Beyond the Limits to Growth (Cont)

Leading the Transition
Ideas from environmentalists that for decades have been derided by economists and politicians—reducing consumption, relocalizing economic activity, building self-sufficiency—are suddenly being taken seriously in households that can no longer afford to keep up with the consumerist treadmill.

This new economy would not be a “free market” but a “real market,” much like the one fabled economist Adam Smith originally envisioned; it would be, as author David Korten has said, an economy driven by Main Street and not Wall Street.

Many globe-spanning corporations—unable to provide a continuous return on investment or to rely on cheap energy and natural resources to turn a profit—will fail

, whereas much smaller local businesses and cooperatives of all kinds will flourish.

Local governments facing declining tax revenues will be desperate

to find cheap, low-energy ways to support basic public services like water treatment, public transportation, and emergency services.

Now that “business as usual” is ceasing to be an option for mainstream society, these strategies need to be rethought and rearticulated coherently, and they need to become
the mainstream.

What we need now are clarity, leadership, coordination, and collaboration. With shared purpose and a clear understanding of both the challenges and the solutions

, we can manage the transition to a sustainable, equitable, post-carbon world, though the urgency of the need to fully and immediately engage with the transition process at all levels of society can hardly be overstated.

Link -
http://www.postcarbon.org/Reader/PCReader-Heinberg-Limits.pdf
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Japan, The U.S., Bubbles and Deflation

The latest Japanese Consumer Price Index, released on July 30th with data through June, shows that Japan has experienced seventeen consecutive months of deflation.

Here is a series of real (inflation-adjusted) monthly close charts of the Nikkei 225 and the S&P 500 since 1970 with their respective annualized rates of inflation shown below. This series also includes an overlay chart with the two index peaks aligned. The overlay retains Japan's inflation to illustrate a point discussed later in this post.



The left sides of the two bubbles are remarkably similar. More conspicuous, however, are the dissimilar contours of the post-bubble declines. A key difference is the fact that Japan experienced nearly simultaneous bubbles in equities and real estate; the former peaked in December 1989, the latter in early 1991. The equity and real estate peaks in the US were separated by approximately five years, and the 2005 peak wasn't generally recognized for another year or two because of the highly regional nature of the real estate market.

Inflation or Deflation?
Many economists and market experts predict high US inflation as a result of the massive government intervention in the current financial crisis. However, over the past year, the US economy slipped into an eight-month period of deflation unparalleled in nearly 60 years.

The decade following the Japanese twin bubbles was accompanied by mild inflation averaging around 1.4% with occasional brief periods of deflation. Thereafter, the Japanese economy has tended more toward deflation (see the circled area).Link -
http://seekingalpha.com/article/218641-japan-the-u-s-bubbles-and-deflation?sourc...
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US & Global markets may well follow trends similar, but not identical to those experienced in Japan between 1990-2010.

The current Global outcomes, will have some similarities & some variations, compared to Japans outcomes.

For example, the rest of the world is now infected by some of the issues, which had earlier afflicted only japan, such as the Aging then of Japan and now of the rest of the world.

Now however, there is also Peak Oil (which commenced in 2005), an upcoming total Population decline (set to commence within 20-30 years) & Climate Change, which is already impacting, but the major effects may not be for another 50-100 years.  

John Williams: Times That Try Our Souls (Cont)

TER: We no longer really have the option of expanding the debt and it's doubtful that even short-term stimulus will have much impact. Looking at this next leg down against that backdrop, what projections would you make about unemployment, housing prices, GDP as we look through the end of 2010 and into '11?

JW: Unemployment will be a lot worse than most people expect. Housing will continue to suffer in terms of weak demand. But in this crazy, almost perverse circumstance, the renewed weakness to a large extent will help push us into higher inflation.

The government is effectively bankrupt. Using GAAP accounting principles, the annual deficit is running in the range of $4 trillion to $5 trillion. That's beyond containment. The government can't cover it with taxes. They'd still be in deficit if they took 100% of personal income and corporate profits. They'd also still be in deficit if they cut every penny of government spending except for Social Security and Medicare. Washington lacks the will to slash its social programs severely, to change its approach to ever bigger government. The only option left going forward is for the government eventually to print the money for the obligations it cannot otherwise cover, which sets up a hyperinflation.

