Wednesday, October 24, 2007

Weak Dollar is Canary in Proverbial Economic Coal Mine

THE DROP IN THE DOLLAR'S VALUE AGAINST LEADING CURRENCIES WILL HAVE REPERCUSSIONS, WHATEVER THE IMMEDIATE CONSOLATIONS :: Americans living overseas see the front edge of the dollar collapse. Life in Europe seems to be twice as expensive as just a few years ago, as Euro-driven price-inflation meets the rapid drop in the value of the dollar against major currencies, like the Euro and the British Pound Sterling. Americans at home are facing higher food prices, higher fuel costs, and an overall slowdown in home-buying.

This is partly due to the US dollar's reduced ability to 'capture' wealth from abroad, via currency exchange, and by extension, via trade. As the dollar falls in value —losing 10% of its value against the Euro in just a few months, and roughly 41% of its value against the Euro since November 2000, when a Euro cost just $0.83—, it less likely that additional wealth will flow into the US economy by means other than the export of manufactured or agricultural goods. And, it is important to note that those exports need not increase in proportion to the dollar's decline.

For now, China has helped by aggressively promoting its exports to the United States, but should it feel able to free up some of that economic might for other pursuits —for instance, to double the EU market for Chinese exports—, the US could see the current economic bubble become suddenly very visible and very brittle. [Complete Text]

Monday, October 15, 2007

Bottled Water: Pouring Resources Down the Drain

Emily Arnold & Janet Larsen, EPI :: The global consumption of bottled water reached 154 billion liters (41 billion gallons) in 2004, up 57 percent from the 98 billion liters consumed five years earlier. Even in areas where tap water is safe to drink, demand for bottled water is increasing—producing unnecessary garbage and consuming vast quantities of energy. Although in the industrial world bottled water is often no healthier than tap water, it can cost up to 10,000 times more. At as much as $2.50 per liter ($10 per gallon), bottled water costs more than gasoline. [Feb. 2006]

The United States is the world’s leading consumer of bottled water, with Americans drinking 26 billion liters in 2004, or approximately one 8-ounce glass per person every day. Mexico has the second highest consumption, at 18 billion liters. China and Brazil follow, at close to 12 billion liters each. Ranking fifth and sixth in consumption are Italy and Germany, using just over 10 billion liters of bottled water each.

[...] In contrast to tap water, which is distributed through an energy-efficient infrastructure, transporting bottled water long distances involves burning massive quantities of fossil fuels. Nearly a quarter of all bottled water crosses national borders to reach consumers, transported by boat, train, and truck. In 2004, for example, Nord Water of Finland bottled and shipped 1.4 million bottles of Finnish tap water 4,300 kilometers (2,700 miles) from its bottling plant in Helsinki to Saudi Arabia.

Saudi Arabia can afford to import the water it needs, but bottled water is not just sold to water-scarce countries. While some 94 percent of the bottled water sold in the United States is produced domestically, Americans also import water shipped some 9,000 kilometers from Fiji and other faraway places to satisfy the demand for chic and exotic bottled water.

Fossil fuels are also used in the packaging of water. The most commonly used plastic for making water bottles is polyethylene terephthalate (PET), which is derived from crude oil. Making bottles to meet Americans’ demand for bottled water requires more than 1.5 million barrels of oil annually, enough to fuel some 100,000 U.S. cars for a year. Worldwide, some 2.7 million tons of plastic are used to bottle water each year.

After the water has been consumed, the plastic bottle must be disposed of. According to the Container Recycling Institute, 86 percent of plastic water bottles used in the United States become garbage or litter. Incinerating used bottles produces toxic byproducts such as chlorine gas and ash containing heavy metals. Buried water bottles can take up to 1,000 years to biodegrade. Almost 40 percent of the PET bottles that were deposited for recycling in the United States in 2004 were actually exported, sometimes to as far away as China—adding to the resources used by this product. [Complete Text]

Sunday, October 14, 2007

Preventive Measures to Curb Damage from Climate Change: How Close Are They? :: Can the world prepare to face the potential economic fallout from increasingly intense weather phenomena, prolonged heat waves, desertification, ice-melt and flooding? While there is no clear proof Hurricane Katrina was a direct result of climate change, hurricanes of such intensity will become increasingly frequent as Gulf waters warm; the aftermath provides real instruction for just how fragile the social fabric can be in the face of natural disaster.

