The Automatic Earth — Ilargi writes: Tim Geithner and Christina Romer tried to paint another rosy economic picture in front of the House Appropriations Committee (”there’s progress, though it’s challenging”), but even their own fellow Democrats don’t buy into it anymore. American politics as a system has ceased to function, because the system has gone from representing people to representing money. And that is something that can only go well as long as the people have at least some of that money. Now that they’re increasingly shut out, the system shuts down; it’s inevitable. Which is why even rating agency Moody’s comes with an at first glance curious warning: even the credit raters now predict pitchforks.

We’ve seen tear gas in Athens recently, and that was just a little taste. As you may know, I’m spending some time in France right now, and it’s not hard to predict what will happen here if and when the government starts slashing salaries (as it must soon). The French simply won’t understand what’s happening, and mass protests will be the result, some peaceful, some violent. It’s every democratic politician’s ultimate conundrum: if you don’t tell people the truth, they’ll turn against you down the line; if you do tell them, they’ll turn against you right away. That makes it obvious to figure out which politicians actually do get elected. Where the government is left, it will swing right, and vice versa, in ever more extreme denominations.

And yet, it’s all just a prologue. There’s nothing easier for politicians than to play people against each other, in order to divert -negative- attention away from themselves. And so they will.

We have a baby boomer generation that has just about all the money that’s left in our societies. Their children, though, have nothing. Except for some hand-outs from their parents (I’m not talking individuals here). Unemployment among young people in many countries is downright scary, often in the 40%-50% range. No jobs, no money, no prospects. In times and places throughout history, this has brought populist dictators to the foreground, and pitchforks and torches into the streets, and there is no reason why it won’t now. Today’s political power is firmly in the hands of the 40-year and older crowd; they have elected incumbent politicians, and more importantly, they have the money and thus the power. The younger generation has no money and no power, but they also have nothing left to lose.

That is a dangerous combination, and how we deal with it will be what decides our futures. …

Most people are far too complacent when it comes to the consequences of a shrinking economic system. Many claim that we can easily downsize to smaller homes and smaller lives, since there’s so much we don’t really need anyway, that we will move in together and return to “good” conversations, growing our own tomatoes and all that. But that’s just not going to happen voluntarily, not on a large and wide scale. The human mind has no reverse. It doesn’t even have a steering wheel. We are built for one of two things: go forward or crash. It looks like there’s no forward left before a major crash happens first. It also looks like there’s not a whole lot of people who realize this. (03/17/10)

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When solving problems you must examine your proposed solutions for: “What is seen, and what is Not seen.”

BBC Environmental Science — Fertilising the oceans with iron to absorb carbon dioxide could increase concentrations of a chemical that can kill marine mammals, a study has found. Iron stimulates growth of marine algae that absorb CO2 from the air, and has been touted as a “climate fix”. Now researchers have shown that the algae increase production of a nerve poison that can kill mammals and birds.

Writing in Proceedings of the National Academy of Sciences, they say this raises “serious concern” over the idea.

The toxin - domoic acid - first came to notice in the late 1980s as the cause of amnesiac shellfish poisoning. It is produced by algae of the genus Pseudonitzschia, with concentrations rising rapidly when the algae “bloom”. Now, its presence in seawater often requires the suspension of shellfishing operations, and is regularly implicated in deaths of animals such as sealions.

Domoic acid poisoning may also lie behind a 1961 incident in which flocks of seabirds appeared to attack the Californian town of Capitola - an event believed to have shaped Alfred Hitchcock’s interpretation of Daphne du Maurier’s The Birds in his 1963 thriller. …

Whether iron fertilisation ever will be deployed as a “climate fix” is unclear. The last major investigation - last year’s Lohafex expedition - found that despite depositing six tonnes of iron in the Southern Ocean, little extra CO2 was drawn from the atmosphere.

Nevertheless, one company - Climos - aims eventually to deploy the technique on a commercial basis. A Climos spokesman agreed that further research on domoic acid production was needed. (03/16/10)

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CommUnity of Minds — Al Gore writes: It would be an enormous relief if the recent attacks on the science of global warming actually indicated that we do not face an unimaginable calamity requiring large-scale, preventive measures to protect human civilization as we know it.

