The Peristaltic Testator

One of the better tiny books I've ever bought has to be, in my opinion, In Other Words: A Language Lover's Guide to the Most Intriguing Words Around the World by Christopher J. Moore. In it, we learn that there are languages without certain terms speakers of other languages take for granted. Once those terms are made known, the odd language out might embrace the foreign term to express what was absent yet blazingly obvious once it was expressed and explained.

Some great examples include the French term Esprit de escalier, literally "the spirit of the staircase;" it's the feeling you get after figuring out the perfect thing to say at a party . . . once you are coming down the stairs leaving the party. There's the Yiddish kvell, a word Harlan Ellison defined as happiness beyond all other forms of happiness, like "the sun shining in the pit of your stomach." From Finnish, there's sisu, a dogged determination to avoid defeat against all odds of winning, even when the odds are seemingly impossible. The author provides an amusing example of sisu in the introduction:

"We're outnumbered," one soldier says. "There must be over forty of them, and only two of us."

"Dear God, it'll take us all day to bury them!"

For this post, perhaps the Japanese tatemae might be appropriate, meaning "the reality that everyone professes to be true, even though they may not privately believe it," and it's counterpoint honne, "the reality that you hold inwardly to be true, even though you would never admit it publicly." Both of those seem awkward to me, since I usually am quite open with my silly notions. Hey, let's face it: I come from the land of the phrase "The squeaky wheel gets greased," meaning those that complain are usually first to get their complaints addressed. We in the States are a very personally opinionated crowd in general (not that any given internet community would provide excessive evidence of this). In Japan, no such squeaky phrase exists . . . but they do say "The nail that stands tallest gets hit first." Two cultures, two attitudes toward expression of personal opinion.

I recently heard a TED Talk that extended the concept of language ( in directions I had honestly not thought possible. )

X-posted to talk_politics.

Got a heads-up today about a notion I've heard before, but which now seems to be getting some actual attention: What if the Treasury minted a couple trillion-dollar platinum pennies?

Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.

Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.

In fact, the most disturbing aspect of this follows immediately: ( Got your attention, have I? )

X-posted to talk_politics.

I have to admit, I was a bit shocked when a simple observation of mine, that the GOP has a plank in its platform stating its aim to "explore a greater role for private enterprise in appropriate aspects of the mail-processing system", blew up into such a kerfuffle. The GOP, after all, has long been the party supported by anti-union forces in general and business leaders with private operations that compete with the USPS. Sometimes both.

I guess I was surprised by the anti-union rhetoric spewed in that post simply because I have long held a different mindset as to what drives union membership, one that seems to me as totally non-controversial, as natural as laws driving cloud formation. My mindset has blinded me to mindsets that lack this simple understanding about human nature, that instead rely upon a complex political and pseudo-economic rational for explaining the very phenomenon of unions. I'll address the latter later, but first I'd like to share my theory ( regarding the bargaining power of individuals more and less alone. )

( So, where does that bring us today, and what can we expect tomorrow? )

X-Posted to talk_politics.

A couple of weeks ago, htpcl wrote a fine piece concerning the current Greek political situation and the rise of the extremist parties in the face of economic collapse and chaos. He made some excellent points, noting how the far-left Alexis Tsipras and ultra-nationalist Panos Kammenos have been making political points demonizing the centrist parties New Democracy and PASOK:

Tsipras . . . sensed the pulse and the big pain of the Greeks and, together with the far-right Kammenos, he said the old big parties like New Democracy and PASOK should be punished for all the evils they've brought upon the country. Now, obviously those really did fuck up big time in the recent decades, but meanwhile some of their achievements are being conveniently omitted in the Tsipras and Kammenos speeches. Like the EU entry (1980, New Democracy's achievement), the Euro-zone entry (2001, PASOK), the well organized Olympic games (2004, PASOK and then New Democracy), and the rising living standard overall. Unsustainable living standard though, and that's the main problem.

(I added emphasis)

I emboldened that phrase because, the more I delve into this whole economics thing from what some are calling a "post-Keynesian" perspective, the more I stumble on to the fact that those very achievements "being conveniently omitted" ( might be a proximal actual cause of Greece's troubles today. )

X-Posted to talk_politics.

(Just another tl;dr post I place here as well as the talk_politics community. Move along; nothing to see . . . unless you want to.)

