Tuesday, April 30, 2013

Here is THE Problem Facing Alternative Energy

You have to solve the intermittentcy issue.

And that means storage. Some folks point to Denmark as a success story without understanding the Danes are wheeling power to Sweden,  Norway and Germany and receiving nuclear, hydro and coal generated base power in return. Ya gotta have the base if you don't have the storage.

Another approach that has potential (energy pun) is to use electric vehicles as storage and load levelers for the grid. It is still early days however, only last week did we see this announcement from the University of Delaware, NRG Energy and the PJM Interconnection: "University of Delaware, NRG EVs Sell Energy to Grid".
It was a first.

Today Robert Rapier posted "The Key To Running the World on Solar and Wind Power" on his R2 blog and which contained this graph:

Energy Density

It is really, really hard to compete with the energy density stored in liquid hydrocarbons.
His whole post is worth a read.

If one is in a reading mood one of our first 100 posts, way back in 2007 was "Sustainable Energy-without the hot air":
Who better than a Cambridge physics professor to hang out with this weekend? Well maybe a few folks come to mind .
Many years ago a very old and wise and rich speculator said to me "There's time enough to do anything, there's not time enough to do everything, you have to make decisions".
I've made my decision. Somebody should do it.

With that preamble (pre-ramble) here's a seven MB PDF with the above title. (If I can tease you just a bit, it's dated April 11, 2007) [at that time=two days old]

If that seems too daunting, here's the website of David J.C. Mackay, Professor of Natural Philosophy and Gatsby Senior Research Fellow, Department of Physics, Cavendish Laboratory, University of Cambridge. Don't miss the "about me" link on the left.
The reviews are almost giddy:
15 Jan 2010 Bill Gates - Clear Thinking on the Topic of Energy 'If someone wants an overall view of how energy gets used, where it comes from, and the challenges in switching to new sources, this is the book to read. ... I was thrilled to see a book that is scientific, numeric, broad, open-minded, and well written on a topic where a lot of narrow, obscure, non-numeric writing confuses the public. People need to really understand what is going on and then be part of the process of moving the world to a new energy infrastructure.'

 Physics World - 'a book every budding physicist should read - and perhaps also ... the one every working physicist would like to have written.'
'the book would be a good way of introducing teenagers to how real physicists work; all the more so because MacKay's treatment of energy is much more positive and empowering than either the school physics curriculum or most environmental literature.'

30 April 2009 - Guardian: Power to the people - "How did a Cambridge physics professor come to write this year's must-read book about tackling our future energy needs?" 

8 April 2009 The Economist - 'The book is a tour de force... For anyone seeking a deeper understanding of the real problems involved, "Sustainable Energy - Without the Hot Air" is the place to start.'

19 June 2009 - Science magazine - "a cold blast of reality ... a must-read analysis ... I found MacKay's book by turns exhilarating and terrifying. His calculations are always thought-provoking even when his assumptions had me banging the table in disagreement. My objections often faded as his analysis unfolded."

And on and on and on.
You get the point.

Since we first posted on "Sustainable Energy-without the hot air" Mackay was appointed one of the eight Regius Professors at Cambridge (of Engineering) and is also trying to fix the mess at the UK's Department of Energy and Climate Change as Chief Scientific Advisor.

Show off.

We also visited the Professor in 2012. By then I had shortened the introduction:
His Wikipedia entry is basically "David J.C. MacKay, see: heavyweight."*
Finally, here is the new download page.

Gold Miners ETF Flows Point to Bearish Bets (GDX)

We've been waiting patiently for a decent risk-reward profile on the long side in this critter for months and, thinking one might be near began posting as much in the last month as in the last year. It's not here yet. $29.52 Down $0.39. Here's the six-month picture via Yahoo Finance:
Chart forMarket Vectors Gold Miners ETF (GDX)

That low was at $27.27 on April 17 and $27.47 on the 18th.
And from MoneyBeat:
It might seem as if investors have had a love-hate relationship with the Market Vectors Gold Miners ETF over the past two weeks, but a closer look at the fund flows suggests traders were bearish all along.

When gold prices collapsed two weeks ago, taking shares of gold-mining stocks down for the ride, there was a surge of new issuance of GDX shares. On the surface that might have been a bullish sign, suggesting investors were buying shares in order to bet on a bounce.

But in this case, traders say the jump of new issuance actually reflected expectations of bearish bets on the $5.8 billion exchange-traded fund. One of the quirks of the ETF market allows market makers to create shares for the sole purpose of lending them to short sellers. Since then, the share count has been shrinking and money has headed out the door of the fund....MUCH MORE
Goldman Sachs on Australian Gold Miner Cash Costs
Now That the FTSE Gold Miners Have Lost $169 Billion of Market Cap... (ABX; NEM)
Big Prints In Bearish Options on Gold Miners ETF (GDX)
Barclays: "If Gold Was "Just A Commodity" What Would Be Its Support Price?" (ABX; G; GLD; NEM)
Cassandra Likes Gold Miners (XAU; GDX; HUI)
Cassandra's fate was to foresee the future but have no one believe her.
She was also the second most beautiful woman in the world and deranged....

...Here's Cassie after taking the dive into Vancouver- listed Canadian juniors:

Cassandra by Evelyn De Morgan
(1898, London); Cassandra in front 
of the burning city of Troy
at the peak of her insanity

Saxo Bank: "There will be more wealth confiscation, without a doubt"

From the Telegraph:
Savers and investors face further "wealth confiscation" in Europe as the continent struggles to resolve the single currency's problems, a bank chief has said.
Cypriots protest against the ratification of a tax on bank deposits in Nicosia on March 18 - 'There will be more wealth confiscation, without a doubt'
Earler this week savers at Bank of Cyprus saw 37.5pc of their balances above €100,000 
converted into shares Photo: EPA
European politicians will take the "easy option" of taking money from the rich rather than raising taxes and cutting spending to deal with the continent's debt problem, Lars Christensen, the head of Saxo Bank, said.
Asked if the raid on uninsured savings in Cyprus would be repeated, he told City AM: "There will be future bail-ins [loss of deposits] and other types of confiscation of wealth in the eurozone, without a doubt.
"There's no other realistic way forward if politicians continue to fail to deal with the basic indebtedness problem across Europe. They will either have to raise taxes and cut spending, or politicians will take the easier route and take money from the rich."
Earlier this week savers at Bank of Cyprus saw 37.5pc of their balances above €100,000 converted into shares, with a further 22.5pc at risk and 30pc frozen. 
Following the Cyprus deal, several senior German economists proposed that wealth taxes be used to fund future bail-outs in the eurozone, with British owners of holiday homes potentially in the line of fire.