Of course, we would still need to deal with the national security risks of our growing dependence on a global oil market dominated by dwindling reserves in the most unstable region of the world, and the economic risks of sending hundreds of billions of dollars a year overseas in return for that oil. And we would still trail China in the race to develop smart grids, fast trains, solar power, wind, geothermal and other renewable sources of energy — the most important sources of new jobs in the 21st century.

But what a burden would be lifted! We would no longer have to worry that our grandchildren would one day look back on us as a criminal generation that had selfishly and blithely ignored clear warnings that their fate was in our hands. We could instead celebrate the naysayers who had doggedly persisted in proving that every major National Academy of Sciences report on climate change had simply made a huge mistake.

I, for one, genuinely wish that the climate crisis were an illusion. But unfortunately, the reality of the danger we are courting has not been changed by the discovery of at least two mistakes in the thousands of pages of careful scientific work over the last 22 years by the Intergovernmental Panel on Climate Change. In fact, the crisis is still growing because we are continuing to dump 90 million tons of global-warming pollution every 24 hours into the atmosphere — as if it were an open sewer.

It is true that the climate panel published a flawed overestimate of the melting rate of debris-covered glaciers in the Himalayas, and used information about the Netherlands provided to it by the government, which was later found to be partly inaccurate. In addition, e-mail messages stolen from the University of East Anglia in Britain showed that scientists besieged by an onslaught of hostile, make-work demands from climate skeptics may not have adequately followed the requirements of the British freedom of information law.

But the scientific enterprise will never be completely free of mistakes. What is important is that the overwhelming consensus on global warming remains unchanged. …

From the standpoint of governance, what is at stake is our ability to use the rule of law as an instrument of human redemption. After all has been said and so little done, the truth about the climate crisis — inconvenient as ever — must still be faced.

The pathway to success is still open, though it tracks the outer boundary of what we are capable of doing. It begins with a choice by the United States to pass a law establishing a cost for global warming pollution. The House of Representatives has already passed legislation, with some Republican support, to take the first halting steps for pricing greenhouse gas emissions.

Later this week, Senators John Kerry, Lindsey Graham and Joe Lieberman are expected to present for consideration similar cap-and-trade legislation.

I hope that it will place a true cap on carbon emissions and stimulate the rapid development of low-carbon sources of energy.

We have overcome existential threats before. Winston Churchill is widely quoted as having said, “Sometimes doing your best is not good enough. Sometimes, you must do what is required.” Now is that time. Public officials must rise to this challenge by doing what is required; and the public must demand that they do so — or must replace them. (03/02/10)

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Tom Dispatch — Bill McGibben writes: Twenty-one years ago, in 1989, I wrote what many have called the first book for a general audience on global warming. One of the more interesting reviews came from the Wall Street Journal. It was a mixed and judicious appraisal.  “The subject,” the reviewer said, “is important, the notion is arresting, and Mr. McKibben argues convincingly.”  And that was not an outlier: around the same time, the first president Bush announced that he planned to “fight the greenhouse effect with the White House effect.”

I doubt that’s what the Journal will say about my next book when it comes out in a few weeks, and I know that no GOP presidential contender would now dream of acknowledging that human beings are warming the planet.  Sarah Palin is currently calling climate science “snake oil” and last week, the Utah legislature, in a move straight out of the King Canute playbook, passed a resolution condemning “a well organized and ongoing effort to manipulate global temperature data in order to produce a global warming outcome” on a nearly party-line vote.

And here’s what’s odd. In 1989, I could fit just about every scientific study on climate change on top of my desk. The science was still thin.  If my reporting made me think it was nonetheless convincing, many scientists were not yet prepared to agree.

Now, you could fill the Superdome with climate-change research data. (You might not want to, though, since Hurricane Katrina demonstrated just how easy it was to rip holes in its roof.) Every major scientific body in the world has produced reports confirming the peril. All 15 of the warmest years on record have come in the two decades that have passed since 1989. In the meantime, the Earth’s major natural systems have all shown undeniable signs of rapid flux: melting Arctic and glacial ice, rapidly acidifying seawater, and so on.