All of what I just described was already in place when the systemic solvency crisis broke. Before this crisis the government was effectively bankrupt. In response to the crisis, the government may have gone beyond what it had to do, but you err on the side of conservatism when you're trying to prevent a systemic collapse. That was a real risk. It still is. Irrespective of the politics of big government spending, quantitative easing, renewed bailing out of banks, whatever is involved, I'd argue that the government still will do whatever it takes to prevent a systemic collapse. That last series of actions had the effect of rapidly exploding the deficit. In just a year, we went from something under $500 billion in official reporting, on a cash basis as opposed to GAAP basis, to something close to $1.5 trillion.

TER: How big will that deficit grow in this second painful and protracted period?

JW: I can't give you a hard number, but I can tell you this. The markets came into this year on consensus projections that we'd have positive economic growth. Forecasts for the federal deficit, treasury funding, banking system solvency, etc. all were based on assumptions of recovery, of positive growth. Those assumptions presumably still underlie what I consider to be an irrational stock market.

But those projections and assumptions were wrong. We're going to have negative growth. The downturn will intensify. We're not in recovery. We have states on the brink of bankruptcy. The federal government isn't going to let California or New York or Illinois collapse. Those are threats to the systemic survival. They're also going to spend a lot more to support people on unemployment. Again, putting aside election year politics and such, the banking industry will need further bailout as solvency issues come to a head again. The federal deficit is going to balloon. It's going to blow up much worse than any formulas would give you, and Treasury funding needs will explode.

TER: Clearly you see us spiraling out of control.

JW: We've been talking about an economic recession, but we are headed for something far worse. I define a depression as a 10% peak-to-trough contraction in the economy. In terms of the broad economy, we're not down 10% in GDP yet. So while we're not formally in depression, we're certainly seeing it in a number of indicators and I think we'll be in a depression, with GDP down 10%, in the near future.

A contraction greater than 25% peak-to-trough puts you in a great depression. That is what I envision, but we'll be taken there by hyperinflation and a resultant cessation of normal commerce.

TER: I'm almost afraid to ask, but how will the stock markets fare when the system breaks down?

JW: Stocks generally tend to reflect inflation, since revenues and profits are in inflated dollars. If you look at stock prices adjusted for inflation, you can have a bear market as well as a bull market. But these are not going to be good economic times. So I think we're going to have a real bad stock market adjusted for inflation.

I'd stay out of stocks in the U.S. With the U.S. markets in serious trouble, the rest of the world probably will see lower stock prices as well, but they're not going to have the hyperinflation.

Russian fires prompt Kremlin to abruptly embrace climate change

Amid what is called the worst Russian fires in history, President Dmitry Medvedev – who recently dismissed concerns over emissions –embraces the need to address climate change.

Moscow
Russia's ongoing heat wave, along with its disastrous fallout, may have finally persuaded the Kremlin to combat climate change

Russian officials, who have until now resisted dramatic action out of fears it would dampen economic growth, have lately issued strong statements linking global warming to the emergency Russia is currently facing. Some hope the abrupt change of tune will result in more effective environmental policies, even after the smog dies down.

"There is no question that we need to get ahead of climate change," says Vladimir Slivyak, co-chair of Ecodefense, a grass-roots Russian environmental group. "This is a wake-up call."
Moscow-region fires triple in size
The crisis, which seems to have taken the Kremlin by surprise, features a fierce and unremitting heat wave that's now well into its second month, a drought that has ruined up to a third of the vitally important grain crop, and a wave of seemingly irrepressible wildfires that have blanketed half of European Russia – including the capital, Moscow – in a cloud of smoke.

Russia's state meteorological service said smog conditions in Moscow have eased from a Saturday peak, but the Ministry of Emergency Services warned that Moscow-region fires have tripled size in the past week, spreading from 65 to 210 hectares. Meanwhile, an average of 700 people are dying per day in Moscow – a doubling of the average rate, which health officials blamed on the smog.

"Our country has not experienced such a heat wave in the last 50 or even 100 years," Russian President Dmitry Medvedev said last week in a speech published in English on the Kremlin's website. "We need to learn our lessons from what has happened, and from the unprecedented heat wave that we have faced this summer.

"Everyone is talking about climate change now," he continued. "Unfortunately, what is happening now in our central regions is evidence of this global climate change, because we have never in our history faced such weather conditions in the past. This means that we need to change the way we work, change the methods that we used in the past."