Senior advisers to Chancellor Angela Merkel pushed for better-off households to pay towards the cost of any future bail-outs for the weaker members of the single currency. The proposals, from members of Germany’s council of economic experts, raised the prospect of taxes being imposed on property in a country such as Spain if its government was forced to seek a bail-out....MORE 
Mr. Christensen does know how to get attention, both for himself:
Saxo Bank Co-founder: "Cyprus bailout a major game changer"
And for the bank:
"Saxo Bank’s 10 Outrageous Predictions for 2013"
"Saxo Bank’s Outrageous Predictions for 2012"

Why Quantitative Easing's Wealth Effects Are Not Enough (It's the distribution that's the problem)

From the Back to Full Employment blog:
Many economists and market participants applauded the Federal Reserve’s decision in September 2012 to make monthly purchases of $85 billion in Treasury and mortgage-backed securities, and hold short-term interest rates at near zero until unemployment fell to 6.5 percent. Now, however, the issue of when to end bond buying is being debated both within and outside the Fed. Some think the central bank isn’t doing enough to deal with the still-fragile economy, while others argue that its actions will result in future price inflation. There is also growing concern that the rapid run-up in prices of stocks and other capital market assets reflects greater risk taking and more leverage and may be signs of yet another bubble.

By March 2013, rising asset values succeeded in filling the $12.5 trillion hole in households’ net worth that developed in 2008. Quantitative easing appears to have played a major role in spurring that recovery. As in the period leading up to the recession, some think this rapid increase in household net worth is a clear sign that monetary ease is producing asset inflation rather than price inflation. But, unlike the previous period, the distribution of these gains primarily benefits upper and upper-middle income households. The largest increases were in their holdings of corporate stocks, mutual fund shares and pension funds, while growth in the values of residential real estate and households’ equity in non-corporate (small) businesses remains below pre-recession levels. Thus, what seems a resurgence of the potential for the so-called “wealth effect” to increase confidence and stimulate demand may be undermined by the further boost this uneven appreciation in asset values gives to inequality.
The benefits of the rise in households’ net worth are far weaker than in the past because there is no clear connection to employment. In addition, the fact that inflated capital market assets held in pension funds are not easily used to back new borrowing may have limited the effect on spending. Asset inflation in the earlier period stimulated job growth and demand because rising home prices spurred new construction and ensured that spending could be funded by home equity borrowing....MORE
HT: Naked Keynesianism
NK says see also:
Quantitative Easing a Keynesian Critique

Global Warming Could Turn Some Women Into Hookers

From The Hill:

Dem resolution warns climate change could push women to ‘transactional sex’
Several House Democrats are calling on Congress to recognize that climate change is hurting women more than men, and could even drive poor women to "transactional sex" for survival.

The resolution, from Rep. Barbara Lee (D-Calif.) and a dozen other Democrats, says the results of climate change include drought and reduced agricultural output. It says these changes can be particularly harmful for women.

"[F]ood insecure women with limited socioeconomic resources may be vulnerable to situations such as sex work, transactional sex, and early marriage that put them at risk for HIV, STIs, unplanned pregnancy, and poor reproductive health," it says.

Climate change could also add "workload and stresses" on female farmers, which the resolution says produce 60 to 80 percent of the food in developing countries....MORE
You know what leads to folks working the sex trade in developing countries?
Poverty and Desperation caused by a lack of economic development.
Rep. Lee might be better advised to figure out why some areas have not climbed the economic ladder. That would go a lot further to decrease the need for "transactional sex" than her global warming resolution.

"Run for the hills, robots have begun to evolve"

One small step for a robot, one giant leap for robotkind.
Credit: Jeff Clune
A team of researchers has done something remarkable: they've demonstrated simulated evolution in a visible, simple way. Also, they've doomed us all. In an experiment akin to that of Dr. Frankenstein, a team of researchers working at the Cornell Creative Machines Lab has provided the world with (further) proof of evolution by designing a program within which simulated robots "build" themselves out of cubes of virtual muscles and bones.

The rules of the simulation are simple: robots that move faster get to reproduce more. And since the robots live entirely inside a computer, their generations pass much faster than our own. So fast, in fact, that the process of their evolution can be seen in the blink of an eye. A wonderful tool with which to teach the principles of evolution, to be sure.

We're thinking that these robots need not always be chained to the insides of a program. It almost seems like they've been created with the express intent of being able to break the chains of their software confinement. Consider their construction: a series of simple cubes. Cubes which are the easiest shape to print on say, a 3D printer....MORE
We've already crossed that bridge, see:
Robopocalypse: iRobot files patent for machine that 3D prints autonomously (IRBT)
Here Comes Another Asteroid Mining, 3D Printing, Robotic, Start-up

"Where are all those natural gas fleet conversions?"

This is a part of the natural gas supply/demand matrix that we don't write much about any more. Last year it became apparent that the conversion costs were still too high for a massive migration and I started quoting part of Hamlet's Tomorrow and tomorrow and tomorrow soliloquy when the conversation turned to natural-gas-powered transportation:
...it is a tale told by an idiot, full of sound and fury, signifying nothing...
Moving on to another good scribe, Kate Mackenzie has been writing some of the best big-picture stuff on natural gas that's out there. Here's a taste via FT Alphaville:
Since 2009 the stark contrast between oil prices (high) and natural gas prices (low) in the US has prompted questions, and visions of a new future of transport fuels.

There was some excitement that this might be gathering steam when Warren Buffett’s freight train network BNSF revealed it would trial LNG powered trains. This is the sort of thing that T. Boone Pickens has been pushing for years: use domestic natural gas as transport fuel to reduce costs, reduce emissions and diminish US dependence on oil imports, while providing a ‘bridge’ to renewables-based infrastructure.

BNSF is not the only one trying it. This FT oped by Citi’s Seth Kleinman argues that there is “a rush in the US to substitute natural gas for oil”, which “will soon go global” (his related full note is in the usual place). Kleinman talks about cars, trucks, trains and even aircraft running on natural gas.

Will this be enough to help bring about the end of the age of oil demand? Kleinman in his note forecasts that “some 30 per cent of carrier fleets and 50 per cent of rubbish trucks will be running on CNG in the US by the decade’s end”.

Making long-term energy predictions is a mug’s game and Todd Woody at Quartz has just dug up a nice example: looking at what the EIA (the US energy statistics agency) predicted back in 1999 about the energy landscape in 2020. Not only did it fail to predict shale gas — a forgiveable miss — but its forecasts also wildly underestimated wind and solar capacity, expecting them to grow by roughly a third through to 2020. Interestingly, even though the EIA didn’t predict the shale gas boom, it was over-optimistic about the growth trajectory for global natural gas consumption – predicting it would be the fastest-growing energy source through 2020, when for several years now coal has taken that honour. The EIA’s total gas consumption forecast for 2010 was also too high, with almost 3,500bn cubic metres of consumption forecast compared to 3,153bn in reality.

Kleinman cites Warren Buffett’s BNSF railway as another example of substitution; that’s indeed a big company that uses a lot of diesel. Yet its move to natural gas is nowhere near certain. As the WSJ’s Russell Gold, who reported the BNSF’s testing of natural gas instead of diesel, reports, it would raise by 50 per cent the cost of a each locomotive’s roughly $2m price tag. That’s why it’s a test....MUCH MORE
If the demand from the transportation sector had achieved the projections of 3 to 5 years ago natty would be trading at $7.00 in the U.S.
Right now the front futures are down 2 cents at $4.15.