Somehow, though, the onslaught against the science of climate change has never been stronger, and its effects, at least in the U.S., never more obvious: fewer Americans believe humans are warming the planet.  At least partly as a result, Congress feels little need to consider global-warming legislation, no less pass it; and as a result of that failure, progress towards any kind of international agreement on climate change has essentially ground to a halt. …

The great irony is that the climate skeptics have prospered by insisting that their opponents are radicals. In fact, those who work to prevent global warming are deeply conservative, insistent that we should leave the world in something like the shape we found it. We want our kids to know the world we knew. Here’s the definition of radical: doubling the carbon content of the atmosphere because you’re not completely convinced it will be a disaster. We want to remove every possible doubt before we convict in the courtroom, because an innocent man in a jail cell is a scandal, but outside of it we should act more conservatively.

In the long run, the climate deniers will lose; they’ll be a footnote to history. But they’ll lose because we’ll all lose, because by delaying action, they will have helped prevent us from taking the steps we need to take while there’s still time. If we’re going to make real change while it matters, it’s important to remember that their skepticism isn’t the root of the problem. It simply plays on our deep-seated resistance to change. That’s what gives the climate cynics ground to operate. That’s what we need to overcome, and at bottom that’s a battle as much about courage and hope as about data. (02/26/10)

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The Oil Drum / Europe — Ugo Bardi writes: The Roma (or Rroma) of Italy are probably the poorest fraction of the residents in the country. They normally live in segregated camps, in trailers or in self built sheds. Only about half of the 150,000 Roma in Italy are Italian citizens; in most cases, they have no stable job and live a very precarious existence as the target of hatred and of open racism. The image to the right,  from Excite Magazine, shows the Roma camp in the suburb of Ponticelli, in Naples, as it was before being burned to the ground by an angry mob in 2008.

Here I am, in front of the whole class. Romani men and women; about 20 people; all coming from the same camp, nearby. They are in their late 20s and early 30s, and they have dressed up for the occasion. Not that they can afford expensive clothes, of course, but the men look smart in their informal attire. The women like to dress in bright colors. They wear the almost obligatory long skirt, as well as earrings and necklaces. They seem to be very happy to have found a way to leave the routine of the camp where they spend their time cooking and looking after young children.

Over the past months, a group of teachers have been lecturing to this group as part of an initiative of the county government. The idea is to help them gain skills that could be useful for them to find a job and integrate better in society. So, we told them how to manage a cooperative, how to manage their personal finances, safety in the workplace, garbage collection and recycling, permaculture, how to surf the web and much more. They have absorbed most what we told them with ease. After having seen them listen attentively to two hours of lessons on the biological carbon cycle and ask intelligent questions afterwards, I was impressed. So, I told myself; why not peak oil? And here I am.

Telling people about peak oil takes different approaches depending to whom you are talking. I understood long ago that most people can’t read even a simple Cartesian graph. Graphs are a language and they never learned it. If you show them the bell shaped curve, they’ll see it as a hill or a mountain of some kind. They’ll feel that it is hard to climb up and easy to descend. Not the way peak oil should be understood.

The Roma I’ll be talking to are at one of the extremes of the spectrum in terms of culture. None of the men went beyond 3rd or 4th grade of schooling; most of the women never went to school at all. The men can usually read, but rarely can write; the women can neither read nor write. They don’t read newspapers and don’t watch the news in TV. They love movies and spend lots of time chatting. It is from these sources that they gather most of what they know. What would be a good way to explain peak oil to them?

Communication is never one way. If I want them to understand me, I must understand them as well. So, for this talk, I have developed an extreme version of the presentation that I give when I know that the people listening are not at the top level in terms of scientific literacy. It is all based on vivid images shown on screen; pictures of oil wells, for instance. No graphs, no text, and no numbers. I have to rely on my voice, on my ability to catch their attention.