A major US city and one of the world's major ports famously collapsed in the face of overwhelming inundation; society unraveled and the horrors were widely reported, with the military deployed to "pacify" the afflicted population. One of the great lessons is that that aftermath was likely wholly preventable, had warnings been heeded and the proper measures put in place.

One of the most common arguments against comprehensive action to halt or slow climate change or to reduce carbon emissions or penalize polluters is that it would "hurt the economy". This is, first of all, shamefully unimaginative, and second, entirely untrue. There is no reason that the enormous amount of spending involved in overhauling global industry and transportation should in any way represent an obstacle to economic growth. Quite the contrary, it may be the biggest boom on record, if spending on innovation, sustainability and development, are properly encouraged.

Governments have a role to play, but private business will have to stoop dragging its feet. Until now, caution in committing to clean energy solutions has been short-sighted and ill-advised. From now on, it may be fundamentally dangerous: society as a whole needs the economic elasticity provided by sustainable fuel sources, and businesses need to adapt now to the coming climate crunch, which will highly regulate destructive activities, such as pollution. [Complete Text]

Saturday, October 13, 2007

The World After Oil Peaks

Lester R. Brown, EPI :: Peak oil is described as the point where oil production stops rising and begins its inevitable long-term decline. In the face of fast-growing demand, this means rising oil prices. But even if oil production growth simply slows or plateaus, the resulting tightening in supplies will still drive the price of oil upward, albeit less rapidly.

Few countries are planning a reduction in their use of oil. Even though peak oil may be imminent, most countries are counting on much higher oil consumption in the decades ahead, building automobile assembly plants, roads, highways, parking lots, and suburban housing developments as though cheap oil will last forever. New airliners are being delivered with the expectation that air travel and freight will expand indefinitely. Yet in a world of declining oil production, no country can use more oil except at the expense of others.

Some segments of the global economy will be affected more than others simply because some are more oil-intensive. Among these are the automobile, food, and airline industries. Cities and suburbs will also evolve as oil supplies tighten.

Stresses within the U.S. auto industry were already evident before oil prices started climbing in mid-2004. Now General Motors and Ford, both trapped with their heavy reliance on sales of gas-hogging sport utility vehicles, have seen Standard and Poor’s lower their credit ratings, reducing their corporate bonds to junk bond status. Although it is the troubled automobile manufacturers that appear in the headlines as oil prices rise, their affiliated industries will also be affected, including auto parts and tire manufacturers.

The food sector will be affected in two ways. Food will become more costly as higher oil prices drive up production costs. As oil costs rise, diets will be altered as people move down the food chain and as they consume more local, seasonally produced food. Diets will thus become more closely attuned to local products and more seasonal in nature.

At the same time, rising oil prices will also be drawing agricultural resources into the production of fuel crops, either ethanol or biodiesel. Higher oil prices are thus setting up competition between affluent motorists and low-income food consumers for food resources, presenting the world with a complex new ethical issue. [Complete Text]

Thursday, October 11, 2007

World Grain Stocks for 2006 Fell to 57 Days of Consumption

Lester R. Brown, EPI :: The world grain harvest for 2006 was projected mid-year to fall short of consumption by 61 million tons, marking the sixth time in the last seven years that production has failed to satisfy demand. As a result of these shortfalls, world carryover stocks at the end of this crop year were projected to drop to 57 days of consumption, the shortest buffer since the 56-day-low in 1972 that triggered a doubling of grain prices.

World carryover stocks of grain, the amount in the bin when the next harvest begins, are the most basic measure of food security. Whenever stocks drop below 60 days of consumption, prices begin to rise. It thus came as no surprise when the U.S. Department of Agriculture (USDA) projected in its June 9 world crop report that this year’s wheat prices will be up by 14 percent and corn prices up by 22 percent over last year’s.