Until we see gas make some serious inroads, say as a bunker fuel for ships, anyone who does natural gas-oil ratios is just wasting brain cells.

We have dozens of posts on Boone Pickens, his (and Nancy Pelosi's) Clean Energy Fuels and Westport Innovations with their natural gas engines although the most recent post was Nov. 2012's "Soros-backed Westport Innovations Approaching Triple Bottom Low (WPRT)".

The first two parts of Kate Mackenzie's Natural Gas: The Hot Air Case series:
The US manufacturing renaissance
About that peaking global oil demand…

Worst Trade Ever: Selling a NYC Mansion for a Pearl Necklace, 1917

From Daytonian in Manhattan:

The House that a Necklace Bought -- The Morton Plant Mansion
At the turn of the last century Fifth Avenue in midtown was known as "Millionaires' Row."  Block after block of mansions, each attempting to outdo the other, lined the avenue from the 30s north to Cornelius Vanderbilt's mansion at 57th Street.  In 1902 William K. Vanderbilt offered the corner lot at 52nd Street and 5th Avenue for sale.  Morton F. Plant, the son of railroad tycoon Henry B. Plant, purchased the land, agreeing to Vanderbilt's stipulation that it could not be used for commercial purposes for 25 years.

Plant commissioned English-born architect Robert W. Gibson to design his residence.  Construction would take three years to complete but the results would be dazzling.  Gibson produced a marble and granite Italian Renaissance mansion; one of the most tasteful and elegant on the avenue.
With its entrance on 52nd Street, Plant's house turned its shoulder to the many Vanderbilt family houses that clustered around it.  Over the doorway a magnificent balcony projected under a classic pediment.  An ambitious stone balastrade surmounted the cornice, under which a richly ornate frieze was pierced by four-paned windows.  The Plants established themselves as major players in the Fifth Avenue neighborhood.

In the meantime, things were changing downtown.  Mrs. Caroline Astor's celebrated brownstone at 5th Avenue and 34th Street had been replaced in 1893 by the Waldorf Astoria Hotel.  By the time Morton and Nellie Plant moved into their new home, wealthy residents of the Murray Hill area in the 30s were already beginning to flee northward.

Morton was a yachtsman and owner of baseball teams in his spare time.  He and his wife hosted elegant dinner parties and social events in their mansion until 1913.  On August 8 of that year Nellie Plant, Morton's wife of 26 years, died.  Shortly thereafter the 61 year old Plant met the 31 year old Mae Caldwell Manwaring -- wife of Selden B. Manwaring.

In May of 1914, not ten months after the death of his wife, Plant announced his engagement to Mae who had obtained a divorce the previous month.  One month after the announcement the couple was married at Plant's immense Groton, Connecticut mansion.  Mae was, reportedly, pleased with her wedding gift of $8 million.

By 1917, with the country in the grips of World War I, Morton and Mae (she preferred to be called Maisie) became concerned about the stores and hotels that were creeping closer and closer to their neighborhood.  Despite the restrictions in his contract with Vanderbilt, Plant began building a French Renaissance palace at 5th Avenue and 86th Street, designed by Guy Lowell. 

In the meantime Maisie Plant was window shopping.  At Cartier's she fell in love with a double-stranded Oriental pearl necklace with a $1 million price tag (equal to about $16 million today).

Before the advent of cultured pearls, flawless pearls were more valuable than diamonds and in Edwardian New York a woman's social status was often measured by the length of her pearl ropes.  Plant called on Cartier and, in agreement with Vanderbilt, sold his Italian palazzo to Cartier for $100 and the necklace....MORE
Hat Tip to and headline stolen from Two Nerdy History Girls

As best as I can figure that property would go for at least $50 million.
The New York Times threw some doubt on the story back in 2001:
...The ''string of pearls'' story is now a favorite anecdote for a long-lost chapter in Fifth Avenue history, even though there is something a little off about it. Plant leased the house to Cartier in 1916, a year before the supposed trade; and he bought a house site on 86th and Fifth a year before that....

"Crop land in Iowa tops $11,500 an acre; bubble ready to burst?"

This is from the Des Moines Register and is the third or fourth article this year where they've used the words farmland and bubble in the same story.
High quality crop land in Iowa is worth $11,515 an acre, up 9.4 percent from September 2012, according to land realtors throughout the state.

The Realtors Land Institute, whose members specialize in farm and land sales, management and appraisal, said the most expensive land was in the northwest part of the state at $13,387 per acre, an increase of 9.2 percent from six months earlier. In the south central part of the state, land averaged $8,480, the lowest in Iowa, but still up 11.1 percent.

All participants in the survey were asked to estimate average values of farmland as of March 2013.
High prices for corn, soybeans, wheat and other commodities have left growers flush with cash to purchase more land. And what the farmers don’t pay for out of their own pockets, historically low interest rates provide them with easy and cheap access to money to close the deal....
In March it was "Farmland values keep going up"
And in January we see "Farmland investors talk of possible Iowa bubble".
(Register via Ag.com)

The register is pretty clued in to the talk on the ground.

Robotic Outsourcing; Food Preparation Robots Targeting Minimum Wage Positions in China, Japan, US

Yes, the anthropomorphic freaks in the picture below are the actual noodle making robots.
From Singularity Hub:

Chinese Restaurant Owner Says Robot Noodle Maker Doing “A Good Job!”
[Source: arkazlive via YouTube]
[Source: arkazlive via YouTube]
Noodle peelers should probably start looking for other things to do around the kitchen – there’s just no competing with these robots. Not only are they saving restaurants in China money in wages, they can work rapidly and tirelessly for hours.

We reported on the robots, invented by restaurant owner Cui Runguan, last August. Now, we’re hearing from another restaurant owner who has had one of the robots in his “employ” for a month. How is the indefatigable noodle-maker working out at the Jinhe Noodle Shop in Beijing? The restaurant owner, with the last name Zhao, loves it and tells China’s state-run Xinhua News Agency that “It does a good job!”

Runguan’s robots peel noodle strips from a firm piece of dough and tosses them directly into boiling water “before diners’ eyes can follow the whole process.” To Zhao and a growing number of restaurant owners in China, choosing robots over human noodle cooks is a no-brainer. While a cook doing the same job would make about 40,000 yuan ($6,400) per year, the robot cost him just 10,000 yuan ($1,600). And no human chef can work so tirelessly.

China is expected to be the world's largest market for robots by 2014 [Source: arkazlive via YouTube]
Its price is already down from $2,000 this past August, which is no doubt a big reason why more than 3,000 restaurants that have already relegated their noodle-making to the robot. As the technology improves and the cost to build and run the robot drops, business will only get better for Runguan, who has received four patents for the technology.

That humans can be replaced by robots that do the job faster and cheaper is an idea that now pervades Chinese employers. “Chinese companies usually start considering robots when the payment for a skilled worker exceeds 50,000 yuan ($8,060) a year,” Tan Xueke, a manager at the Xinsong Robot Automation Company in Shenynang, told Xinhua News Agency.

The repetitive action that goes into preparing certain foods such as noodles makes automation an obvious choice. In Japan robots are already being used to make sushi, and a robot in San Francisco can serve up 340 hamburgers an hour. But while robotic cooks provide restaurants a novelty for customers and savings for owners, other robots are invading China’s workplace on a much grander scale. Most notably is Foxconn who, last November, began replacing 1 million jobs performed by humans with robotic automation. The metamorphosis is advancing quickly. In late February the company announced it put a freeze on hiring new entry-level workers. This was due in part to a high worker retention rate following pay increases, but it’s also a conscious decision to accelerate the automation of their factories....MORE
HT: Mish
Also at Mish: Interview with Bitcoin Jesus

At least the sushiBots look like machines:


Except for the placement device:
(via TechNovelgy)

Monday, April 29, 2013

"In place of austerity, what comes next?"

From Trust Your Instincts:
In his Wall Street Journal Heard on the Street column, Simon Nixon looks at the question of "in place of austerity, what comes next?"

The simple answer to Mr. Nixon's question is the combination of the Swedish Model with fiscal stimulus and an end to monetary policies like zero interest rates and quantitative easing.

Regular readers know that a modern banking system is designed to absorb the losses on the excess debt in the financial system.  Under the Swedish Model, banks are required to perform the role for which they are designed.

Specifically, banks recognize upfront the losses on the excess debt.  Each borrower's debt is reduced to a level where the borrower can afford to make the debt service payments.  At the same time, the write-down is limited so that it does not create any equity for the borrower.

With the banks absorbing the losses on the excess debt, the burden of servicing this debt is removed from the real economy.  Capital that is needed for growth, reinvestment and supporting the social contract is no longer diverted to debt service.  As a result, the real economy begins to grow again.

To boost the recovery in the real economy, there should be some fiscal stimulus.

To further boost the recovery in the real economy, monetary policy must be changed to eliminate all the economic headwinds that it is currently creating.  These economic headwinds were triggered by reducing interest rates below Walter Bagehot's minimum threshold of 2% and include for example the Retirement Fund Death Spiral. 
That last bit is a real problem that I've not seen Mr. Bernanke or any other Fed Governor address: How are public employee union pension funds going to meet their contractual obligations when the 10-year yields less than 1.7%?
As for the banks recognizing their bad loans we have this from 2009:

Obama: Swedish Model Would Be Impossible Here
From ClusterStock:
Eventually the government might be forced to nationalize a large swath of the banking sector, but they'll be dragged kicking and screaming. Yesterday's non-bailout announcement aimed to preserve the status quo, and Obama himself dismissed the idea that the US could adopt the Swedish model in an interview with ABC...

The Swedish Model

As the [college] site that I lifted the picture from said:

(okay, sorry we know its tacky)

The Case for Less: Is Abundance Really the Solution to Our Problems?

The two examples of the problem with abundance that the author uses are each in their own way incorrect.
On obesity the problem is not just the availability of cheap high calorie food, it is that what passes for food really isn't. The manufactured/processed stuff that lines the grocery aisles is about as close to food as masturbation is to sex.

The second example, information overload, is just silly. There may be a firehose of of data coming at you but being overloaded by it is a choice and a failure to move up the DIKW pyramid.

A few years ago Barry Ritholtz had a simple, straightforward post on the topic: "Intelligence Hierarchy: Data, Information, Knowledge, Wisdom".

Here's another way to look at it:


Getting stuck at the base of the pyramid or off on the left side of the flow chart is your own damn fault.

From the New Republic:
The future is better than you think” is the message of Peter Diamandis’s and Steven Kotler’s book. Despite a flat economy and intractable environmental problems, Diamandis and his journalist co-author are deeply optimistic about humanity’s prospects. “Technology,” they say, “has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet.... Abundance for all is actually within our grasp.”

This is a lively book, and it provides an interesting, if uncritical, survey of developments across a range of technologies. We find Craig Venter, the man who sequenced the human genome, sailing around the world looking for algae that can be engineered to emit jet fuel. We explore “vertical farms,” which extend the methods perfected by pot growers to entire buildings full of crops. (Imagine Manhattan growing corn.1) And in their section on “the almighty stem cell,” the authors suggest a future in which the replacing of our organs is not dissimilar to installing a new muffler.

But Diamandis, a space entrepreneur and the co-founder of “Singularity University,” is ultimately more interested in our attitude toward the future than in scientific details. He fears that humanity is biologically wired to be pessimistic, and that it therefore cannot appreciate the capacity of “exponential technologies” (those that improve at an exponential rate) to solve humanity’s problems. By 2035, Diamandis claims, most of humanity’s problems can be solved: we can reach “an end to most of what ails us.” Those who doubt the truth of such a proposition are the avatars of “moaning pessimism,” who suffer from cognitive defects that prevent them from seeing the truth. The “linear brain,” Diamandis says, cannot “comprehend our exponential rate of progress.”
A book that preaches the “good news” of humanity’s redemption in 2035 may bring to mind more explicitly religious works. Skeptics may call it religion for geeks, where exponential technologies replace Yahweh as the Great Provider. Others may dismiss the book as a species-wide extrapolation from The Power of Positive Thinkingwhere cynicism is humanity’s downfall. 

But the book is not so easily discounted, for it accurately reflects an important tradition that has driven American technologists since the time of Henry Ford, if not earlier. Abundance pretends to be contrarian, and it once might have been, but today it mainly reaffirms a view of society already deeply embedded in much of America’s technological elite, especially in Silicon Valley.

That view is simple to state. Humanity’s fundamental problem comes down to scarcity—not having enough of what we need and want. We need food, water, new shoes, new gadgets, and so on, and we suffer when we do not have them. That problem can and will be solved by technology, or—at an individual level—by buying or otherwise gaining access to the objects of our desires. Once our needs are met, we can all live happily ever after. As Diamandis puts it, we must imagine “a world where everyone’s days are spent dreaming and doing, not scrapping and scraping.”

Optimism is a useful motivational tool, and I see no reason to argue with Diamandis about the benefits of maintaining a sunny disposition. I also agree with both Diamandis and the New Testament that we may worry about the future more than necessary. Still, all this does not eliminate the need to ask whether the abundance program that Diamandis prescribes is actually right for humanity. 

The unhappy irony is that Diamandis prescribes a program of “more” exactly at a point when a century of similar projects have begun to turn on us. To be fair, his ideas are most pertinent to the poorer parts of the world, where many suffer terribly from a lack of the basics. But in the rich and semi-rich parts of the world, it is a different story. There we are starting to see just what happens when we reach surplus levels across many categories of human desire, and it isn’t pretty. The unfortunate fact is that extreme abundance—like extreme scarcity, but in different ways—can make humans miserable. Where the abundance project has been truly successful, it has created a new host of problems that are now hitting humanity.