So, I tell them of peak oil based on the example of a person. When we are born, I say, we are very small, but with time we grow and we can do more things. But we also become old. In time, we can do less and less and, eventually, we must die. In a way, I continue, it is the same with oil. When oil is young, there is a lot of it. As it gets older, we use it up and there is less and less of it. We must work harder to get as much of it as we used to. It is the same with many things you are doing - haven’t you noticed that you must work harder? They look at me and nod. They understand the concept. …

When you present peak oil to someone who is middle class, the reaction may be denial or mobilization. But rarely you see people who have understood peak oil who are indifferent to it. There are good reasons for that. If you are middle class, you can see right away how peak oil can hurt you. You depend on a salary and, if your job vanishes because of peak oil, you’ll be in deep trouble. You have to pay your mortgage, your health insurance plan, instruction for your children, and all the rest. Peak oil can destroy you. …

But think of your situation as a Romani person. You have no stable job; so you can’t lose it. You don’t own a house, so you can’t be evicted. Nobody will give you credit, so you’ll never be in debt. You have no retirement plan, so you rely on your children for support when you’ll be old. You depend on welfare, sure, but you also know that you can live with very little. Finally, you live in a close-knit community formed of family clans. You quarrel with your neighbors and relatives all the time but you know that in a difficult situation, they’ll help you if they can.

Peak oil will be hard on the Roma, just as it will be on us, but they have a fighting chance of surviving it. In several ways, they are already post peak. (02/25/10)

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Huffington Post — Ellen Brown writes: While bank bailouts fatten Wall Street, states continue to battle the credit crisis. In the search for innovative solutions, some political candidates are proposing that states generate their own credit by setting up their own banks.

State budgets for 2010 face the largest shortfalls on record, totaling $194 billion or 28 percent of state budgets; and 2011 is expected to be worse. Unemployment has already officially hit 10 percent, and many economists expect it to rise higher. Continued high unemployment will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services states provide. The existing alternatives are spending cuts or tax increases, but both will just serve to make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. The result is a reduction in overall demand. Tax increases also remove demand, by reducing the amount of money people have to spend.

Amanda Paulson, writing in the Christian Science Monitor, quotes Arturo Perez, fiscal analyst with the National Conference of State Legislatures, which released its survey of state budget situations in December: “Unless you’re North Dakota, you’re probably a state that has had some degree of difficulty or crisis involving finances. It’s the worst situation states have faced in decades, perhaps going as far back as the Great Depression in some states.”

Unless you’re North Dakota — a state with a sizable budget surplus, and the only state that is adding jobs when other states are losing them. A poll reported on February 13 ranked that weather-challenged state first in the country for citizen satisfaction with their standard of living. North Dakota’s affluence has been attributed to oil, but other states with oil are in deep financial trouble. The big drop in oil and natural gas prices propelled Oklahoma into a budget gap that is 18.5% of its general-fund budget. California is also resource-rich, with a $2 trillion economy; yet it has a worse credit rating than Greece. So what is so special about North Dakota? The answer seems to be that it is the only state in the union that owns its own bank. It doesn’t have to rely on a recalcitrant Wall Street for credit. It makes its own. (02/24/10)

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The Washington Post — Bill McKibben writes: The cross-country ski race I’ve been training for, set for today high in the Green Mountains: cancelled, lack of snow.

Meanwhile, across the continent, backhoes and helicopters are moving snow down British Columbia’s Cypress Mountain in an attempt to cover the Olympic ski courses, and technicians are burying cooling pipes beneath the moguls to keep them from melting. Some climate-conscious jokers put out a video pushing the sport of “bobwheeling” for future snow-challenged Olympiads.

And apparently there was some snowfall in the greater Washington area last week.

When you’re trying to launch snowboarding tricks on dry ground and simultaneously shutting down the U.S. government because the snowbanks are casting shadows on the Washington Monument, something odd is going on. This isn’t a good old-fashioned winter for the District of Columbia, not unless you’re remembering the last ice age. And it doesn’t disprove global warming, despite Sen. Jim De Mint’s cheerful tweet: “It’s going to keep snowing until Al Gore cries ‘uncle.’ ”

Instead, the weird and disruptive weather patterns around the world are pretty much exactly what you’d expect as the planet warms. Here’s how it works:

In most places, winter is clearly growing shorter and less intense. We can tell, because Arctic sea ice is melting, because the glaciers on Greenland are shrinking and because a thousand other signals send the same message. Here in the mountains of the Northeast, for instance, lakes freeze later than they used to, and sometimes not at all: Lake Champlain remained open in winter only three times during the 19th century, but it did so 18 times between 1970 and 2007.