I recently shocked montecristo by dropping a name not many bandy about: Ellen H. Brown. Ms. Brown is the author of the blog Web of Debt and has published an informative book of the same name. She is also one of the names associated with a new economics movement focusing on monetary policy. It's so new, in fact, a rallying name has yet to be, er, coined, though "monetarist" and variations thereon pop up from time to time. The goal of these thinkers: to cut through the years of economics education that has allowed graduates to achieve even doctorate level educations without understanding the basic principals of monetary creation that I briefly outlined in my last post. When it comes to books about how money works, they are few and far between.

In the shocked comment, montecristo asked if I were a "Greenbacker." I honestly don't know if I am or not; though I enjoyed Ms. Brown's book and have had a few email exchanges with her, I'm too aware of gaps in my understanding to embrace her entire philosophy without first trying to learn what backs it and of what value it might be. I admit I lean in her direction, but that's really neither here nor there. Today, I would like to share in ( what it means to be a Greenbacker. )

X-posted to talk_politics.

The intertubes are a great resource for some things. Not so great for others. The instant nature of information dissemination is great for a death notice going 'round the world in seconds, as the recent deaths of Kim Jong Ill and that Libyan guy with the alphabet-soup-of-possible-spellings name demonstrate.

The not so much category, though, has to go to examining information on a more long-term, less spur of the moment manner. One must sift through a whole bunch of Rick rolls and cats with hats to find bits that fit with an overarching narrative that might, just might, prove useful to people trying to sniff out future trends. A good place to start would be this whole indefinite detention clause in a new bill that might soon be signed into law.

I'll let Glen Greenwald discuss the finer points of both this new future law and the trends that have been leading leaders to it. Essentially, not only can terrorists be indefinitely detained,

but also also anyone who “substantially supports” those groups and/or “associated forces” (whatever those terms mean).

That, I'm sure you will agree, is a pretty wide net to cast. Anyone who, for example, questions the legitimacy of the US government's actions might be described as someone who "substantially supports" terrorist groups who do the same, even though the first group bases their objections not on so-called "criminal acts" of the US, but rather on actual laws on the books within the United States itself, laws the current executive in charge might be violating. Protest too hard, and you might find yourself locked up without access to a lawyer . . . ever.

So, what future would be so extreme that the disaster planners in Washington deem unilateral detentions a necessary option? How about the breakdown of civil society?

I've already noted that just about everything in our presently organized society depends upon cheap and easy transport. If fuel costs rise too high, our economy hits the gas ceiling. From there, I've extrapolated that laws may have been crafted to protect our financial sector from the long contraction the loss of economic growth will necessarily create. (Mind you, I noted the protections were enacted for the financial sector, for the established banks and their oh-so-important bottom line of profit, not for the plebians like you and I merely relying upon our monetary system for financial survival. After all, those protections created money for reserves not lent into the economy.)



This is nothing new. The above graph was presented by M. King Hubbert himself in an article called "Exponential Growth as a Transient Phenomenon in Human History", published in 1976. Dmitri Orlov outlines the progression of Hubbert's three predictions:

In 1956 Hubbert predicted the US oil peak would be sometime between 1969 and 1971. For this he was ridiculed and laughed off the face of the earth (almost). Turned out the US oil peak was in 1970. This is something the drill-baby-drill, it's all the environmentalists' fault, ditto heads don't know anything about.

Next in 1974 Hubbert predicted the world oil peak to happen about 1998. However he DID say that if OPEC were to restrict the supply, then the peak would be delayed by 10-15 years which would put it at 2008-2013 . . . a reasonably close estimate of the actual global oil peak which started in 2005 and has continued as a plateau up to now. . . .

The chart above is his third prediction, about which Hubbert says:

"The third curve (on the left) is simply the mathematical curve for exponential growth. No physical quantity can follow this curve for more than a brief period of time. However, a sum of money, being of a nonphysical nature and growing according to the rules of compound interest at a fixed interest rate, can follow that curve indefinitely...Our principle constraints are cultural...we have evolved a culture so heavily dependent upon the continuance of exponential growth for its stability that it is incapable of reckoning with problems of non-growth...it behooves us...to begin a serious examination of the...cultural adjustments necessary...before unmanageable crises arise..."

(I emphasized.)