The worldwide obesity epidemic is our most obvious example of this “flip” from problems of scarcity to problems of surplus. Even a few decades ago, the idea of fatness as a public health problem would have seemed ridiculous. Yes, there have always been fat people, but as the scholar Benjamin Caballero writes, as late as the 1930s most nations still just wanted larger citizens. “The military and economic might of countries,” he observes, “was critically dependent on the body size and strength of their young generations, from which soldiers and workers were drawn.”2

 Today the statistics on obesity are so outrageous that they seem almost unbelievable. The Centers for Disease Control find that 69 percent of American adults are overweight, and half that number obese or extremely obese....MORE
HT: Abnormal Returns

See also:
And Now for Some Good News
X Prize Founder Wants to Mine Asteroids
I am personally quite optimistic and grow weary of hammering our readers with negative postings.
The only reason we do it is, as one gutsy young lady said to me, "do you want to know the bad news or not?"
You get a faster and more extreme move out of bad news so yes I want to know it.

China: "3D printing---A new brick in the Great Wall"

Ya think this may have some far-flung implications? It's not just robots the Chinese are going after, it's the additive manufacturing end of the 3D biz, metal not plastic.Our second of three posts from The Economist today:

Additive manufacturing is growing apace in China

ALTHOUGH it is the weekend, a small factory in the Haidian district of Beijing is hard at work. Eight machines, the biggest the size of a delivery van, are busy making things. Yet the factory, owned by Beijing Longyuan Automated Fabrication System (known as AFS), appears almost deserted. This is because it is using additive-manufacturing machines, popularly known as three-dimensional (3D) printers, which run unattended day and night, seven days a week.

The printers require an occasional visit from a supervisor to top them up with the powdered materials they use as their “inks”, or to remove a completed item, but apart from that they can be left on their own. They build up the objects they are making one layer at a time, as the ink is sintered into place with a laser in a way that creates little waste and can make shapes impossible to achieve using the traditional “subtractive” technology of lathes, milling machines and cutting tools.

Though it is not yet ready for use in mass production (building things up is slower than trimming them down), 3D printing is excellent for making prototypes, customised jobs and short production runs, for there is no need to retool each time the specification changes. All that need be done is to alter the software that controls the print heads.

Western countries led the development of 3D printing, and the technique has been praised by Barack Obama as a way to revive America’s manufacturing industries. It may yet do so. But the extent to which that revival will be brought about by the return to America of production which has migrated to countries like China is harder to predict—for China has plans of its own.
Keep your powder dry

At the moment AFS is in the prototyping business. Its customers are mainly aerospace firms and vehicle-makers that need experimental designs turned into metal quickly. The powders in its machines’ hoppers are plastics, waxes and foundry sand. The results are sent off to foundries, where they are used to make moulds for the sand-casting of metal objects.

According to William Zeng, AFS’s deputy general manager, all the parts needed to make a prototype car engine can be printed and cast in this way in under two weeks. A conventional machine shop would need several months to do that—not least because many of the components would have to be made by hand.
AFS also has a second line of business. It sells the laser-sintering printers it makes to others, for this is a rapidly growing industry. And some of its machines, which cost up to 1.5m yuan (about $250,000), can do more than just sinter plastics, wax and sand; they can sinter metals directly....MORE
HT: Clusterstock 

Some of our recent posts on additive, sintering, etc:

3D: "The Difference Between Makers and Manufacturers"
3D Printer Co. ExOne Files for $75 Million IPO (XONE)
Stratasys as the Leader in the 3D Printing Industry (SSYS; DDD)
There is some European stuff, particularly in additive manufacturing but also in bioprinting, that SSYS will have to keep an eye on if they intend to be top dog.... 
Another Use for 3D Printing: Building A Beak for a Bald Eagle
Because the technology is only now ramping up (after a twenty year gestation) the results are still a bit crude.
As advances are made in sintering there will eventually be stuff made, not prototypes but actual stuff, from steel or copper or...

Two European companies — EOS of Germany and Arcam of Sweden are ahead of the pack in the metalworking part of the biz.... 
"3-D printed shoes that could help sprinters shatter records"
Yeah, yeah I know 3-D printing can create the vascular system an artificial liver would require.
This story is way cooler though. Look at the picture, with these things I'm Mercury:

For his final project at the Royal College of Art in London, Luc Fusaro outlined a process for building custom-fitting sprinting shoes that weigh just 96 grams.
Laser Sintered Shoes
The shoes are fabricated using a selective laser sintering process that uses precise 3-D scans of an athlete's foot to achieve maximum fit. The really tantalizing (but unfortunately uncited) bit about Fusaro's design is that by fitting shoes to a sprinter's feet so precisely, significant performance improvements might result...

Another Big Selloff Coming for Gold

Going back to Thursday evening's "UPDATED--Japan "Core"* CPI Prints at Negative 0.5%, Gold Pops":
...Gold picks up another $10.90 to $1479.10. Somewhere between that price and $1525 (remember $1525? target on the way down?) is a dandy spot to sell some shiny stuff.
Maybe one last "Buy it before it goes higher" spasm for a couple percent.
ZeroHedge is too gleeful, PPI is more important at this stage.... 
And From Today's MoneyBeat:
Gold’s bounce could last a while longer, but technicians believe the bigger downtrend remains very much alive.

It’s been two weeks since gold prices staged a historic plunge. Front-month gold futures fell $203.70, or 13%, in two days, to settle at a two-year low of $1,360.60 on April 15. Since then, prices recovered to a high of $1,484.80 in intraday trading on Friday, before pulling back to $1,453.60 at Friday’s settle.

While technicians say gold could continue to bounce around in a relatively narrow range over the short term, they believe another big selloff is coming.

The rebound “hasn’t done anything to undo the damage done over the past week and a half,” said MacNeil Curry, head of global technical strategy at Bank of America BAC -0.00% Merrill Lynch Global Research. If anything, he said, the low-volume bounce off the lows has reinforced the negative technical bias.

“Volume traditionally follows the trend, so the [recent] low volume says the trend is still very much to the downside,” Mr. Curry said.

He thinks gold could eventually fall below the previous lows and test key support in the $1,250-$1,300 range before bouncing again....MORE
Front futures $1472.10 up $1850, here's the recent action from FinViz:

And here's the action in spot, April 23-25 via Kitco:

"Disruptions: Brain Computer Interfaces Inch Closer to Mainstream"

"Any sufficiently advanced technology is indistinguishable from magic."
-Arthur C. Clarke, Profiles of the Future (revised edition, 1973)

Right now the most amazing unclassified stuff is probably the prosthetic limbs coming out of DARPA funding and the mind-machine interface work that Dr. Nicolelis is doing with the goal of having a paralyzed person kick the first ball at the FIFA 2014 Soccer World Cup on June 12, 2014, in São Paulo, Brazil.

From the New York Times' Bits blog:
Last week, engineers sniffing around the programming code for Google Glass found hidden examples of ways that people might interact with the wearable computers without having to say a word. Among them, a user could nod to turn the glasses on or off. A single wink might tell the glasses to take a picture.

But don’t expect these gestures to be necessary for long. Soon, we might interact with our smartphones and computers simply by using our minds. In a couple of years, we could be turning on the lights at home just by thinking about it, or sending an e-mail from our smartphone without even pulling the device from our pocket. Farther into the future, your robot assistant will appear by your side with a glass of lemonade simply because it knows you are thirsty.

Researchers in Samsung’s Emerging Technology Lab are testing tablets that can be controlled by your brain, using a cap that resembles a ski hat studded with monitoring electrodes, the MIT Technology Review, the science and technology journal of the Massachusetts Institute of Technology, reported this month.

The technology, often called a brain computer interface, was conceived to enable people with paralysis and other disabilities to interact with computers or control robotic arms, all by simply thinking about such actions. Before long, these technologies could well be in consumer electronics, too.
Some crude brain-reading products already exist, letting people play easy games or move a mouse around a screen.

NeuroSky, a company based in San Jose, Calif., recently released a Bluetooth-enabled headset that can monitor slight changes in brain waves and allow people to play concentration-based games on computers and smartphones. These include a zombie-chasing game, archery and a game where you dodge bullets — all these apps use your mind as the joystick. Another company, Emotiv, sells a headset that looks like a large alien hand and can read brain waves associated with thoughts, feelings and expressions. The device can be used to play Tetris-like games or search through Flickr photos by thinking about an emotion the person is feeling — like happy, or excited — rather than searching by keywords....MORE
We've had a few posts on Dr. Nicolelis: 

UPDATED--"A leading neuroscientist says Kurzweil’s Singularity isn’t going to happen...."
Maybe He Didn't See the Part Where the Monkey Controlled a Robot on the Other Side of the World With Its Little Monkey Brain
"In Scientific First, Researchers Link Two Rats' Brains via Computer" (What's next, the paralyzed walk?)
Update: Not Everyone is Impressed With Dr. Miguel Nicolelis' Latest Intercontinental Mind-Meld

And re: DARPA going back to our first year on the www we've been begging:
Here's something that got misplaced in the link-vault.
(does anyone have a program to manage a rolling inventory of 20K links, spread over a couple servers and four PC's? We're looking for some sort of Brain-Computer Interface thingy. DARPA?...
And a year later:
We've got too many feedreaders and terminals and I really need DARPA to get cracking on the mind-machine interface link/bookmark retrieval thing. All this whining is due to a misplaced link.
We've got 45,000 of the suckers in the link-vault so I can probably jury-rig a post without it....
And a couple times a year since then.
We're now up to a quarter million bookmarks in the link-vault and 1400 feed-readers and terminals and still no interface.

There's a New Blog in Town: Dizzynomics

So I get in this morning and waiting for me is a note from my favorite tech guy, Siva (a streetwise Hindu boy, Caltech) with just six words: "There's a new blog in town".
Except for knowing waaay too much about American Westerns (I think the above is an obscure ref. to "Blazing Saddles") Siva is pretty sharp and said we had some visitors from Dizzynomics.

Lo and behold it's one of our fave journos, Izabella Kaminska, who has adopted the Wordpress platform, given us an intro post and a preview of coming attractions:

Posts and points I have running around in my head, but still need to pen.

1) More on the notgeld issue and the effects of war on growth (in relation to points Krugman is making in reference to Rogoff and Reinhart).

2) More on why free float is so important.

3) More on how digital issued money by the central bank could solve a lot of today’s problems, and why much of the problem relates to seigniorage liberalisation.

4) More on how China’s gain is not necessarily the west’s loss, and vice versa. There is a potential virtuous circle to be had, and we can all be beneficiaries of an increasingly glolbalised and efficient world.

5) Leisure living and the rise of decadent lifestyle TV. (Masterchef)

6) Unemployment doesn’t have to be a bad thing if we compensate workers accordingly. In times of abundance unemployment means more of society can afford not to work.

7) I’m working on a big collateral repo post about gold for FTAlphaville.

8) The return of the new economy.

9) The essential role of the state in managing the transition to a new economy.
10) More on why Jaron Lanier us wrong!

11) I’m reading Richard Dawkins’ Selfish Gene. It has important insights for economics which are potentially under appreciated. They also relate to peace and cooperation. Baboons also tell us a lot about human nature and abundance. There is an entire post in my head about a particular Baboon phenomenon.
Here's her latest.
We've added her to our blogroll at left.
We've also added a blog, MoneyBeat, which comes from some outfit called Dow Jones & Co.
Tip o'the cap ma'am.


Slaves To The Algorithm

More and more of modern life is steered by algorithms. But what are they exactly, and who 
is behind them? Tom Whipple follows the trail

From INTELLIGENT LIFE magazine, May/June 2013
There are many reasons to believe that film stars earn too much. Brad Pitt and Angelina Jolie once hired an entire train to travel from London to Glasgow. Tom Cruise’s daughter Suri is reputed to have a wardrobe worth $400,000. Nicolas Cage once paid $276,000 for a dinosaur head. He would have got it for less, but he was bidding against Leonardo DiCaprio.

Nick Meaney has a better reason for believing that the stars are overpaid: his algorithm tells him so. In fact, he says, with all but one of the above actors, the studios are almost certainly wasting their money. Because, according to his movie-analysis software, there are only three actors who make money for a film. And there is at least one A-list actress who is worth paying not to star in your next picture.

The headquarters of Epagogix, Meaney’s company, do not look like the sort of headquarters from which one would confidently launch an attack on Hollywood royalty. A few attic rooms in a shared south London office, they don’t even look as if they would trouble Dollywood. But my meeting with Meaney will be cut short because of another he has, with two film executives. And at the end, he will ask me not to print the full names of his analysts, or his full address. He is worried that they could be poached.

Worse though, far worse, would be if someone in Hollywood filched his computer. It is here that the iconoclasm happens. When Meaney is given a job by a studio, the first thing he does is quantify thousands of factors, drawn from the script. Are there clear bad guys? How much empathy is there with the protagonist? Is there a sidekick? The complex interplay of these factors is then compared by the computer to their interplay in previous films, with known box-office takings. The last calculation is what it expects the film to make. In 83% of cases, this guess turns out to be within $10m of the total. Meaney, to all intents and purposes, has an algorithm that judges the valueor at least the earning powerof art.

To explain how, he shows me a two-dimensional representation: a grid in which each column is an input, each row a film. "Curiously," Meaney says, "if we block this column…" With one hand, he obliterates the input labelled "star", casually rendering everyone from Clooney to Cruise, Damon to De Niro, an irrelevancy. "In almost every case, it makes no difference to the money column."

"For me that’s interesting. The first time I saw that I said to the mathematician, ‘You’ve got to change your programthis is wrong.’ He said, ‘I couldn’t care lessit’s the numbers.’" There are four exceptions to his rules. If you hire Will Smith, Brad Pitt or Johnny Depp, you seem to make a return. The fourth? As far as Epagogix can tell, there is an actress, one of the biggest names in the business, who is actually a negative influence on a film. "It’s very sad for her," he says. But hers is a name he cannot reveal.

IF YOU TAKE the Underground north from Meaney’s office, you will pass beneath the housing estates of south London. Thousands of times every second, above your head, someone will search for something on Google. It will be an algorithm that determines what they see; an algorithm that is their gatekeeper to the internet. It will be another algorithm that determines what adverts accompany the searchgatekeeping does not pay for itself.
Algorithms decide what we are recommended on Amazon, what films we are offered on Netflix.

Sometimes, newspapers warn us of their creeping, insidious influence; they are the mysterious sciencey bit of the internet that makes us feel websites are stalking usthe software that looks at the e-mail you receive and tells the Facebook page you look at that, say, Pizza Hut should be the ad it shows you. Some of those newspaper warnings themselves come from algorithms. Crude programs already trawl news pages, summarise the results, and produce their own article, by-lined, in the case of Forbes magazine, "By Narrative Science".

Others produce their own genuine news. On February 1st, the Los Angeles Times website ran an article that began "A shallow magnitude 3.2 earthquake was reported Friday morning." The piece was written at a time when quite possibly every reporter was asleep. But it was grammatical, coherent, and did what any human reporter writing a formulaic article about a small earthquake would do: it went to the US Geological Survey website, put the relevant numbers in a boilerplate article, and hit send. In this case, however, the donkey work was done by an algorithm....MUCH MORE
HT: Abnormal Returns

Price Declines of Selected Commodities

Note: The Economist is using the standard seven month snapshot.
Just kidding, this graph shows changes since the September 2012 interim peak.

Commodity prices are falling fast on fears that Chinese growth is slowing and that economic recovery elsewhere has stalled. The Economist’s all-items index has lost 5% this month and is 12% below its 2012 peak last September....MORE

Saturday, April 27, 2013

With Commodity Coffee Down 55% Why Isn't Your Iced Half-Caf, Quad, Grande, Soy, Starbucks Doubleshot™ on Ice Any Cheaper? (SBUX)

This has got to be good for coffee margins:


And from Agrimoney:
Starbucks holds off dive into weak coffee market

Starbucks Corporation revealed it had been in no hurry to jump into the weak arabica coffee market, even as ABN Amro forecast further drops to come in values of the bean, to levels not seen since 2009.
Starbucks, flagging lower coffee costs as a major driver of a 26% rise to $390.4m in earnings for the January-to-March period, revealed that its forward purchases of beans had slowed to a crawl in 2013.
The group, the world's biggest coffee chain operator - which late last year said that it brought ahead about half its needs for the 2014 fiscal year, which starts in October - revealed that its purchases since had been limited to "incremental buying".
"So we have a little bit more than half of our needs locked up for 2014," Troy Alstead, the Starbucks finance director, told investors.
"We're not meaningfully priced at all in fiscal 2015 yet," he added.
'Commodity tail wind'
The strategy reflected comfort over the direction of arabica prices, which have fallen by more than half from their peak two years ago, during a rally which raised Starbucks coffee costs by some $200m in both fiscal 2010 and 2011.
Starbucks believes the retreat in coffee prices will boost its profits by $100m this year, and signalled a potential for a further boost next year too....MORE

New York Fed: "Japanese Inflation Expectations, Revisited "

I strive to avoid becoming an exemplar Churchill's definition of a fanatic: "A fanatic is one who can't change his mind and won't change the subject." but I'm aware I come close with this Japan stuff. Now that Japan is again funding various carry trades (a role that gold had up until late 2012, watch those lease rates baby), in currencies, in government debt even in equities it really doesn't pay to take a parochial view of the cross-border money flows.

For a quick primer on a couple interesting aspects of Japanese policy may I commend to your attention FT Alphaville's "On the virtuous circle of exporting deflation"? I'll leave it to the reader to dive into the meat of the matter, here I'll highlight a bit of back-and-forth in the comment section:
cmmdfacccfa | April 24 2:31pm | Permalink Money doesn't flow out of equities and into bonds, or vice versa. If Joe has cash, and I sell my stock to Joe in order to buy a bond from John, then John becomes the owner of the cash once held by Joe. Someone (Joe) still holds the stock, and someone (cmmdfacccfa) still holds the bond.

The prices of bonds and stocks change depending on our changing assessments of the proper valuations, but cash didn't "flow out of equities." 
To which the response is:
Izabella Kaminska | April 24 3:40pm | Permalink @cmmdfacccfa - you are of course right, but flows create imbalances and thus impact prices. Thus more people wanting to sell equities than sell bonds equals a fall in equities relative to bonds. Thus flows, liquidity and free available float determine everything. 
And there you go.
As a side note, from the syntax I'd guess the first commenter is related to the Ohio Facccfa's.
So how do you measure the intangibles?
From the Federal Reserve Bank of New York:
 An important measure of success for monetary policy is a central bank’s ability to anchor inflation expectations; inflation expectations influence actual inflation and, hence, the achievement of a given inflation goal. This notion has special significance for Japan, where CPI inflation has been intermittently negative since 1994 and where it is widely believed that expectations of future inflation have been persistently negative (that is, ongoing deflation is expected). In this post, we describe and evaluate an alternative, market-based measure of Japanese inflation expectations based on international price parity conditions. We find that recent inflation expectations have attained a level substantially higher than their previous peaks over the past three years.

    By way of background, recent policy action by the Bank of Japan has shone a spotlight on Japanese inflation expectations. On April 4, the Bank announced a program called Quantitative and Qualitative Monetary Easing (QQE), which was a pledge to drastically ramp up asset purchases to increase the monetary base, and to extend the duration of assets held on the Bank’s balance sheet. Since nominal yields on Japanese government bonds have been quite low for some time, a preferred indicator of QQE’s success would be a decline in real interest rates as inflation expectations move closer to the Bank’s recently announced 2 percent price stability target.

Measurement Issues

How does one go about measuring Japanese inflation expectations? The consensus on this topic is that there is no single reliable measure. A commonly used market-based gauge of U.S. inflation expectations is the difference in yield between nominal and Treasury inflation-protected securities (TIPS)—the breakeven inflation rate. Analogous measures come from over-the-counter derivatives called inflation swaps. In Japan, the market for inflation-protected government bonds, called JGBi’s, is very thinly traded and a majority of the issuance has been bought back by the Ministry of Finance in recent years. These factors have cast doubt on the ability of JGBi prices to convey reliable information about inflation expectations. Swaps suffer from similar liquidity issues.

    Alternative extant measures of inflation expectations are available from surveys of households, investors, and professional forecasters. However, survey responses may by formed in a backward-looking manner, making them more responsive to actual inflation than predictive of the future. The range of views offered by market‑ and survey-based measures is illustrated in the chart below. While measures of five- and ten-year expectations have converged somewhere around 1 percent in recent months, in the past analysts would have little confidence of even getting the correct sign of expected inflation by looking at any given measure.


A Measure Based on Purchasing Power Parity

Given these concerns, we consider an additional market-based measure derived from U.S. inflation expectations—for which there are more actively traded inflation‑protected securities and swaps markets—and international price parity conditions. To our knowledge, these tools are not commonly used to make inferences about Japanese inflation expectations, but may provide a useful alternative to Japanese JGBi’s and swaps. One exception is a report by Goldman Sachs Economics Research (“The Market Consequences of Exiting Japan’s Liquidity Trap,” Global Economics Weekly 13/05, February 2013), which uses the thirty-year yen/dollar forward rate to infer Japanese inflation expectations....MORE

Friday, April 26, 2013

GMO First Quarter Letter: "The Race of Our Lives" By Jeremy Grantham (Resources, Population, Climate Change etc.)

I will be referring back to this, for now it's my weekend read.
Mr. Grantham is far too pessimistic about fertilizer availability (Phosphorus and potassium [potash])
In addition this is the first time he has written at length about population and while he doesn't go as far as the Voluntary Human Extinction Movement (Après vous) he doesn't address the totalitarian policy response that is the natural outgrowth of his argument.

See also: the spectacularly wrong and wrong-headed forecasts made by Paul Ehrlich for which he has been rewarded with an endowed chair at Stanford-definitely a mark against Stanford.

Via Advisor Perspectives:
Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action. It is likely to be a close race. 

The Fall of Civilizations
The collapse of civilizations is a gripping and resonant topic for many of us and one that has attracted many scholars over the years. They see many possible contributing factors to the collapse of previous civilizations, the evidence pieced together shard by shard from civilizations that often left few records. But some themes reoccur in the scholars’ work: geographic locations that had misfortune in the availability of useful animal and vegetable life, soil, water, and a source of energy; mismanagement in the overuse and depletion of resources, especially forests, soil, and water; the lack of a safety margin or storage against inevitable droughts and famines; overexpansion and costly unnecessary wars; sometimes a failure of moral spirit as the pioneering toughness and willingness to sacrifice gave way to softer and more cynical ways; increasing complexity of a growing empire that became by degree too expensive in human costs and in the use of limited resources to justify the effort, until the taxes and other demands on ordinary citizens became unbearable, so that an empire, pushed beyond sustainable limits, became vulnerable to even modest shocks that could in earlier days have been easily withstood. Probably the greatest agreement among scholars, though, is that the failing civilizations suffered from growing hubris and overconfidence: the belief that their capabilities after many earlier tests would always rise to the occasion and that growing signs of weakness could be ignored as pessimistic. After all, after 200 or even 500 years, many other dangers had been warned of yet always they had persevered. Until finally they did not. 

The bad news is that as I read about these varied scenarios – and I have missed listing several – they all appear plausible and each seems to be relevant to several earlier collapses of empires and civilizations both large and small. Very recently, one of these scholars, William Ophuls, wrote a new book, Immoderate Greatness2 (a quote from Gibbons’s Decline and Fall of the Roman Empire), with the subtitle Why Civilizations Fail. It is a straightforward summary and synthesis of all of the ways to fail in 70 small pages, yet with extensive notes and references. It is written in remarkably accessible, simple language and divides the causes of failure into six categories. Unfortunately, all six seem to apply to us today in varying degrees, and where one factor might be manageable – although often has not been – he makes the chances of our managing all six seem slight. It is persuasive and needs to be read. It takes about two hours.

William Ophuls’s conclusion is that we will not resist the impressive list of erosive factors and that, in fact, we are in the fairly late stages of our current civilization’s race for the cliff edge with nothing much to head us off. His study of history leads him to believe that civilizations are actually hard wired to self-destruct: programmed to be overconfident, to keep on pushing for growth until limits are overstepped and risks accumulated to the breaking point. His offer of good news is that after the New Dark Ages, when civilization again rears its head, presumably with a much smaller population, we will have acquired the good sense to be less overreaching, less hubristic, a lot humbler about growth and our use of resources, and more determined to live in balance with the natural energy we receive from the sun and the heat, food, and water with which we can sustainably be provided.

I have just two comments about our current problems. First, that there is one particular pressure this time that seems particularly serious: aversion to bad news. The investment business has taught me – increasingly as the years have passed – that people, especially investors (and, I believe, Americans), prefer good news and wishful thinking to bad news; and that there are always vested interests to offer facile, optimistic alternatives to the bad news. The good news is obviously an easier sell. Good news in investing in particular is better for business; good news on resource limitation is better for the suppliers of resources; and good news on climate change – that it basically does not exist and is even a hoax – is better for energy companies, among the biggest and most profitable of all companies. Historians have pointed out the bias against the need for change: there are always clear beneficiaries of the current state of affairs but the benefits of a changed world in contrast will look vague and uncertain to the likely beneficiaries. That is always the case. What is less common, although not unique in history, is what we have today: the near complete control of government by the powerful beneficiaries of the current system.

The second point is that although I find Ophuls’s argument well-reasoned and although I must acknowledge the strong possibility of a very negative outcome, I feel it is too pessimistic (which, sadly, is a rare occurrence for me on this topic). Yes, we are taking extreme risks with resource depletion and with the environment, especially concerning climate damage and ocean acidification. Yet I believe the case for the near certainty of our running off the cliff misses the existence of two extraordinarily lucky (and, one could argue, undeserved) gifts that were not available to any prior stressed civilization. They may arrive like the U.S. Cavalry, just in time to turn us away from the cliff edge. But at best, as Wellington is famously paraphrased as saying about the Battle of Waterloo, it will be a “damn closely run thing.”3   It will be the race of our lives.

Our Last Best Hopes: Declining Fertility and Improving Technology for Renewable Energy
Declining Fertility
The first of the two incredibly fortunate factors that might enable our current world to avoid at least partial collapse is declining fertility. Malthus correctly analyzed the main problem of our then history (in 1800): population had always kept up with food supply, leaving even successful societies only a few bad growing seasons away from starvation. He predicted that this would always be the case and he was wrong on two counts. The first is a short-term factor – only existing for 200 or 300 years and therefore irrelevant for the longer term of our species – and that is the increased ability to extract previously stored energy in the form of coal and oil. This hydrocarbon interlude will end either when that share of hydrocarbons that can be extracted economically is used up, or more likely when the tyranny of the second law of thermodynamics imposes its will: enough of the higher forms of convenient compact energy like coal and oil will have been converted into heat, waste, and especially carbon dioxide to ruin our climate in particular and our environment in general....MORE

"Europe’s ageing population – graphic of the day"

From Thompson Reuters' Knowledge Effect:
Long after the debt crisis is over, Europe will be struggling with an even more serious problem – how to pay for increasing numbers of old people. Today’s graphic is a map of Europe showing the projected old-age dependency ration in 2060.
europe ageing

HT: Kedrosky