But rising temperature is only one effect of climate change. Probably more crucially, warmer air holds more water vapor than cold air does. The increased evaporation from land and sea leads to more drought but also to more precipitation, since what goes up eventually comes down. The numbers aren’t trivial — global warming has added 4 percent more moisture to the atmosphere since 1970. That means that the number of “extreme events” such as downpours and floods has grown steadily; the most intense storms have increased by 20 percent across the United States in the past century.

So here’s the thing: Despite global warming, it still gets cold enough to snow in the middle of winter. It even gets cold enough to snow in Texas and Georgia, as it did late last week. And the chances of what are technically called “big honking dumps” have increased. As Jeff Masters, the widely read weather blogger, pointed out last week, a record snowstorm requires a record amount of moisture in the air. “It is quite possible that the dice have been loaded in favor of more intense Nor’easters for the U.S. Mid-Atlantic and Northeast, thanks to the higher levels of moisture present in the air due to warmer global temperatures,” he wrote. (02/24/10)

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Wall Street Journal — Dateline: February 11, 2010.  As Europe’s leaders gather in Brussels today, they have only one crisis in mind: the debts that threaten the stability of the European Union. They are unlikely to be in any mood to listen to warnings about a different crisis that is looming and that could cause massive disruption.

A shortage of oil could be a real problem for the world within a fairly short period of time. It was unfortunate for the group which chose to point this out yesterday that they should have chosen to do so on the day the Organization of Petroleum Exporting Countries, or OPEC, reported that the effects of the financial downturn had led to a slight downgrade in its forecast for oil consumption this year.

Against the gloomy economic backdrop that Europe currently provides, siren voices shrieking that a potential energy crisis is imminent and could be worse than the credit crunch are liable to be dismissed as scaremongers. Since they are led by Sir Richard Branson, whose Virgin group runs an energy-guzzling airline, and include Brian Souter, who runs Stagecoach, another energy-hungry transport business, they are also at risk of being seen as self-interested scaremongers.

But the work of the Industry Taskforce on Peak Oil and Energy Security shouldn’t be disparagingly dismissed. Its arguments are well founded and lead it to the conclusion that, while the global downturn may have delayed it by a couple of years, peak oil—the point at which global production reaches its maximum—is no more than five years away. Governments and corporations need to use the intervening years to speed up the development of and move toward other energy sources and increased energy efficiency. (02/11/10)

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Cluster F%#k Nation — James Howard Kunstler writes: What started out as a case of The Emperor’s New Clothes now has America looking like the world’s biggest nudist colony, with everyone in the long chain of power and authority admiring each other’s splendid new (imagined) pimp suits. …

A nice example popped up last week with the GDP (Gross Domestic Product) index for the fourth quarter of 2009. The equation affects to measure the growth in economic activity and this particular release imputed that the US economy had expanded at an annualized rate of 5.7 percent. Wow, impressive! We must be digging a new Panama Canal or something.

It turned out to be based largely on some jive about inventory “investments” — meaning, I guess, that the Ronco Corporation has laid in 1.7 million Dial-O-Matic food slicers and Showtime Rotisseries in the expectation that American stock market investors will enter 2010 creaming off their mutual fund profits to spend wildly on every infomercial prompt beamed at them over the graveyard shift at Fox News.