This price projection assumes normal weather during the summer growing season. If the weather this year is unusually good, then the price rises may be less than those projected, but if this year’s harvest is sharply reduced by heat or drought, they could far exceed the projected rises.

With carryover stocks of grain at the lowest level in 34 years, the world may soon be facing high grain and oil prices at the same time (See Figure). For the scores of low-income countries that import both oil and grain, this prospect is a sobering one.

World grain consumption has risen in each of the last 45 years except for three—1974, 1988, and 1995—when tight supplies and sharp price hikes lowered consumption (See Figure). Growth in world grain demand, traditionally driven by population growth and rising incomes, is also now being driven by the fast growing demand for grain-based fuel ethanol for cars.

Roughly 60 percent of the world grain harvest is consumed as food, 36 percent as feed, and 3 percent as fuel. While the use of grain for food and feed grows by roughly 1 percent per year, that used for fuel is growing by over 20 percent per year.

Although the rate of world population growth is projected to slow further, the number of people to be added is expected to remain above 70 million a year until 2020. Each year the world’s farmers must try to feed an additional 70 million people, good weather or bad. This growth is concentrated in the Indian subcontinent and sub-Saharan Africa, which is where most of the world’s hungry people live. [Complete Text]

Monday, October 8, 2007

Project Quipu: Integrated Economic Atlas for the 21st Century


Examining the manner in which financial news is reported in the popular media, Think proposes to create a system whereby live-update, rss-technology, and financial and editorial expertise, come together to produce a reliable up-to-the-minute resource for evaluating broad economic trends and engagements, without limiting analysis to single-parameter references like GDP or individual stock indices.

It is often thought that in order to organize ideas or to put some kind of order to any analysis, one needs uniformity, a limited number of generic categories and a single system of uncomplicated parameters by which to categorize each subject under review. But the truth is, this uniformity is not and will not be the rule of any part of lived reality.

To emerge from the fog of flawed, incomplete and opportunistically limited economic and financial analysis, means we need to come to grips with the fact that all resources, all functions or 'services', be they natural or the product of human ingenuity, figure somehow in economic values at all levels. There may be no clear way to quantify their contribution or mercantilize them, but they are there, and nothing can be fully understood in economic terms without seeing this.

We could calculate, for instance, that to do by artificial means what nature does of its own accord in a handful of basic environmental 'services' (such as climate stabilization or the global fresh water supply—avoiding discussions of such complex processes such as new species evolution, deep-sea current patterning or ultraviolet light blockage and refraction), we would have to spend well in excess of 10 times the entire global economic output (using GDP in sum as a base).

This helps us to take note of the immense ecological influence we have erased from economic calculations, seeing it as inconvenient or in realistic terms unquantifiable. But it does not help us to place a useful economic value on such influence over the economic infrastructure of civilization, globally or locally.

It may be enough to say, though this shades all following calculations of any kind in a significant and problematic way, that they are indispensable and dynamic values. They exceed all calculable value of our own activities, which without their contribution would simply not make sense or could not take place at all.

Metaphorically, their incalculable immensity could be compared to the way the tides at the edge of a great sea shape and define the shoreline and the kind of activities that can be conducted at that point of contact. It is necessary to think of how such information could then be integrated into a more complete and less untruthful (it's worth noting) matrix of economic calculations.

What parameters determine downward and upward trends, and what do such trends mean for our 'traditional' economic footing, financial activities, international treaty obligations on issues like trade, water, farm subsidies, and transportation? These questions only begin to gain relevance when we see that the 'macro' view is in fact far broader than the segmented vignette-style of economics we are accustomed to pursuing, for the level of mathematical and sociological comfort it affords.

So, everything is very big, all numbers are astronomical, nature is everything and more, we cannot make it all fit into a nice little frame... yes, yes, yes, this is true and it's a problem. But what can we do to apply this observation to our economic outlook in general or to programming the calculations for this quixotic pursuit of an intregrated economics?