It seems to me our disaster planners are taking measures to prevent the gas ceiling from hitting us too hard on our collective noggins, falling in the process right into the mindset the emboldened quote above illustrates. To prevent thinking outside the so-called box of exponential growth alternatives, one might start by developing a new source of liquid fuel; no matter how expensive that fuel might prove to extract or distribute, it will be something our economy can use while we figure out how to use less. Call this our emergency supply. How about extracting liquid fuel from tar sands and shale, then move this liquid to where it is needed? A really nice map of this plan can be found here, with an interactive feature describing the links planned and completed.

Ah, but let's say we aren't able to extract enough tarry goo from low-energy geological formations to prevent further spikes in fuel price. Let's say we get alternative political groups like, say, the Tea Party or the Occupy movement (opposite sides of the same coin, if you ask me) continuously bitching about the growing price of transport, food, and other stuff of life, but the shrinking prospects for ordinary people to get employment or other decent livings. Let's say the continued snuffing of protest by riot gear clad officers really rankles a few, and they decide to shake things up by blocking or disrupting pipelines. If they do this where the goo first flows from the steam melted tar sand, there's nothing we in the States can do . . . is there?

Well, yes there is. We can send troops north at the invite of the Prime Minister. You see, the United States and Canada agreed to just such a troop-sharing back in 2008.

Canada and the U.S. have signed an agreement that paves the way for the militaries from either nation to send troops across each other’s borders during an emergency, but some are questioning why the Harper government has kept silent on the deal. . . .

The left-leaning Council of Canadians, which is campaigning against what it calls the increasing integration of the U.S. and Canadian militaries, is raising concerns about the deal.

“It’s kind of a trend when it comes to issues of Canada-U.S. relations and contentious issues like military integration. We see that this government is reluctant to disclose information to Canadians that is readily available on American and Mexican websites,” said Stuart Trew, a researcher with the Council of Canadians. said there is potential for the agreement to militarize civilian responses to emergency incidents. He noted that work is also underway for the two nations to put in place a joint plan to protect common infrastructure such as roadways and oil pipelines. . . .

“Are we going to see (U.S.) troops on our soil for minor potential threats to a pipeline or a road?” he asked.

(I emphasized yet again.)

If those minor threats come at a time when other supplies of petroleum prove in drastically short supply, Mr. Trew, then the answer might very well be yes. After all, south of our border we are enacting not just legislation but, as Glen Greenwald notes, a trend toward laws that pull the legal protections granted citizens by the Constitution and Bill of Rights, possibly all so we can avoid the societal perturbations financial crashes and famine can create.

It will take time to adapt to a world without cheap motive power. We may not have the fuel necessary to make that transition without major disruptions to our economy's current configuration and subsequently to the stuff of life that structure enables. This detention mentality is a band aid. This militarization, whether crossing borders — Iraq? Afghanistan? Canada? — or deployed right here at home might be another albeit larger wound dressing, an attempt to staunch the flow of fuel from our hungry gas tanks. People who cannot conceive of viable alternatives might be pursuing the only path they see available.

I worry that they might be exactly right.

solarbird just posted a video of an MSNBC host lashing out at the political Usual Suspects from the huckster brigade (you know, the familiar faces doling out the usual sound bites).

What surprises me the most? I'm used to this invective and honesty from the blogosphere, but from a paid member of the Lamestream Media? They usually represent the same views as the buyers of Congress Rattigan indicts.

I wonder how long he'll keep his job after this goes viral.

Back in August of last year, I ended the last episode of Swatting the Swarm with this paragraph:

Alan Greenspan may not have been in charge of the Fed during the most severe and obvious part of the collapse, but his actions -- or rather, his ideological inaction -- sowed the seeds for the impending disaster. To understand what happened, we need to note how systems work in general, how our economic system works in particular, and how we individuals within the systems can have more control over system outcomes than the leaders supposedly guiding the system with their authoritarian control.

I figured it only fitting to do some reading on the economy and how it works before laying out my damning indictment of Greenspan. I'm still reading, of course, but have still found enough hard informed commentary to all but dismiss that group of economic thinkers and theorists to which Greenspan belonged as a starry-eyed gaggle of dogmatic optimists sometimes led by (in some cases) out-right con artists. Sadly, this group wields an enormous amount of power and influence today, all but dictating policy in defiance of the democratic process and skewing toward their conclusions far too many aspects of our everyday lives.