Memo to nation: we’re not really growing, we’re shrinking. Is this necessarily a bad thing? I dunno.  Unlike, say, the stockholders of Toll Brothers I’m not so sure that “housing starts” represents my idea of a healthy economy — since it really means we’re destroying every cornfield and cow pasture left outside our cities, which will play havoc with our national life when the reality of our Wile E. Coyote agribusiness fiasco starts to hit home and we discover what cornfields and cow pastures were really all about in the first place. …

… our economy is not really expanding, it’s contracting — and pretty swiftly. The question is how will we manage this contraction and what kind of nation do we become as this occurs.     For the moment, we are a nation committed to sustaining the unsustainable, and because this is the case we invite grievous political mischief as it becomes ever more obvious that the populace is being swindled — and the populace becomes ever more ticked off about it. Thus, you get the Tea Bagger movement, and things like it, where the disenfranchised meld legitimate complaints with fantasies and conspiracy theories, and produce an incoherent agenda based on ideas like “keeping the government out of Medicare!” One can easily see a movement like this ramping up into full-bore corn-pone Naziism. …

More probably, we’ll be dragged kicking and screaming into an epochal contraction of economy, something the industrial world hasn’t really seen before, something more severe even than the Great Depression we never stop chattering about (as though it was like The Hundred Years War). Instead of preparing for it intelligently by doing things like promoting small scale local farming, local networks of commerce, and rebuilt railroads (things, incidentally, which are within the powers of government to promote) we’ll squander our dwindling capital and political resources fighting over the table scraps of the twentieth century. Life is tragic, history is merciless, and societies don’t always make good collective choices. (02/01/10)

CNN Money — Shawn Tulley writes: Here we go again. Less than two years after the housing market collapsed, the U.S. economy is threatened by a new bubble in asset prices. This time, four billowing balloons are hovering: two commodities — gold and oil — stocks, and government bonds.

Don’t be fooled into thinking that last week’s 5% drop in the S&P, and the recent sell-off in oil, remotely makes them fairly valued, let alone bargains. Equities and commodities, as well as Treasuries, which actually rallied as stocks dropped, still have a long way to fall. The reason: They’ve already seen huge run-ups that put their prices far above their historic averages, and far above the levels justified by fundamentals. …

So how do you spot a bubble? My view is that we’re now seeing the same signs that exposed the frenzy in real estate: prices flying far above their historic averages, measured either in inflation-adjusted dollars (commodities) or as a ratio of the income they produce (stocks and Treasuries). Watch for gravity to take over, just as it did in housing.

Treasuries

The rate on the 10-year Treasury is now a mere 3.6%, well below the 5.5% rate that it averaged between 1993 and 2007, a period where inflation ran at an annual 3% clip, meaning that the “real rate” after inflation, stood at about 2.5%.

So let’s assume that future inflation also averages 3%, about where it stood in the second half of 2009. At today’s prices, Treasuries are offering a real yield of just 0.6% — 1.9 points below our 14-year average.

But as the economy recovers and the threat of inflation causes the Fed to tighten monetary policy by raising rates, the yield could rise to 5.5%, handing investors a big loss. Reminder: When yields rise, bond prices fall.

Yet even that scenario is optimistic. Given the huge deficits from the bailouts, it’s likely that investors will want a far bigger cushion for expected inflation — which suggests, says Wesbury, that the yield on 10-year bills could go over 6% in 2011. …

Stocks

Let’s assume that investors want a 10% return from stocks (a 7% real return plus 3% gains from inflation). But at current prices, there is no way that the S&P can deliver those kind of gains in future years.

Here’s why: Think of the S&P as one company that provides a total return in two components, a dividend yield and a capital gain. Together, the two should equal 10%. But the two are inversely correlated. The lower the dividend yield, the higher the earnings growth rate must be to get you to that 10%. When yields are extremely low, those growth rates become mathematically impossible.

Right now, the P/E multiple for the S&P is an extremely high 20, based on a formula developed by economist Robert Shiller that removes the constant gyrations that can under or overstate the ratio, and the dividend yield is just over 2%. So to hit that 10%, earnings must rise 8% — assuming 3% inflation, 5% annually in real terms.

But earnings tend to track GDP, which rises about 3% a year over long periods, though far more slowly in a recession. So 3% real GDP growth isn’t nearly enough to lift profits 5%. That implies that stock prices must drop sharply: A fallback to their historic P/E of around 14 would require a 29% correction, taking the S&P from its current level of 1,092 to around 770.

“Stocks will disappoint us if we buy them when they’re expensive and delight us if we buy them when they’re cheap,” says Rob Arnott, chief of asset manager Research Affiliates. Now, they’re extremely expensive, and destined to disappoint. (01/26/10)

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