We first need to correct the errors that are already built into our economic calculations, and which are part of the traditional economic outlook: for example, nuclear energy. Why do we not count the costs of long-term maintenance, security, protecting national technological secrets, pollution clean-up and, above all, the long-term hermetically-sealed containment of nuclear waste?

Primarily, because that last figure requires examining the huge costs of sealing radioactive materials in a hermitically-sealed, non-conductive container, for between 1 million and 10 million years, which may take us only to the half-life of the radioactivity of the spent fuel.

Depleted uranium, for example, which is used as a heavy metal for armor and bomb-casings in US military machinery, has a radioactive half-life of 4.5 billion years. 1 to 10 million years to abide by public health and safety laws and prevent widespread radioactive contamination of the natural environment or of human habitat.

We can calculate these costs, but they remain unimaginably vast. Imagine telling a businessman —it is irrelevant whether he is serious or not, talented or not— we would like you to build a nuclear plant for electricity generation, move toward taking a profit after a few decades, maybe make a few billion dollars over another few decades, then pay for decomissioning the plant, clean-up of all dangerous substances or contaminated panels or constructions, then pay all the expenses for containment and security, for 1 to 10 million years, during which you will not be able to take any profit from your activities.

The offer would not be convincing. So, in our calculation of the usefulness of such technologies, we need to take very seriously the reality that those costs will be paid or those operations will not be successfully carried out. Though we may see the economic value now, and tell ourselves as a society, it's worth it to get the gain we get from "cheap" energy now, we need to see clearly what those costs look like, and what they will take away from us in the future.

The calculations need to be wholecloth and transparent. The healthy functioning of any market depends on there not being unreliable pockets of secrecy and deceit where the eye is fooled and the 'magic' of economic value just a trick.


The founding principle, the goal and the challenge of this undertaking is to integrate and comprehend in an integrated manner the economic, ecological, financial and spending data that account for real long-term viability and prosperity at the human level. It begins in the theoretical realm, and through analysis and discussion, could reach the moment of practical application, likely with much new information technology put into the process. The model will be the physical metaphor of the Inca quipu, a tool for measuring taxation in an empire that combined urban centers, agriculture and nomadic hunter-gatherer bands.

The quipu was a system of strings, knots, colors and patterns, created in each case by the individual agent whose job was to oversee the history of taxation and tributes offered to the Inca by his subjects in a given region. It provides an evaluation of geography, social composition, currency and chronicle.

The quipu was used to evaluate the state of affairs through a dynamic system of spontaneous coding, a system open to the introduction of new elements, categories and coding patterns, at nearly any time. The quipu's creator might have been the only living soul able to fully decode its meaning, which was, in itself, a way of establishing enhanced economic value in the work of formatting and maintaining the document itself.

The problem will be, evidently, how do we program into a matrix for moment-by-moment calculation of an international economic outlook, values we cannot quantify? and, how do we allow for a dynamic, bottom-up intregration of new code, new parameters, and new paradigms into what should be, in theory, a consistent model for evaluating global economic trends, beyond the bounds of the traditionally 'economic'?


These are questions that need answers, and will form the basis of Project Quipu. Allow for discussion, criticism, analysis and the contest of ideas, to guide us toward a series of solutions that help make such a matrix possible.

Project Quipu proposes as a rule not shying away from seemingly impossible calculations, because they likely contain vital economic data which may come to us in forms not quantifiable but in fact relevant and comprehensible, when seen through the adequate lens.

One key feature will be timing: as with any economic reality, the moment brings context that cannot be discarded, and two moments which may appear numerically similar may in fact have amply divergent significance. It is therefore vital to understand that any data with real impact will emerge either more slowly or more rapidly than our ability to perceive it, just out of reach of our attempts to 'capture the moment'.

We cannot take a 'snapshot' and live the captured moment at the same time, so we must manage that lapse in time appropriately and understand that it carves out a hollow in the information available to us. This nature of the moment helps to shape the method, so to top off the aggravating complexity of this challenge: we cannot assume at any time that we have rendered the definitive picture of a global economy. It escapes our grip like water...