Economics purports to be, you see, a science, and as such should rely on supporting its claims with empirical evidence. That's what other branches of science do, after all. Much of the following 150+ years of biology and paleontology have, for example, supported Charles Darwin's 1959 Origin of Species and his theory of natural selection found therein. That same year brought us one of the most important foundation observations supporting today's science of climatology.

As the two examples of science provided suggest, though, is that a lot of damage can be done to the reputation and understanding of good and well-supported theories if enough people with money find it in their best future interest to distort and obfuscate the official record. Believe it or not, even given the massive distortions climate change deniers and creationists have wrought on those other disciplines, economics has suffered an even greater attack and for a far more extended time. The Neoclassical and Neoliberal branches of economic theory prove far less supported in their tenets or their conclusions than either climate change denial or intelligent design, yet very few in the media even question the veracity of these assertions. As a result, we get a never-ending blast of neoclassical nonsense regurgitated by pundits, noise that effectively deafens the populace clamoring for real information they can use at the ballot box and with their checkbooks. Until that clamor is stanched, few will hold the qualifications to make informed decisions governing their very lives.

With this in mind, the following Too Long; Don't Read post addresses some of the tenets of neoclassical economic theory with explanations where I am able to provide them and dissenting opinions discussing why said tenets are theoretical at best and delusional at worst, backed by some of the books in which my nose has recently been buried. ( Click onward to view the Mythos. )

Addendum, May 3, 2011: In my haste, I forgot contributions from Pink and Hertz (which sounds like an S&M porn, I know). They were included today.

A bit ago, I posted in The Gas Ceiling that, since energy is our economy, and since unfrenzied, more-or-less natural increases in extraction rates may have come to an end in 2005, we should see unprecedented times ahead regarding our economy.

A recent Calculated Risk post came with an interesting way of graphing the impact of recessions:


Click for Statistical Embiggenation

This lets casual observers note the gap between the start and the end of various recessions. Some are longer in duration; other deeper; but most, as you can see, follow a fairly symmetrical bell curve progress with as much time between the beginnings and ends of the recessions. Since we're definitely not out of it yet, it's too soon to say whether or not this recession will follow that pattern, but. . . .

Just glancing at this graph, I noticed that most of them happened in the teeth of -- and probably as a result of -- temporary fuel shortages caused by supply disruptions both intentional and incidental. 1974's recession definitely started with the 1973 OPEC Embargo; 1980's with fuel shocks likely caused by Iran's 1979 revolution (and all the drama attendant thereto); 1981's downturn came soon after the start of the Iran-Iraq War.

Notice also that with the exception of 1969, all of the recessions previously ended with employment levels either at or higher than the previous peak of employment at the start of the various recessions. That 1969 exception is interesting; I've read in more than one book recently that our Western standard of living for a majority of people rose almost steadily from about 1820 to 1970; I have a theory why this happened, but will expound on it another time.

Back to the foreboding ellipsis above. I don't think the rebounded employment level will ever reach the pre-Great Recession mark, or if it does, that the curve will less resemble a symmetrical bell curve and more a cliff plunge followed by a much longer, gently rising slope upward to the "recovery." Why? It's that darned Gas Ceiling. We can't expand the economy without burning fuel, and fuel will be the one commodity that fails to materialize no matter what we try.

Oh, and I put "recovery" above in scare quotes simply because I very much doubt the jobs of tomorrow will in any way resemble the jobs of yesterday. They will not pay as well (adjusted, of course, for inflation or the lack thereof). That's why I think it will be a longer, slower recover this time around; too many will despair of the wages offered verses their wage expectations, and put off employment until the absolute last minute.

I'm not bragging, or reveling here in a Doomer Porn-gasm. Rather, I see this graph as an easily testable benchmark. The other fuel-shock induced recessions recovered after fuel supplies were recovered or secured elsewhere; if that can't happen due to Peak. . . .

We'll see what happens in, according to the graph, about 15 months. If we're back to pre-recession employment, I was wrong.

A few years ago, I kinda saw the direction our energy shortages would have on the overall economy and coined a term to describe the phenomenon -- "The Gas Ceiling." It's a play on the Glass Ceiling, the invisible employment/income level above which women could not achieve in a male-dominated corporate business environment, but refers instead to the unknowable ratio of the currently available petroleum fuels to the current economy's demand for those fuels. This article articulates the idea well:

In 2009 the peak demand story seemed confirmed, as prices stabilized around $70 in June, and U.S. consumption remained well off its previous high. Most people thought the nearly 2 mbpd decline in U.S. petroleum demand from 2007 through 2009 owed to efficiency and people driving less.

In reality, only about 15% owed to reduced gasoline demand. The other 85% was lost in the commercial and industrial sector: jet fuel, distillates (including diesel), kerosene, petrochemical feedstocks, lubricants, waxes, petroleum coke, asphalt and road oil, and other miscellaneous products.

Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world’s most developed economies to shrink. At $147, it wreaked serious damage.

As I explained in “Investment Themes for the Next Decade,” the new normal will be cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing, only to bump our heads against the ceiling once more.

And every time we hit that ceiling, we find it lower relative to the floor. Meaning we can stand only as tall as the last time, but probably not that tall. Our economies will contract. Why:

The reason is simple: Energy is the only real currency. Every dollar of fiat currency or GDP was ultimately derived from cheap energy. Trying to print your way out of energy decline is like prescribing ever-higher doses of aspirin for a headache caused by a brain tumor. Yet those at the levers of monetary policy are, by all appearances, completely ignorant (or in willful denial) of this fundamental fact.

This makes using the remaining energy available to improve the efficiency of energy-dependent systems (like transportation) problematic: experimenting with new fuel injection systems, building prototype high-mileage cars, installing electric transit and electrifying older routes -- all will compete for money, which (as noted above) is generated by burning fuel. Less fuel means fewer dollars. The competition will come down to the very immediate need for individuals to get to work with the cars they own now, verses some speculative system that (cross you fingers!) might work.

I find the "completely ignorant" and "willful denial" folks the most problematic. Sadly, most of the prognosticator "economists" fall into that category, even some of my closest friends. The rise in our standard of living started, after all, way back in 1820 (or so -- it's troubling to come up with exact numbers):

From 1820 to 1970, over every decades, average real wages rose, enabling a rising standard of consumption. These 150 years rooted workers' belief that the US was a "chosen" place where every generation would live better than its parents. (Richard D. Wolff, Capitalism Hits the Fan, Olive Branch Press, 2010, p. 51.)

George Stephenson's Rocket, the first
commercially practical steam locomotive.
1820 . . . a few decades after coal started to efficiently power industrial processes and a few years before this fossilized energy was used to propel transportation. We have been living in a period of increasing expectation for almost 200 years. The economic models on which we depend have only ever been subjected to temporary shortfalls in fuel supplies, never systemic, increasing and permanent shortages. We literally don't have the tools -- conceptual or, by extension, mathematical -- to appreciate our predicament, let alone predict what will likely happen next.

In the last few posts on monetary policy (now tagged How to Make Money), I noted that our economy has never been designed for resilience, that instead it is predicated on systems that increase our money supply or simply go bust. We have no mechanisms in place to carry our society through deflationary periods of bust that will prevent further cascading loan default and continuing economic shrinkage. We instead have constructed a system that tries to walk a tightrope between rampant inflation and collapse spirals.

Without a recovery/depression prevention mechanism, it's no wonder that our economists have been instilled with a selective historicity, education that answers "What will happen if the recessions continue?" with "They never have in the past, so things will undoubtedly look rosier in the future." Nassim Nicholas Taleb has written two books (so far) about why this answer is simply wrong.

Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race "looking out for its best interests," as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

[This is the gist of] . . . the Black Swan problem in its original form: How can we know the future, given knowledge of the past; or, more generally, how can we figure out properties of the (infinite) unknown based on the (finite) known? Think of the feeding again: What can a turkey learn about what is in store for it tomorrow from the events of yesterday? A lot, perhaps, but certainly a little less than it thinks, and it is just that "little less" that may make all the difference.

(Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, Random House, 2007, p. 40.)

As a society we are all about to incur Taleb's revision of belief. The first linked article author concludes with a question or two: "All of which begs a final question: If the answers are transition to renewables, and rebuilding our infrastructure for high efficiency, then where will the money and energy to do it all come from? And how long will it hold out?"

The answer may come not from economists, but from archeologists, especially those studying the remains of cultures that no longer exist, or those that made the necessary transition successfully. Whichever we as a society choose, expect a few surprise bumps on the noggin along the way.