Those are arguably the strongest words a Kremlin leader has ever delivered to a domestic audience on the subject of climate change.
Link -
http://www.csmonitor.com/World/Europe/2010/0809/Russian-fires-prompt-Kremlin-to-...
============
Why is this not in the Environment section?

WE can not wait for the future to arrive, before we act to mitigate the effects, in the case of Climate Change!

Because the timelines for mitigation of the Climate related risks are on a planetary clock, not a human clock.

WE can't just click our fingers and say problem solved, but our demise from Climate related risks, would simply be the blink of an eye, on a Planetary scale!

The Fusion of Peak Oil & Climate Change

Peak Oil and Climate Change deal are two historic events for humans and life on earth. The first threatens modern industrial ways of living and the latter threatens the climatic systems that are an integral part of our world and the way we live and survive.

A quick recap on both. Peak Oil is the point of historic maximum global oil flow, Climate Change is the alteration of established climate systems due to (in this case, anthropogenic) global warming. The onset of both will affect food & water supplies, mortality rates, conflict, migration and much more. The evidence that climate change is underway and almost past the point of no return is very strong and Peak Oil day by day gathers more credence as many studies point to an imminent peak.

How do these two events affect each other though?

The decline of global oil supply and the increasing cost of everything as a consequence means we will see our ability to deal with the consequences of Climate Change reduced.

Let us take a look at Britain. The decline of oil and gas will of its own accord make it harder to keep Britain warm but if the Gulf Stream does switch off as a result of Global Warming, the gap between what is needed and what will be available will get wider. The change to a colder climate would have a negative affect on crop growing, at a time when declining oil and gas supplies make the agriculture business more expensive. Warming sea temperatures are pushing fish stocks further afield, out of traditional (and already over-fished) fishing waters. Fishermen, so dependent on oil for their boats, will have to pay more for their fuel to go after these already dwindling and increasingly distant fish stocks. The insurance industry is already facing increasing pressures from Climate Change, but when the economy nose-dives past the oil peak, this double whammy could knock out the insurance industry. Will those in increasingly flood prone areas be able to pay the insurance costs during the recessions brought on by the decline of oil supplies?

The European Environment Agency recently pointed to how Germany is now at risk from more extreme weather, such as heavy rain - which raises the risk of flooding, especially the densely populated plains of central Europe. Cleaning up and repairing that damage costs money and requires energy. The economic climate, post peak, is going to be less able to deal with it. At the other extreme, Italy's coming crisis is drought, and there is a need there to improve irrigation to improve agriculture. Once again, money and energy are needed, and both will be harder to come by.

Further afield we are seeing glaciers melting and other regions becoming more arid and water flows changing. The ability to process and transport water to these regions will become more expensive, if it is at all possible, since drinking water is already tight in many areas. For example, desalination plants are an energy-intensive way of getting drinking water from sea water. Another option is to build pipelines to transport the water, but this is an expensive and complicated option. What we are likely to see, according to Tearfund, a relief and development agency, is an increase in water refugees.

As river and rain patterns change abruptly, the agriculture that has been grown for those climates will have to change, but the patterns may alter so much that the ability to grow food is severely impaired, and the need for oil and gas for fertiliser and food transportation will go up. This will lead to increases in, for example, famine and drought. With the world economy going into a long-term downturn as a result of Peak Oil, and the cost of everything going up, the willingness and ability from the wealthier (but increasingly less wealthy) world to deal with the problems brought on by Climate Change will decline.

The list goes on. Forest fires will increase, but the ability to fight them will decrease. Disease will spread but the cost and transportation of medicines will increase as a result of the great oil decline, while the ability to pay for them by those in need will decrease. As the world economy goes into recession as a result of oil decline, the ability and willingness of the rich to give to the poor in regions directly affected by Climate Change will wane. Cheap oil has enabled us to tackle many of the world's problems - to varying degrees - when we have been willing, but Peak Oil marks the beginning of a very big change as far as that goes.

In this paper I discuss the possibility that the U.S. economy may become enmeshed in a Japanese-style, deflationary outcome within
the next several years.

Conclusion
The global economy continues to recover from the very sharp recession of 2008 and 2009. During the recovery, the U.S. economy is susceptible to negative shocks which may dampen inflation expectations. This could possibly push the economy into an unintended, low nominal interest rate steady state.

Escape from such an outcome is problematic.

Of course, we can hope that we do not encounter such shocks, and that further recovery turns out to be robust. But hope is not a strategy.

The U.S. is closer to a Japanese-style outcome today than at any time in recent history. In part, this uncomfortably close circumstance is due to the interest rate policy being pursued by the FOMC. That policy is to keep the current pol-icy rate close to zero, but in addition to promise to maintain the near-zero interest rate policy for an .extended period.

But it is even more than that, because the reaction to a negative shock in the current environment is to extend the extended period even further. delay the day of normalization of the policy rate farther into the future. This certainly seems to be the implication from recent events. When the European sovereign debt crisis rattled global financial markets during the spring of 2010, it was a negative shock to the global economy, and the private sector perception was certainly that this would delay the date of U.S. policy rate normalization. One might think that is a more inflationary policy, but TIPS-based measures of inflation expectations over five and ten years fell about 50 basis points.

Promising to remain at zero for a long time is a double-edged sword.

The policy is consistent with the idea that inflation and inflation expectations should rise in response to the promise, and that this will eventually lead the economy back toward the targeted equilibrium of Figure 1. But the policy is also consistent with the idea that inflation and inflation expectations will instead fall, and that the economy will settle in the neighborhood of the unintended steady state, as Japan has in recent years.

To avoid this outcome for the U.S., policymakers can react differently to negative shocks going forward. Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to stay low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome. A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.Link –
http://research.stlouisfed.org/econ/bullard/pdf/SevenFacesFinalJul28.pdf
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There are at least some in the US Federal Reserve, who see things somewhat differently?

Congratulations !!!!!!!
(Slow sarcastic handclap)

the last horse comes home !!!!!!!!

ask mad mod mozzaok what his ideas on it are!!

Futurenomics

We need to be clear here, this is not merely a matter of Stimulus versus Austerity or Keynesians versus the Austrian approach.

Both have there place, given the right circumstances, but both have zero chance of being successful, in the current circumstances!

What are the right settings for now?

Let me say 2 things very clearly, the right settings should have started about 50-60 years ago, but that did not happen and there are now no Hollywood endings!

For any complex society, to exist for an extended period of time, the Society & its Economy MUST be mutually INCLUSIVE, they must support each other.

At present, the Global & OZ Society & Economy are mutually exclusive, they will destroy each other, in a relatively short period of time!

To put it into perspective, we have spent 50-60 years, drawing down on the future surpluses, to pay for our excesses of today and now our future has arrived!

We are quickly coming to the point where the major Economic drivers will cease providing the Productivity that is required to generate the surplus needed to enable a complex society - OURS!

One of the major Economic enablers, being Energy (Oil, Coal & Gas) is already on the "Road to nowhere", with Oil having already Peaked and Coal & Gas are set to follow within 40-50 years.

The other great enabler is Population Growth and that has been spiralling down for some time and will start going into Decline with 20-30 years (see Japan), with us being unable to take actions to prevent that from ocurring, as the Decline in our Essential Resources of Energy, Food & fresh water making that impossible!

So, leaving the past alone, as it only leads to recriminations, we are now essentially faced with 2 choices -
1) Live for today & screw the future consequences.
2) Take the pain now & leave future generations with a fighting chance, for their survival & that of the human race.

I vote for the later!

We have 2 basic future options -
1) Extinction, via the status quo.
2) Life, via the Society & Economy finding ways to become mutually sustaining!

But what will that mean?

It will mean 20-30 years of higher taxes & lower benefits.

It will mean heading to ZPG, over the next 20-30 years, then a gradual reduction in the Global Population, by natural regression, over time.

It will mean an urgent "Manhattan Style Project" to locate any possible replacement/s for Oil, Coal & Gas, as quickly as humanly possible. A large part of that project will be to enable the transition away from Fossil Fuels, to their replacements, in the shortest time possible, to assist in restricting the flow of GHG's into the environment.

It will mean changing the Political & Economic status quo, into something new, which will allow us the time needed to extricate ourselves from the CRAP that we ALL created! And, to do that, it will mean dragging every nation into a common agreement, on the actions needed, by any & all means available.

Now, I don't know IF we will be allowed to make our own decisions, which may result in better outcomes, as I suspect that some contingency plans are already under way.

Whether we like it or not & whether they work or not, are entirely different questions!

So, as George Bernard Shaw said, "life wasn't meant to be easy" and I suspect we are in the process of confirming that to be a fact?