising market, “extreme overvaluation” and the role of the Federal Reserve. This all seems more of a reminder of well-entrenched market sayings such as the "trend is your friend" and "don't stand in front of a freight train" based on charts, wave patterns and his gut feelings that we have disconnected from true market value and when we do these trends seem to take on a life of their own. Of course, that does not mean Grantham is not right and even as icons such as Macys and Sears announce closing more stores the markets may ignore such things.

Below is a summary of what Grantham sees might happen.

  • ■ “A melt-up or end-phase of a bubble within the next six months to two years is likely, i.e., over 50%.
  • ■”If there is a melt-up, then the odds of a subsequent bubble break or meltdown are very, very high, i.e., over 90%.
  • ■ “If there is a market decline following a melt-up, it is quite likely to be a decline of some 50%.
  • ■ “If such a decline takes place, I believe the market is very likely (over 2:1) to bounce back up way over the pre-1998 level of 15x, but likely a bit below the average trend of the last 20 years, as the trend slowly works its way back toward the old normal on my ‘Not with a Bang but a Whimper’ flight path.”
So what should investors do? Grantham reiterated his call to own “as much emerging market equity risk as your career or business risk can tolerate” and some EAFE, an acronym for Europe, Australasia and the Far East. The problem with this strategy is that when markets correct these markets will also be heavily impacted and possibly even more than those in America. Like so many other investors who have been wrong for so very long, I continue to feel something is very very wrong with what is unfolding. Over the years we have experienced several bubbles each bigger than the last and it might have raised the bar higher for calling something a bubble. It is important to remember how we got here in the first place. As this is being written a feeling of déjà vu has washed over me, yes in some ways it feels just like 2007, but different!

Monday, January 1, 2018

Planning A Sustainable Future For Mankind Is Critical

On occasion, it is good to take a few moments to reflect on where we are, and where we are going. Over the last few months the threat of nuclear war has increased and more frightening is the acceptance of such an event as a way of solving growing problems. Our days, however, all filled with many other issues that will eventually determine not only our fate but the fate of mankind as well. Only to the most self-centered individuals with no children, family or friends can the issue of creating a sustainable future not be an issue of importance. In many ways, it should be considered "job one" in our rapidly changing world, yet it is almost always put on the back burner and ignored because of both political and economic ramifications.

Sustainability Is Critical To Our Future
Sustainability means planning our future in a way that we do not set ourselves up to crash and burn at some future date. Long-term planning has not been something politicians excel at or are even good at. Our system is geared at getting politicians re-elected and fulfilling the most pressing needs of today.  Things like profit, greed, and quenching our unrelenting desire for growth is placed in front of longer term issues and needs. Mapping out a logical and sustainable long-term plan requires delving into some rather hefty philosophical questions like what brings real happiness. We would have to think about what kind of society and world future generations might want to live in. We would have to recognize the role of the human animal in the overall scheme of things.

As the population has soared during the last two hundred years man has spread out and constructed infrastructure across the planet to support this growth using more natural resources than at any time in history. Already more is needed and the repairs required to maintain what we have built will be staggering. It appears we lack the courage to even discuss these issues in any real way. Do not expect to be guided by politicians, the super wealthy or most business leaders. Few people are willing to come out and say the recently adopted modern model of life based on lifestyles developed in America and western society are unsustainable. The few that mutter these words are often scorned. This could all be considered part of a giant conspiracy of silence but is more likely a head in the sand act of denial, but denial that will lead to our demise.

Jeremy Grantham’s investment firm GMO manages about $110 billion in assets. He also backs the Grantham Institute of Climate Change at London’s Imperial College. He says population growth is a huge “threat to the long-term viability of our species when we reach a population level of 10 billion” because it is “impossible to feed the 10 billion people.” Billionaire Bill Gates says we should cap global population at 8.3 billion at the same time his vaccine and other programs are extending life expectancy. Columbia University’s Earth Institute Director Jeff Sachs says even 5 billion is unsustainable. To stop adding more people our population is tough enough. But how do we eliminate two billion from today’s seven billion total? Voluntary?

We should remember that for most of his 60,000 years on earth man has been a minor consumer of the earth’s stores of energy. With the discovery of fire, man began to increase his demands and draw on the short-term energy stores that had been accumulated over scores of years or even centuries by woody plants.  Only in the last hundred years with the invention of the internal combustion engine and a huge increase in population has man begun to tap the planet's long-term energy supplies of oil and natural gas at an alarming rate. In merely a blink of an eye, we have shaped a world where our lifestyles revolve around and are dependent on oil and the consumption of energy from fossil fuels.

War Has Turned Mosul Into Rubble
As the world continues to develop the importance of design and quality are factors that cannot be stressed enough. An issue we are failing to address is that as the world's population soars we cannot afford the wasteful luxury of constructing buildings that grow obsolete or must be replaced every few decades, buildings should last for centuries. We also cannot afford to bomb and lay waste to whole cities killing and destroying what so many have worked so hard to create. How we use our new skills and the choices we make will determine if mankind blankets the world with Las Vegas style resorts on every corner, fills the skies with glass towers, or constructs homes and shelters suitable for our fellow man.

It concerns me that in developing countries such as China and India that have huge populations of have-nots we are seeing developers follow the same flawed pattern of growth that was pioneered in America. The creation of huge wealth in China has manifested itself in conspicuous consumption as people rush to show they are successful. Poor planning has not promoted a lifestyle of efficiency and social interaction but has encouraged the private automobile with its massive support system of highways and the construction of more high-rise towers. The ability of the planet to sustain our recent lifestyle that is too new to have stood the test of time is very questionable.

“One of the disturbing facts of history is that so many civilizations collapse,” warns Jared Diamond, environmental anthropologist and author of the classic “Collapse: How Societies Choose to Fail or Succeed.” Many “civilizations share a sharp curve of decline. Remember this is totally entwined with the economy and everyday life. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth, and power.” Can it be stopped? Before it’s too late? Don’t bet on it. Watching how those in Washington and other capitals avoid dealing with the many real problems we face is not encouraging.

 Footnote; The above article is not an endorsement of some kind of "carbon tax" as much as it is a call for better planning and less waste. This post dovetails with many of my recent writings, for more I might suggest reading the article below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged.