Revisiting London

I wrote this article around the time of the London riots when everyone was still pretty sure it was just a bunch of young hooligans taking to the streets to steal stuff. The Economist has since blogged about this feature in the Guardian about the London rioters that has clearly been tempered by the new and growing understanding of the Occupy Movement. Even the Archbishop of Cantebury has gotten into the act.

The Archbishop says:

But when the endemic problems they identified are combined with the impact of massive massive economic hopelessness and the prospect of record levels of youth unemployment, it isn't surprising if we see volatile, chaotic and rootless young people letting off their frustration in the kind of destructive frenzy we witnessed in August.

Prior to which, I had said:

Do these protests seek the overthrow of governments? Do they seek democracy and accountability? Perhaps. The immediate need that is being fulfilled for most people in these protests isn’t democracy though. Democracy isn’t a need. Accountability isn’t a need. Hope, however, is.

Who would have thought an Anglican Archbishop and a Pagan Greener could have so much in common?

But this isn't a chance for me to say "I told you so". I'm here to talk about something I didn't expect - and perhaps should have, given our knowledge of how the Spring started. It's the role of the police, and the exercise of power in general, that was a major driver in this riot:

Economic issues were important. The cause most often cited for the riots was poverty (86%), but unemployment (79%) and inequality (70%) featured prominently too. Few guessed, though, that this tinder in the box was lit at least as much by the long arm of the law as the invisible hand of the market. Almost three-quarters of interviewees said they had been stopped and searched by the police in the last year; 85% said "policing" was an important or very important cause of the riots. Just 7% believed the police do a good job in their area. (Younge, Guardian)

We have been seeing it over and over again in Occupy protests: the police are perceived as the enforcers of the 1%. Let's not consider that fact, let' take the angle of critical theory and simply analyse that statement as a text. Why are so many people in ostensibly free democracies stating that the police are the tools of the elites? Why would a major cause for the London Riots be the invasive and repetitive imposition of police authority on the working classes? The reason in Tunisia, Egypt, Syria, and Libya is clear... but could it be that there has been a general perception of an erosion of personal rights even in the "Western Democracies"?

I'd say that's a pretty safe bet.

And when you hear people like screenwriter Patrick Meighan (The Family Guy) write:

I unlinked my arms voluntarily and informed the LAPD officers that I would go peacefully and cooperatively. I stood as instructed, and then I had my arms wrenched behind my back, and an officer hyperextended my wrists into my inner arms. It was super violent, it hurt really really bad, and he was doing it on purpose. When I involuntarily recoiled from the pain, the LAPD officer threw me face-first to the pavement. He had my hands behind my back, so I landed right on my face. The officer dropped with his knee on my back and ground my face into the pavement. It really, really hurt and my face started bleeding and I was very scared. I begged for mercy and I promised that I was honestly not resisting and would not resist.
My hands were then zipcuffed very tightly behind my back, where they turned blue. I am now suffering nerve damage in my right thumb and palm.

And when you hear about people like Retired NY Supreme Court Judge Judge Karen Smith:

Karen Smith was working as a legal observer when she saw a distressed woman pushed to the ground and beaten by an officer, she said.
When she demanded he stopped, the unidentified cop pushed her against a wall and threatened her with arrest.

And watch the UC Davis pepper spray incident:

The examples have become altogether too many to mention in one place. One advantage that we have is the all-pervasiveness of social media, communications equipment, and the ubiquity of handheld video.

Luckily, now, the lawyers are coming out. No, I didn't think I'd ever hear myself say that... but bear with me. Police actions have not ceased in their ferocity, I only just today saw several tweets regarding citizen journalist Spencer Mills (@Oakfosho) getting clubbed by a baton today (23.12.2011). Encampments have been destroyed, but something new is coming out of the movement: dissipation has brought new approaches.

The police can fight pitched battles in open squares against hundreds of unarmed protesters. That's something riot squads are trained for. But can they stop the hydra they have created by chasing the protesters from the squares? No. They have simply forced the occupation to adopt more effective tactics in pursuit of the same general strategy.

In this, as in so many events in history, I see one of those glaring "you really should have negotiated at the start" moments. The soft way could have aided the authorities, but they used the hard way, and fanned a spark into a flame.

29 Trillion Served

A recent article in alter.net has brought my attention to the fact that the Fed has been helicoptering in far more money than previously thought - if you take all of the past three years into account.

To the tune of $29 trillion.

So... what is the dollar? If you believe it's anything but a myth, then I've got this bridge in Brooklyn I'd like to sell you.

Only problem is that I deal exclusively in magic beans.

I said here that a solar power system to provide enough heat and power to supply a single house in Calgary would cost in the neighbourhood of $150,000. I was wrong.

Calgary has an average of over 2400 hours of sun per year.
This package of 20 Canadian Solar solar cells costs  $10,936.00.
It produces 20x240v of power, times 2400 hours of sun, equals 11520 kWh/year.
That's more than enough (by about a third) to power an average detached home in Calgary.
With 40 more panels, the same home could be heated, according to the StatsCan numbers in the referenced article.
Amortised over the 25 year warranty, that's $192.91 per month at 5% interest.

Bundled with the cost of your own mortgage, that would be negligible.

This nifty website let's us compare costs. For 11520kWh/year, the price would be somewhere around $100 per month in Calgary. For heating a home, Enmax charges $6.59/GJ. At an average of 140GJ/year for a Calgary home, that's about $77/month in gas heating.

Assuming no increases in gas or electricity price over the next 25 years....

...OK, really, stop laughing....

...assuming no increases in gas or electricity price over the next 25 years, solar is actually competitive. It is ABSOLUTELY competitive when comparing to electricity price alone. As a matter of fact, if you own a detached house, this basically means that you're losing money by not getting a solar system. How much are you losing? Approximately (assuming amortization over 25 years at 5% interest) $35.70/month, or $10,710 over the life of the system - again, at current market rates for electricity.

For fun... we are currently buying 900MW from BC and Saskatchewan and that is likely for the peak business hours of every day. It would take 187,500 houses equipped with this solar system to replace that amount of generation... so it's not really possible... but replacing ANY part of that generation capacity is the elimination of an expenditure for the utility. Enmax credits homeowners back for the electricity generated through microgeneration, but  am certain they take a good margin for themselves. Not only is it expenditure avoidance, it's a revenue positive proposition.

The City of Calgary, which wholly owns Enmax, should be taking this up with Calgarians far more vigourously...

The End of Wishing

Durban has ended in yet another do-nothing-disguised-as-a-half-measure. Kyoto was never going to succeed. We have been duped long enough. We have to stop wishing others will see the light and solve the problem for us. Anjali Appadurai had it right when she said:

I speak for more than half the world’s population, we are the silent majority. You’ve given us a seat in this hall, but our interests are not at the table. What does it take to get a stake in this game? Lobbyists? Corporate influence? Money? ... You have been negotiating all of my life. In that time, you’ve failed to meet pledges, you’ve missed targets, and you’ve broken promises.

She's right. Hell, I'm more than twice her age and they've been negotiating MY whole life. As a youth, I wrote a letter to then Prime Minister Brian Mulroney about Acid Rain - he's the only Prime Minister who actually wrote me back and signed his name on the paper, by the way. Now, after Canada took so many strides to stop the tide of noxious chemical fumes across the border (admittedly, the noxious fumes mainly stopped due to American government regulations that stated industries had to openly declare their effluents, combined with the fact the bottom fell our of American manufacturing), and was viewed as a leader in Environmentalism by so many, we've stepped out of Kyoto. Durban has been the final confirmation of a sad fact: national governments are both unequipped to and incapable of effecting adequate change to save our children's future.

At first, the thought is immensely depressing. We wonder why we let ourselves get strung along for decades with nothing but unfulfilled targets as our recompense. We wonder how - after cultivating such a careful cynicism - we could have been duped. Depression turns to horror as we think of the world our children will inherit. Horror at the thought that our kids will have it even rougher than us. Our generation is the first generation in recent history that will have less than the generation before it. Where we are newcomers to (or soon-to-be newcomers to) an economy where the search for jobs is cruel and unrelenting for so many... will our children enter a world when their search is for fresh water? Arable land? We have wants, but what wants will they have?

If you take a moment, though, it is possible to transcend this horror. We can break through the veil of inevitability if we simply change the way we look at the situation. If governments keep getting made by promises that aren't kept; if we sense that there is a rule here that seems to govern governments such that they inevitably end up taking the most wildly shortsighted path toward the future; if we are seeing the same thing happening over and over and over again, we might just be stuck in a self-perpetuating and self-reinforcing system. Knowing that is the first step to liberation. It doesn't sound like it, but bear with me.

There is an ancient Norwegian poem that has a stanza which states, "Ice we call the broad bridge (Ís kǫllum brú bræiða)". If you think of it, a seafaring people which used rivers for trade shouldn't think of ice that way. Rivers were the conduit to their sources of wealth inland, ice was a stopper of commerce and... well, let's be honest... raping an pillaging. There can't be anything good about a drakkar frozen into the ice if you're a Viking. If you think about it, though, the stanza makes sense. Ice allows you to cross to the other side on foot. Previously impossible communication and trade is now possible. It just so happens that you have to use a different mode of transport, and the direction you're travelling is perpendicular to the direction you would normally travel. It takes a change of outlook, but the change doesn't mean the end - it just means you've got different opportunities.

As long as you can wrap your head around the change in lifestyle, you're gold.

The first step is realising there's a problem. The drakkar's frozen in the ice, and you're not going downriver anytime soon. Governments are trapped in a positive feedback loop that makes them do things that are not in their own long-term self-interest. In this case, it makes no sense to down the oars and grab the rudder. You're not going anywhere that way. You have to acknowledge the predicament you're in, and have a good think.

A good first stop to learning how to change a system is Donella Meadows' masterpiece article "Leverage Points: Places to Intervene in a System". Donella Meadows is an unsung genius of systems theory, and sadly, she was lost to us before her time. What remains of her written work is well worth a read as she had a knack for making the unfathomable into something not only understandable but palatable as well. An easy reference to the twelve leverage points is on Wikipedia and her book, Thinking in systems : a primer, is available on Amazon. Her advice is great, but perhaps not exactly what we need right at the beginning. What we need at the beginning is a less sweeping philosophy. We need something a little more local.

If the national government is unable to change, then focus smaller. Change can happen at the Provincial level, the Municipal level, even the community level... but it can also happen on the individual level. As long as we have some objectives in mind when we do our local thing, we are acting in the interest of the "think global, act local" mantra. One global change we can enact locally is to rely less on hard currency, and save it for what we can't avoid using it on. If you do one or two things that either help you not spend money, or help you trade goods rather than services with other people, then you can hold on to cash for things like the heating bill - which can't be paid in carrots. Here are a few general ideas to start us down that road.

Money is a golden treadmill. The more comes in, the faster you run, the harder it is to get off. Debt is the same, only backwards. Either way, you're running... and the more you run, the more the wheel has you. The key is not to have more money or simply reduce your debts. The key is to reduce the need for money in you life. That can happen in a number of ways, and the most important one, in my opinion, is sharing. Our economies began in gift-giving and social debt rather than barter and financial debt. The concept of debt was originally moral rather than accountable. Many societies continue this gift-giving tradition. The Japanese, for one, give gifts all the time - though if you ask them, they'd like the whole tradition to stop. To my friends and family in Japan, gift-giving is a bit like a treadmill, too - once one gift is given, you MUST reciprocate. It can go on forever, and this problem is compounded by the fact that the gifts are typically useless and purchased with money. What's more, when I take a gift to my friends or family in Japan, it's typically food and they typically feel obliged to open it right there and share it with you, which is kind of defeating the purpose of giving them something. I love the Japanese very much, but their culture, much like every other culture in the world (mine included) has its weird parts. My father-in-law has a solution. He grows organic vegetables. His vegetables are DELICIOUS. He tells me with great relish how he brews up garlic and hot pepper sprays as insect deterrence, cuts bottles into little whirlygigs to put on poles so the ground vibrations scare moles, and he also likes to discuss the finer points of keeping a matsutake mushroom plot secret. To this day he's still opaque about whether or not he ACTUALLY has a matsutake mushroom plot. Well played, dad-in-law, well-played.

His goal, however, is the farming itself... so he doesn't keep most of his harvest. His vegetables go straight to his clients, who are quite delighted to have them. Here's the solution: give something home made and useful, like vegetables. Make wine or beer. Have an apple tree in the front yard and share the fruit. Do something cheap (or preferably free), make a surplus, and give it away. If it is something that replaces money that someone else might have spent, you've done your job. You have successfully stopped money - even if it's pennies - from entering the market. Gift-giving can turn into more long-term and regular arrangements. For instance, I currently teach English to a person who, in turn, comes to my house and teaches my son Japanese (and gets a good lunch out of the bargain, as well). Give what you have to show what you've got, and perhaps someone else will make the deal more permanent.

Have you spoken to your neighbours lately? Do they have a car? Do you work in the same place? You could commute together. Cars are the bane of my existence. They are endless money pits that do nothing but depreciate in value, pollute the air, and break down unexpectedly. When I was living in Canada, I walked to work 45 minutes every day (yes, even on THOSE days). I still had a car for groceries and the like, but I walked to work. It's something you might want to consider: if you have a car, you may be wasting money. Here is a nifty calculator to determine how much that might be. Here's a quick tip - buying a new car is about equal to adding over $100k to your mortgage. Ask yourself, would you like $100,000 more house, or would you like a car? If you feel you need a car for your job, is it a job you really want to be doing? Could you do a job within walking distance for $500 less per month instead of paying for insurance and gas and lease and repairs? Currently, I live in a huge metropolis with horrible traffic, and I ride a little electric scooter. It's slow, it's small, and it's cheap... but it also fits between the cars, and I get home faster than anyone driving in a four-wheeled vehicle. You could get a similar model - or an e-bike - for a reasonable amount. As a matter of fact, it's about the same as a standard adult-sized bike. To me, I'd rather pay higher rent and walk/bike than pay rent and be a slave to a car lease. In the end, not owning a car is a good financial decision, and by doing so, the money treadmill turns slower.

Going back to a gift-giving and barter economy (at least in small part) should assist us save a little money for lifestyle improvements down the road... like that solar panel you always wanted, or just a better mash tun for your all-grain brewing operation. Those are a few ideas that you can use to wean yourself and your friends and neighbours off hard currency a little. Trust me, these skills and flows of goods will come in useful! If the power goes out for a couple days, you'll be glad to know that Maggie down the road has fresh veggies, that Jim on the corner has the compost Maggie likes, and you've got the homebrew that Jim likes. These little safety nets make life a little more comfortable.

The next stop on this ride is municipal policy, and you can start to read about that here and here and here and here...

Money - Part 4

The fact that the value of dollars and the supply of dollars are two completely different things is a very hard pill to swallow. For example, during the past period of quantitative easing, the USD has functionally not budged. It's sat right around the CAD, and the Euro has been volatile against the dollar which has actually created periods of flight to the USD, increasing its value. The USD is a reserve currency. Economists like to state that "The demand generated from its prime reserve currency status has added significantly to the value of the U.S. dollar over the past several decades." Now I'd like to say something about that last linked article... it's another one of the "scare you into buying my favourite investment" sites, so take it all with another mound of salt. Also notice that they talk extensively about the Euro becoming a more important reserve currency than the USD. Well, given the recent trouble in the Eurozone, the Euro's status as a reserve currency has become somewhat dimmed. The question is - how much value does being the world's reserve currency grant you? I wager it's actually one of the single most powerful tools in a state's arsenal for maintaining a steady currency value: has printing more money had an overall negative effect on the USD? Absolutely not. It hasn't because the supply of dollars doesn't matter. People who want the gold standard back, or who want to scare you into trying to buy gold, will tell you that the supply devalues the currency... but it hasn't. Neither has the creation of money out of nothing that private banks perform on a daily basis.


So what is it that people are buying in USD that they can't get in other currencies? Well, lots of stuff. The USA is still a massive producer of really really sweet and awesome stuff. The classical American of yesteryear was a successful entrepreneur, building cars, computers, and toilet seats. Nowadays, though, a major contributor to the price of the dollar is the global demand for oil. That's something rather major, and it's denominated in USD. Buyt that's not all. Lots of stuff is denominated in USD even though it has nothing to do with the USA! A fully 85% of transactions, to be specific.

Furthermore, sins against supply and demand are possible by fiat: the Yuan, for example, is pegged to a "basket" of currencies... because the Chinese government says so. Yes, it has adequate reserves to fend off any form of speculation that could change the Yuan's government-controlled value... but the important thing is that the yuan's value has nothing to do with anything... it's just set where the Chinese government wants it. Fine, you may say... a central government of a well-known authoritarian state can control its currency's value by fiat, but thats not possible in a democratic free market econom... oops. Switzerland.

...so, as we were saying, some government simply has to say "we'll buy or sell our currency as much as needed to make certain it stays at a give value", and the currency is pegged. They don't HAVE to do any buying and selling, just threaten... and speculators will keep the peace for fear of getting burned. It's like having a financial nuclear arsenal: I'm a country, I can tax, offer bonds, and even print this stuff if I need to, and I will use it to enforce my fiduciary will.


What's the situation then? We can say the following things are probably true:
1) Currency values are not based on their money supply versus their reserves. We know this theoretically because banks are allowed to create money out of nothing, and that money does not affect currency values. We know this practically, because the USD went through a significant period of quantitative easing and came through more or less unchanged in value.
2) Some currencies are "reserve currencies", and these currencies gain value by this status alone. The USD has certainly benefited from this situation, as has the Euro, which has, many have complained, been artificially inflated against the dollar.
3) States can peg their currency by fiat. They may use tools like China or like Switzerland, but it remains a fact that state actors have the ability to exercise the muscle of their reserves in order to maintain the value of their currency at a given level. Canada even did this for a long time, and Hong Kong still does.
4) The currency supply does not influence currency value so long as there is a demand for the currency in business transactions. The strength of a currency is therefore more linked to how much business is being done with that currency than how much of that currency exists. This explains why it is in China's long-term interest to keep propping up the US through loans, because a majority of their reserves are held in USD, and a huge number of USD flow to China to purchase goods. If we look at this loop backwards, we see that since the majority of China's foreign currency reserves are held in USD, and their ability to peg their currency depends on the USD's ability to maintain value. They loan cash to the US so that the US will continue to buy Chinese goods, which increases the Chinese USD reserve, which further ties China to the fate of the USD. If they would let their currency float, they would actually be able to unhinge themselves from the dollar and let it drop; sadly for them, they believe it necessary to peg for the good of their manufacturing sector.

Perhaps the greatest example of supply and demand in currency values being completely unhinged is the most recent (and oft-mentioned) episode of quantitative easing the US unleashed. Important to understand is that we would never have known how much money the US Treasury created out of thin air unless Sens. Paul, DeMint, Sander, and Grayson chased down the Fed and forced it to produce a reckoning of the full amount. It was the first ever audit of the Fed in its close to one century of operation. That, in itself, is huge news. The full audit report is here and the recommendations here, but the main feature is the full amount of the bailout.

To put things in perspective, Canada's annual governmental operating budget - to run the entire country in 2011 - is:
$235,600,000,000 CAD ($235 billion)
Canada's national debt is:
$586,000,000,000 CAD ($586 billion)
The amount that the American congress' Supercommittee failed to address is:
$1,200,000,000,000 USD ($1.2 trillion)
The USA's current debt - that is to say, all the money that the USA owes to everybody, is (at the current second):
$15,094,945,129,699 USD ($15 trillion)

The amount given to banks by the fed in the aftermath of the global financial crisis was:
$16,000,000,000,000 ($16 trillion)

Again, to put this in perspective - they could have paid off the entire US debt.
The amount given to CITIGROUP ALONE (2.5 trillion dollars) could have run Canada for ten years without any taxes on our population whatsoever. It was not voted upon, it came from nowhere, and it was simply dumped into the global economy without so much as a blip in the value of the USD that could be attributed to it. This is perhaps one of the most exasperatingly obvious examples of the failure of the international monetary system. While a bunch of senators argue about 1.2 trillion dollars and don't come to an agreement about what to cut, the Fed can print more than 10 times that and not be brought to task. The more you think of it, the more absurd it becomes.

Have you seen it in the news? No?

I might wonder why that is.

At the end of all this, what can we say money is? I think we can classify it more for what it does: it's a tool for the redistribution of wealth. Wealth, of course, is all the stuff in the world that lets us live happy and healthy lives. Here's the rub: there's only a finite world with a finite amount of wealth, and we've already seen that there is a functionally infinite money supply. Economic growth is great, but the planet isn't getting any bigger, and there quite simply isn't enough wealth in the world to be bought by all those dollars. If all the wealth in the world was worth a quadrillion dollars, and we could print ten quadrillion (which we can), would that mean there was all of a sudden ten times more wealth? No. It would simply mean there would be nine quadrillion dollars with nothing to buy, or everything would have to be priced 10 times greater. Money supply is not simply unhinged from its value; it's unhinged from the amount of food in the world. It's unhinged from our health. It's unhinged from our ability to access an education. It's unhinged from our ability to maintain the vital environmental services that protect our ability to live on this planet. The travesty of creating money does not rest with the simple lack of correspondence between the market forces of supply and demand on currency value. It lies in the fact that money is simply a tool to redistribute wealth in an economy, and we can't eat it. When the amount of money in circulation doesn't have anything to do with the amount of real wealth in circulation, wealth is not being distributed correctly. There's a problem here, and it isn't going to be solved by quantitative easing.

Money - Part 3

Money has several very interesting facets. One of the facets is that - due to the odd current system we live in where private banks (not the mint or Bank of Canada) can create money on a whim - demand and supply are more or less completely unhinged. Your eyes perhaps rested on the part of that sentence where I said "banks create money on a whim", right? Well, more accurately, private banks actually create money out of nothing. If you click the link that I referenced just there, you'll note it goes to the Bank of Canada website. On the Bank of Canada website, it says:

Commercial banks and other financial institutions provide most of the assets used as money through loans made to individuals and businesses. In that sense, financial institutions create, or can create money.
The Bank of Canada manages the rate of money growth indirectly through its influence on short-term interest rates, or through the reserves provided to large deposit-taking institutions.

Which is interesting, because it basically means Canada has no real control over its money supply: money is created and destroyed by banks and other financial institutions. In a way, this makes sense: in order to make money on deposits, a bank must invest those deposits. The problem is that a bank cannot have money in two places at once. If it wants to make money on deposits, it must take the deposits out and put them into loans or the market. It can't leave them in a vault and hope the pennies have copious sex with one another. What is a bank to do? It writes your account balance on a piece of paper, and loans the money you gave them out to someone else. The person who took the loan got real money - you get an I.O.U. Poof! The bank just created money!

Perhaps this is a bit hard to take. Let's make it more concrete: you have $100. You invest it in the Bank of Bob (the initials of which, conveniently, are also BOB). I need a $100 loan from the BOB. BOB writes in your account book that you hold $100 in their accounts. BOB then gives me $100. In effect, we both have the same hundred bucks. I hold the real currency, and you have a piece of paper that says the bank will render you $100 upon demand. Let's say you leave the money there until I pay back the loan. I pay back $100 plus $5 interest. You close your account and take your $100 back, which gained $2 interest. The bank pockets the $3 difference. The $100 IOU is discharged, and the money supply effectively shrinks again. I say that the money supply "shrinks" because really, at the time the loan was created, you had $100 and I had $100, and it meant that our little economy held $200. When the loan is repaid, the bank receives $105, gives you back $102, and keeps $3.

The cozy thing about this is that the math all works out - no money is created or destroyed. The I.O.U. is discharged when I wish to take my money out... but something isn't right. We have an economy of three entities here: you, me, and BOB. You give $100 bucks you have in hand to BOB. BOB invents another $100 bucks out of it (which we can accept, it's actually an I.O.U, not real money) and gives me $100. The economy is operating with $100 real dollars still and $100 "owed" dollars: a promissory note for a hundred bucks. At the end of the loan the economy once again contains just the... hey! Wait a minute! Where did that extra $5 come from? In effect, it has to come from outside the economy, or be created someplace, or... or it is loaned by someone else to pay the debt.

Hmm. In a closed system like this, the only way for debt to be paid is further debt from other banks, which itself leads to further debt. Well, one way to make up the money is something called "quantitative easing", which is really just a fancy name for "making it up out of nothing". A lot of the extra cash that society needs to pay off debt actually comes, one way or another, from the government going deeper into debt; either through bond issue (which is to say, going into debt where the creditor is the public itself), quantitative easing, or just changing the interest rate. We discovered in the 80s that the high interest rates didn't make the money supply heed the helmsman, so I'm consistently wondering why we think lowering the yield curve will in any way correct the financial troubles of the current US economy... but I digress. My main point here is that the government makes money. Out. Of. Nothing.

In a reserve system, the supply of money versus the commodities and currencies held in reserve should devalue the currency. As I said before, however, the supply and demand of currencies are no longer correlated. Supply is just supply: it is created out of thin air by banks, by the government through quantitative easing, through bond issue, fairies, whatever. Demand relates to what the money is used to buy, not with how big the money supply is. Dollars buy you iPhones. Dollars buy you oil.

On to part 4.

Money - Part 2

The only reason people buy currency is because they need to use that currency for something. Just like people buy soybeans because they want to make tofu. The forex, however, has turned into a market where I would imagine a majority of the trades are now speculation. Real money has real use, and I have to use Canadian dollars to buy Canadian bonds, just as real soybeans have real use, and I need soybeans to make tofu. There are speculators who bet on the market that there will be high demand for soybeans due to a drought, blight, or rising demand for tofu. This is no different from speculators who purchase the Canadian dollars because Canadian bonds are a good buy and they feel the dollar is under-priced. People who speculate on gold, silver, and platinum are also betting on commodities, not articles with intrinsic value. Silver and gold have skyrocketed in value in part because of the perception that they are shelters from the storm, but this is something of a false perception: gold and silver are beneficiaries of demand - in part driven by the speculation that they are a good place to shelter money. Did you follow that? Gold is benefiting from the financial uncertainty of the markets, and the fact that people think it is a good place to shelter their money. It's got value primarily because it is a catch-22 of perceived value: I think it's a shelter so I buy it so it goes up in value so its a shelter.

Precious metals are not immune to demand-driven shocks. Their value does not track inflation. They do not have a guaranteed increase in value over all time periods. I'll cite one case in point: platinum's market crash in late 2008. An article makes it clear why platinum has value: it's used in car catalytic converters. Why does gold have value even when years worth of gold stock is above-ground? I love this quote:

Why is gold produced?  There are plenty of tons of it in aboveground stockpiles, decades based on annual consumption, so why burrow miles into the earth to bury it in a vault?
The value gold adds to society is in its ability to assist us in performing mental calculations of value.  When using gold as the numeraire a much more accurate assessment can be made when allocating capital.

Soooooo... what the author is saying is that platinum has a price based in demand for automobiles. The value of gold is that it helps us with math. IT HELPS US WITH MATH. She openly stated that there is a glut of unused gold above ground that is doing sweet nothing, which smells of bubble to me. Here's more to love, from the Economic Times of India:

Central banks in emerging nations have been buying more of the metal to diversify their reserves. Most central banks hold their reserves in currency, and mostly in dollars. While many have diversified to increase their holding of other currencies such as the euro, economic troubles have meant the value of the currency holdings has depreciated vis-a-vis the domestic currency. In comparison, gold has been rising, and central banks holding big quantities of the metal managed to protect themselves from losses due to erosion of reserve currencies.

I'd like to point out first and foremost that many readers might have initially thought that all national reserve banks MAINLY held their reserves in gold... but it just ain't so. The Economic Times also mentions, "Gold prices are far more volatile than platinum, as has been evident during the course of this week. For that matter, over the past few days, as perception of risks eased, so did gold prices. Platinum prices draw their strength from economic cycles and industrial demand." Platinum's price is based on demand. Gold's price is based on lack of confidence in the economy. One of these things is an idea, and the other is real. A bunch of people acquiring large stockpiles of stuff and not selling it because they think it adds value to their portfolios is not a recipe for long-term growth in value: it's a recipe for a bubble bursting, just like it did on radio stocks in the 20s, tech stocks in the early 2000s, and housing at the end of 2007.

I'll take one last swipe at gold by saying that before the stock market crash in early 2000's, people bought tech stocks because hey... they were winners. The tech stocks crashed and then people ran to the only two safe bets left: gold and real property. In 2008, people fled from property, and now they only have gold to flee to. In times like these, people buy and hold. When there's a load of unused stuff out there on the market, it takes but one perception of a move from that commodity to start a flight from it, too. I would love someone to explain to me, after some financial apocalypse, how they intend to redeem their gold for useful items? It will be just as useful as money: a commodity that is neither food, nor gas, nor booze. If you want something that survives economic meltdown... build a still. But that is not what I came here to write about. I came here to write about money.

On to part 3.

Money - Part 1

It seems many people are not quite fully informed about what money is, where it comes from, and from where it derives its value.

There are lots of theories about what civilisations did for currency and trade in ancient times. Barter is a popular economic theory for prehistoric trading, though most peoples did not likely operate on a strictly goods-for-goods economy. Contrary to popular belief, economies as a subset of cultures are better studied by anthropologists and sociologists than economists. The models that economists have about the primordial tribal systems of trade that humanity evolved are a complete mismatch with reality. Many cultures' economies were based on gift-giving that created social debts between people rather than financial ones. Anthropologists will probably tell you that the gift was the first basis of all economies. The concept that coinage evolved to replace barter because it was more convenient is a common but almost wholly counterfeit story - it is more of a thought experiment with no basis in actual fact. Anthropologists have not found evidence this ever occurred in any civilisation, ever - the "spot trade" is not normally possible in a barter system, and not typically practiced. It's easier for a pre-literate society to handle "trade" as a subset of politeness than it is to handle it as a subset of maths and statistics.

The development of currency was neither uniform nor widespread in early civilisations, and coinage did not invariably develop for the purposes of trade. Germanic tribes in the times of Tacitus used gold coins as one of many items of trade, but they were a fundamentally gift-giving culture. Tacitus writes that in German tribes, if a guest's eye rested too longingly on another person's possession, it behoved the owner to give it over immediately. Coins, as useful as they might have been to the Germans, were, more often than not, sunk in a bog for the Gods' gift of victory in the next battle than used in trade. So much for a clean theory on where money came from or what it was used for. The myth about barter and the convenience of coin is actually a convenience for economists. When it comes to the actual history of the matter, I would prefer to trust archaeologists, sociologists, ancient historians, and anthropologists, thank you.

Money was based on precious metals for a long period of time. The link cited there on wikipedia has a good quick reference chart on what has been used as the "reserve" at any given time in history. We became accustomed to money being valued against something. The adage that paper money and fractional reserve banking evolving from goldsmiths' proto-banks is apocryphal, (and I recommend you take the linked movie with a mound of salt) but it can serve a purpose of understanding how we may have been able to reason the need for paper money versus coinage. The Goldsmith's story is an oft-repeated example of fractional reserve banking and it does at least make the concept somewhat accessible. Again, I stress - this isn't historical fact, it's just an illustration. Take from it what you will. Here is something a little more factual.

The issue is that since 1971, money has been traded without being based on anything except demand. Nixon eliminated the gold standard, and ever since, currency has been traded like a commodity. If you've ever traded currency on the foreign exchange (forex), or tried one of those free accounts the brokers give you (try it, it's fun and you learn a lot by doing), you know that currencies don't have value except against other currencies. In order to trade, you must purchase a currency "pair". That means you buy one currency with another currency. For example, I could go long on the Aussiedollar versus the Swiss Franc which means I take my own currency, and purchase Swiss Francs to buy Australian dollars. A long position implies a short position: I believe the Aussiedollar will increase in value versus the Franc. In effect, you could also say I'm shorting the Franc with Aussiedollars just as much as you could say I'm going long on Aussiedollars against the Franc.

On to part 2.

Revisiting the Open Letter to Mom and Dad

Well, here we are. The Spring has come home, and Europe and North America are finally waking up to the paradigm-ending economic shocks we had back in 2008. When the Guardian ran a piece recently about the Occupy Wall Street movement, what it had this to say about the current crisis:

What we've learned now is that the economic crisis of the 1970s never really went away. It was fobbed off by cheap credit at home and massive plunder abroad – the latter, in the name of the "third world debt crisis". But the global south fought back. The "alter-globalisation movement", was in the end, successful: the IMF has been driven out of East Asia and Latin America, just as it is now being driven from the Middle East. As a result, the debt crisis has come home to Europe and North America, replete with the exact same approach: declare a financial crisis, appoint supposedly neutral technocrats to manage it, and then engage in an orgy of plunder in the name of "austerity".

Echoed my own sentiments so closely that I was relieved to know at least one other person was thinking the same way as I: that this is the fight our parents failed to finish in the 70s. They failed to finish it because the oil taps opened up again, credit began to flow, and stagflation made them hold on to their jobs. It was a perfect storm of threats and inducements to maintain the established economic order.

Thankfully, people are standing up and calling a spade a spade. On the 6th of March this year, I said:

We're at a historical tipping point. There is still time to do something about it, but the job of my generation now is to force [your generation] to care. We've got to snap you out of this late-life reverie of a paradisiacal post-employment existence in the south of France, sipping wine. The economic system is buckling. If we keep thinking of things in the terms of well-worn economic adages (you know, the same theories that said such a thing as stagflation couldn't exist - the same stagflation you lived through?) we will keep getting the same economic results. We need a change. We need you to wake up that dormant war-resisting flower child. We need to pull the cobwebs off your sleeping inner homesteader. Didn't you notice that the American boomers - the ones who grew up as flower children - were the same parents who proudly sent their kids off to war in the Middle East?

Well, here we are.

Coppice Agroforestry

I am very keen on the forthcoming book Coppice Agroforestry as it is right up the alley of what my thought experiments have been leading into. A sustainable resource stream from a relatively low-maintenance and versatile crop. Coppicing (called pollarding when stems of trees are cut higher) can do everything from providing leafy fodder for animals to providing switches for basketweaving to beanpoles to firewood. It's a sustainable mode of agroforestry that keeps the landscape in a constant state of renewal, which fosters a diverse and varied ecosystem. The guys who are writing this book are the ones who wrote the two-volume set Edible Forest Gardens, veritable bibles of the practical side of Permaculture.

Others are involved in the sustainable silviculture revolution. World Agroforestry Centre promotes sustainable use of forest resources and provides plenty of data on sustainable silviculture - specifically geared at releasing products to market. This, along wth the UN's recent (finally!!) interest in sustainable organic agriculture and food security, should go a long way to promoting sustainable farming practices and ensure livelihoods for lots more small-holding permaculturalists.

Not Only Is Chemical Farming Bad, It's Worse

Two lovely stories today that I will quote liberally for you. First, the results of a 30-year exhaustive study comparing chemical and organic farm yields are in: organic farming isn't just healthier, it's higher-yielding, and earns the farmer more dollars per acre.

This story is a follow-up on the rather despairing piece I wrote about the state of "conventional" (or as I have taken to calling it, chemical) farming. Here are some hilights.

1. after a three-year transition period, organic yields equalled conventional yields
2. Organic corn yields were 31 per cent higher than conventional in years of drought
3. organic systems were almost three times as profitable as the conventional systems
4. no-till conventional corn was the least profitable
5. farmers who cultivated GM varieties earned less money over a 14-year period than those who continued to grow non-GM crops
6. Organic systems used 45 per cent less energy than conventional
7. Production efficiency was 28 per cent higher in the organic systems
8. Soil health in the organic systems has increased over time

You can read the whole article, but this kinda sums up the wisdom:

With results like these, why does conventional wisdom favour chemical farming? Vested interests. Organic farming keeps more money on the farm and in rural communities and out of the pockets of chemical companies. As the major funders of research centres and universities, and major advertisers in the farm media, they effectively buy a pro-chemical bias.

The other article is a brief news release from the UN HiCom for Human Rights. The lead line sums it up:

Small-scale farmers can double food production within 10 years in critical regions by using ecological methods, a new UN report* shows. Based on an extensive review of the recent scientific literature, the study calls for a fundamental shift towards agroecology as a way to boost food production and improve the situation of the poorest.

So, what's to be done? Clearly something to do with weaning ourselves off chemicals and back on to taking care of the soil.

You can see the whole UN report here. To my Chinese friends, check here.

The Eurozone vs. the Hedge Funds

A trader gets to the meat of the matter about the market. I don't necessarily believe him when he says Goldman Sachs (and its ilk, I imagine he is implying) rules the world. Governments do have more tools at their disposal than Goldman Sachs. I don't necessarily think that there will be a huge global crash... maybe there will, maybe there won't. What I do want to pick up on is a comment that may have been lost in the hyperbole: "I'm a trader."

That one line is important. He, and the other traders, do not care about bailouts or stimulus packages. He's there to make money from the market. If the market goes south, he and his colleagues will find a way to derive money from it, which will magnify the crash. It's his job. It's the market as force of nature: the traders are simply filling their part of the ecosystem. This is what the market does. All he can say is "be prepared".

So, be prepared!

What's the Big Idea??

A big problem of mine is assuming that people can read my mind. I realise, yet again, that a lot of the things I have been thinking about for a sustainable living project have simply never left my tiny little brain. To the end of airing these ideas, I thought I’d write down what I have been thinking about for the past few weeks. It centres on a kind of thought experiment: a row-house complex with four units on a plot of land. Four families, all living and perhaps working in the complex, and attempting to make a go of living functionally (if not actually) off grid. The reason for building a rowhouse complex is pretty clear: when building to a passive house standard, the money is all in the envelope of the house. That means that building a row unit saves on insulation of at least one quarter (and at most more than one half) of the total outer wall area, allowing for more square footage at a lower per square foot cost. Heating (which would likely amount to no more than $400/yr for the whole complex based on the passive house standard) would then be shared through the condo association.

First off, I imagine a lot between 25-100 acres, 50-75% treed, mainly with hardwoods would be preferable. In my most specific preferences, those hardwoods would be ash and birch, but I realise I can’t necessarily be choosy in this regard. The project I am imagining is a mixed-revenue and rather holistic economic enterprise that does not focus on any one product, instead it’s meant to produce a number of “crops” while taking into account the general laziness of the occupants, so the forested portion of the project is geared toward a kind of slow silviculture. Birch and ash, you see, have a couple advantages. Both are good saleable woods, but they can also both be coppiced, which is perhaps one of the most sustainable modes of forestry around. Coppicing produces the same kind of succession that the typical forest cycle naturally produces through the occasional fire or catastrophe, allowing for the meadow-dwelling ecosystem to remain more or less undisturbed on the land for as long as it is coppiced in a proper cycle. Ash and birch work well on a 12-15 year cycle, so the forested region would be divided into 15 and coppiced regularly in sequence. Ashwood makes good poles, axe (and other tool) handles, longbows, you name it. Both ash and birch can be tapped.  It would allow me to regularly make the joke to people that “I’d tap that ash”. Just that is worth the lulz.

Clearing would be required for a house, and I have it in mind to get subdivisible land. One of the things about having a real estate family is that they are quick to point out the market facts that theory doesn’t take into account. One of those things is that owning a house that is part of a housing cooperative instantly makes it both difficult to resell and therefore drops its market value. I understand that, in theory, housing cooperatives SHOULDN’T have this saleability problem, and in theory, they are just another form of house ownership that can be transferred like any other… but in practice, it don’t work that way. Cooperative housing enthusiasts would be quick to give me an earful of counterarguments, but my reality is the market. I would like a multi-family project, but I want it to be a project that is based on ownership of a whole house and not of a share in a cooperative. Luckily, condominium ownership is more mainstream and provides the capacity to 1) own a unit in the rowhouse complex, and 2) have a cooperative vehicle by which the collective can share access to common areas. This division between personal and public is key. A member of the project owns a house and through the condo association owns access to the common land and greenhouse attached to the complex.

My idea calls for a greenhouse to be located on a south-exposed slope and attached directly to the house. This is because it would allow for some of the greywater filtration and urine processing concepts that I’ve already talked about before. Each greywater system would be separate for each house, so there can be no recriminations about who threw the candy wrappers in the loo. While I still believe it is possible to edify adults to the point that they can transcend the tragedy of the commons, it is hard to do this for unsupervised children. Realism should prevail when it comes to this kind of systems design. The greenhouse would contain aquaponics systems that should also run separately, if only for the purposes of sustainability: one linked system that fails leaves everyone hungry; one of four individual systems is just a temporary stress on production. Vegetables can be produced year round in such a system, and fish can be harvested on a routine basis after a year. I am planning on experimenting with a “bioponics” system here in the Philippines that requires no fish food inputs to be purchased. If it works, that would be a substantial savings on traditional aquaponics methods and would integrate food waste processing into the whole house system. Any organics that cannot be processed easily in the black soldier fly and vermiculture bins can be pyrolised for biochar in a biochar gasifier. There are commercial units available that are virtually fuel-neutral, since running the system from a hopper requires only propane to start the gasfication process, and continuous processing would not only not require further fuel but it would heat the greenhouse too. This is another reason to keep woods other than hardwoods on the lot: fuel for the biochar gasifier that produces heat for the greenhouse and biochar for the garden.

Some people have become convinced that what I am interested in is “farming”. No. It isn’t. Farming is not something I really want to do. That said, a limited amount of farming would be good to offset food costs and perhaps create some value-added assets for the project. Farming is simply a small part of a greater project I am interested in.  I am actually more interested in small-scale manufacture or value-added production. To me, the perfect industry would be a brewery or cider operation, since it produces so much organic by-product.  Mixing this with an oyster and shiitake mushroom operation would be advantageous, and both are reasonable profit for work input. Such an operation already exists elsewhere and is tried and tested. Raising grain would be great if quantities could be adequate for very small scale brewing. Still, there should be a minimal dependence on any one product, and the production should move to where the resource is most abundant in any given year.

I’m painting a lot of blue sky. This is because the end result is more important than how the project gets there. The end result that this project aims for is not some kind of anachronistic pastoral dream or a retreat from society. The aim is sustainability – for sustainability’s sake. The aim is to have a place where basic needs are fulfilled - food, water, clothing, and shelter – and the occupants can take several different tacks to create value for their products and make money enough to cover the stuff they can’t make themselves. I’m not attempting to re-create an old way of life but – even if it never gets past the thought experiment phase – moving toward creating a lifestyle that’s more focussed on satisfying human needs without requiring recourse to working in an office. Consider this: if you own a car, you’re paying about $150 per month in gas, $200 per month in car payments and $50 in insurance. That’s $400 of your after-tax salary, which is about $500 real dollars. What if you took a $400 pay cut and walked to work? You’d be saving money, you wouldn’t have the sudden outlays that are occasionally necessary for cars (and the thousand natural shocks that tyres are heir to). What if we then thought that way about food?

What if we decided that, instead of enslaving ourselves so another person can become wealthy from our toil, we just unhitched ourselves from that treadmill and went happily away to a place where we provided for ourselves? That’s the idea. Not farming, not some form of country lordship… just taking care of your needs without getting beguiled by the dollar signs.

American Spring?

Here we have a few links to keep the Spring movement going.

Globalrevolution Live Cam

Facebook Group: Occupy Wall Street

Note: if you type "Occupy" followed by a space in the search bar in Facebook, you'l be presented a list of "Occupy [cityname]" pages where these little movements are springing up. I think the last number I heard was 5000+ for the NYC group and rising. This is being unreported in current mainstream media. Please repost wherever you can.

And Another Post on Big Ag...

Controlling Our Food
Highly recommended expose on Big Ag.

Just to Reinforce the last post...

Farming in Nature's Image

I finally finished Farming in Nature’s Image, an academic and dry bit of writing that describes, in intimate detail, the studies of the Land Institute to 1992. As an added bonus, it includes some fundamental ecological basics that I had read before, but the concepts were so well-explained that I had several epiphanies of understanding while reading. Perhaps my favourite was the nitrogen cycle, but there were several wonderfully-stated truisms that really brought home the understanding of ecology from a whole-systems perspective.  It is also yet another book that brings me back to a solitary idea that never seems to be far from any of my reading:

Farmers are getting economically gang raped, and they have been for decades. This is true because of five vicious cycles in the economy of farming: the Trade cycle, the Bank cycle, the Chemical cycle, the Seed cycle, and the Land cycle.

The Trade Cycle

Farmers compete globally for markets for their products, and therefore the concept of supply and demand is global. Even if there is a drought here, there may be a bumper crop there. The commoditization of crops means that crops will always be sold for the lowest possible price based on global supply. The fact that the farmer may have had a terrible crop this year doesn’t matter: when your market is the world, your competition is the world. The only way to secure a living is to make sure you have enough crop to sell (even if it’s at a low price). That requires industrial farming, which requires a heavy financial outlay.

The Bank Cycle

Most farmers therefore begin their productive lives hideously deep in debt. Combines, trucks, land, outbuildings, seed drills, silos… all these things cost money. So much money, in fact, that huge corporate megafarms are starting to be more the rule than the exception. Individual farmers are becoming incapable of buying into industrial farming. Those who do are deep in debt. That means that they must use every trick imaginable to secure a steady yield from their fields.

The Chemical Cycle

Pesticides, herbicides, and Fertilisers are able to push yields up – temporarily. Problematically, pesticides and herbicides kill (and fertilisers chase off) beneficial soil bacteria which would assist in the fixation of nitrogen, tilling and chemicals destroy mycorrhizae which would help in the uptake of minerals. Pesticides create pest resistance, and must be rotated or used in combination – or even replaced entirely. Greater applications of chemicals are required to control pest populations growing in chemical resistance, and in order to protect desired plants from being affected by chemical application, they mus be bred with a degree of chemical resistance themselves. The ongoing chemical warfare against pests and weeds is a self-perpetuating arms race that only the agro-chemical industry wins… but not by defeating pests. Big ag wins by keeping farmers in hock for newer, better chemicals.

The Seed Cycle

It also keeps them buying new seeds to make certain their crops have resistance to the chemicals being sprayed on them. These are the same companies introducing terminator genes, along with contracts that force farmers to buy seed year after year and not keep any of their own for replanting. New chemicals mean new crops with new genetically-engineered chemical resistances, and the seed cycle is pushed ever onward by the chemical cycle.

The Land Cycle

After paying the loan interest, the chemical bill, the seed bill, and selling this year’s crop for a pittance, the farmer has adequate take-home money to live a reasonable existence. He doesn’t have much money (if any) to invest, but for retirement, he has his land to fall back on. Many people have only their land to fall back on. Sadly, that means the land will be valuated after thirty or so productive years of soil erosion, chemical application, and the resultant salinization. There is no such thing as an industrial farmer’s field that does not lose fertility year on year due to intensive industrial farming methods. The only way to recover fertility in the industrial model is to lay a field fallow, which means it is taken out of production in order to rebuild its natural fertility, and this fertility is once again mined when cropping begins anew. There is a catch-22 here: the value of the agricultural land is based on its soil properties, its fertility. The farmer’s entire retirement therefore rests on the sale of something that he has, year on year, forcibly depreciated in value. What’s more, he will then propagate the cycle by selling his land to a new farmer who then begins his productive life in debt…

There’s a solution.

Sadly, famers are so trapped by the industrial farming cycle that they simply can’t break out of it. Once you’re paying off debt monthly, cashflow becomes more important than your future. Then again, I guess that’s the vicious circle we all seem to get caught up in. It’s about time to cash out.

Corrugated HDPE Pipe

I've been contacting the folks at algasolar for information on their bioponic project, and they are moving forward with building plans for both barrels and pipes and hybrid systems. I've sourced some Philippine HDPE pipes here and hopefully they will sell small quantities. I've sourced yabbies and tilapia through sulit.com, and here's hoping the building permit with the wife goes through. My selling point: mosquito-eating fish.

Yabbies? Yes, Yabbies.

I admit that I had written off Yabbies (Australian slang for crayfish) as an aquaponic beastie because of their typical lifecycle. Most crayfish require brackish water during part of their lifecycle - as well as a muddy shoreline - to reproduce, meaning that the breeding of such wee beasties would be more troublesome than it was worth on a small scale. And then I read about Redclaw Crayfish.

Crayfish are kind of cute, they fill in the detritivore section of the menagerie where tilapia are decidedly omnivorous, and algae and phytoplankton are the base of the food chain. There are some good yabby resources from the folks in Queensland, they are apparently reasonably suited for aquaculture, and they can clean up the stuff that falls to the bottom of a fish tank. In short, sounds like a winner.

Mmmmm. Too bad I don't eat em.

More more more!

Yabby feed.

A big PDF on Yabbiculture

Yabbies: do they make good neighbours?

New South Wales gets in on the Yabby thing.

Hay and Yabbies.

What is Debt?

Intriguing article that is part of the argument I made yesterday. A quick quote:

And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.

Thanks to the friend (you know who you are) who brought it to my attention.

London Riots

Occasionally, the ideas of many become synchronistic enough to manifest a Zeitgeist. A meme catches on like a wildfire; unanimity builds out of formlessness. This often happens within, but not across, demographic boundaries. Each demographic may take similar actions, but for entirely different reasons. From these manifold motivations uniform actions can come, but more often than not, manifold motivations manifest manifold machinations. In order for a meme to jump demographic boundaries, it must affect either the importance of a motivation (e.g. hunger normally trumps jewellery) or the utility of an action (e.g. employment can fulfill several human needs, whereas food can only fulfill a few – and only one or two of those things isn’t naughty). Our human capacity to “muddle on through” seems to be based on these fundamentals. We know, without need for deep thought, that food is more important than most things in life, but when it is plentiful, we turn our eyes to the next most pressing motivation. A hierarchy of needs (though it is likely not Maslow’s) is there, but we conveniently forget necessities when they are fulfilled in order to concentrate on the next need that needs fulfilling. That is the truth of it: human activities are so seldom exactly uniform because we are all acting on a different set of immediate circumstances. We have different contexts and different immediate needs. Fulfilling long-term needs, especially when the immediate opportunity cost is high, is not in our programming. Unanimity is, therefore, tough to manifest.

Unanimity is further obscured due to the fact we are products of learned behaviour. To a perpetual student, the solution to the lack of jobs is more training. To a junkie, the solution to coming down is another hit. To a gambler, the solution to going bust is just one more roll of the dice. Stepping out of our programmed patterns of behaviour is difficult, and uniform action requires many people step out of their comfort zone. That’s hard for humans to do even in a nurturing and accepting environment. I’ve met very few people who take to new experiences well. For many, it takes at least a moment of reflection, but more often it takes deep thought, rationalisation, and time to let the new reality seep in. Few people adapt immediately to the loss of a job. Few people can adapt readily to the loss of a loved one. It takes time to get used to the idea that you’ve graduated from grade school. Change is tough, and takes some coping to get right.

Then came the Arab Spring. We in the West persist in calling it a rising up of people to fight for freedom… but freedom is such an ephemeral and hard-to-quantify need. As a matter of fact, it isn’t really a need at all. Except in Libya, which seems to be an odd anomaly, the popular uprisings have been peaceful. The repression has not. Still, in Syria, peaceful protests persist even in the face of slaughter. Do these protests seek the overthrow of governments? Do they seek democracy and accountability? Perhaps. The immediate need that is being fulfilled for most people in these protests isn’t democracy though. Democracy isn’t a need. Accountability isn’t a need. Hope, however, is.

While hope itself may seem ephemeral and hard to quantify, I assure you, hope is a Boolean variable. You either have it, or you don’t. Here’s how to tell whether you do: if you think that there is a possibility your life could be better tomorrow than it is today, then you have hope. The martyr who lit himself on fire and ignited the whole Maghreb had lost all hope. Upon reflection, it appears that hopelessness resonated throughout the region. Where the middle class is rapidly being put into its place as a new underclass beneath the hyper-rich and the despotic, the hope that hard work will result in a more comfortable and happier future is wearing off. Mobility was promised to those who could do their time in post-secondary education and stick it out in entry-level for a few years, but that security had become more and more tenuous. In all of the Arab Spring regimes, protest was not permitted. Protest of any kind was considered seditious. Peaceful protest in and of itself was and is therefore notable. That protest is now sending a message to leaders in the Maghreb and in the Middle East: give us a better future or get out of our way. The dimmer the light at the end of the tunnel appears, the more realistic it seems to dig a new tunnel.

Similar dynamics are at work closer to home. The Obama election campaign tapped into America’s lack of hope with an unrelenting zeal. His progress, once elected, was steadily watched. The electorate waited with bated breath for when he was going to work his miracle… but his presidency has been marked by simple, though reasonably sensible, governance. He can’t crack the lobbies, nor can he undo partisanship, nor can he wrench himself easily out of military commitments made during the preceding presidency. The weight of history is heavy on his shoulders, and his ability to create more hope in America than there was before his election has likely fallen short of expectations. Whether this will affect his re-election is a moot point; his election itself proved that there is the beginning of a unanimity of purpose that is spreading throughout America. It is proof positive that the idea of hope, necessitating change, is a meme that has jumped demographic boundaries. Hopelessness moved the swing vote. If the vote doesn’t provide results for hopelessness… then what will hopelessness do next? Is it lost on people in Europe and North America that the middle class is becoming a new underclass for the hyper-rich? The same hopelessness of being crushed under the boot-heel of a despotic regime is dawning on the middle classes of the developed world, but it is no despot who is doing the crushing. The hopelessness comes from the hedge funds that annihilated their retirement savings. The investment houses that set their retirement savings up to be annihilated. The government that allows the same criminals who perpetrated this travesty to get away, scott-free, with their bonuses intact. There is a new sense of hopelessness rising in the developed world, and more and more, western governments are using familiar methods of curbing it.

We can see an indication in the London riots as to what may happen. I had predicted the Arab Spring would come to Europe and the US, but I admit I had not predicted it would turn violent, nor did I think England would be the first to taste it. Writer after writer have fallen over themselves attempting to distance these looters and rioters from the nobility of the Arab Spring, but such distinction is rhetorical, self-congratulatory, and wrong. The rioting in London is equally produced by a confluence of hopelessness. The methods used are equally an affront to the establishment. Whereas in Egypt, massive protests were seditious even if peaceful, in a democracy, peaceful protest is just par for the course. It was when the powers that be stopped listening to protesters that protest itself gave no feeling of hope. The rioters in London have spoken in a language that is heard by Whitehall as loud as the voices of the Arab Spring have been heard in palaces around the Middle East. These were not race riots, they do not conform to readily identifiable trait except this: they are a different kind of uprising. Cracking down on them will only reinforce the sense of hopelessness they manifest. Pouring water on a flame will normally douse it.

That is, of course, if it wasn't started with oil.

The Internets

After three weeks of being unable to use the internet (like an extended version of those dreams you had as a child where you couldn't scream), I finally got DSL installed. I won't tell you how excruciatingly excruciating it was just to get the company out here to get stuff installed... but rest assured, I have been run through the bureaucratic gauntlet.

It's done now. I think.

I can get back to posting stuff, which I will, very soon.

New Economy

An article in The Nation that covers some of the issues we should be wrestling with...

Most of the projects, ideas and research efforts have gained traction slowly and with little notice. But in the wake of the financial crisis, they have proliferated and earned a surprising amount of support—and not only among the usual suspects on the left. As the threat of a global climate crisis grows increasingly dire and the nation sinks deeper into an economic slump for which conventional wisdom offers no adequate remedies, more and more Americans are coming to realize that it is time to begin defining, demanding and organizing to build a new-economy movement.

Aquaponics becomes Bioponics

Just a quick note to say I’m back, and I’ve found the closest thing to the kind of aquaponic system I want here: http://bioponica.org/biogarden-and-incubator/

The system itself replaces the food input for biomass and other readily available stuff (like pee). I’m keen, and I have been corresponding with the company about getting plans.

This could be linked up to so many other integrated systems it isn’t even funny.

Many Apologies!

China has been blocking VPN services like mad and it's very difficult to get on to Blogger. Not that I don't want to, but I'm locked out for now. I hope to get back to regular blogging soon, or at latest, around July 20 when I am back in Canada.

Time to Abolish Mathematics

Dr. Gord Hamilton discusses why we should abolish mathematics in elementary education.

Gord is a game designer, Math proselytiser, and all-round genius. What do you think?

China's Water Woes

This year could be a bad year for Chinese crops due to drought, but other things get affected by a lack of water, namely: hydropower projects. Of which, China has the biggest in the world.

Total capacity at the Three Gorges hydropower project amounts to 18.2 gigawatts, the equivalent of about 15 third-generation nuclear reactors and more than a third of Hubei's total. It generated 84.4 billion kilowatt-hours of electricity in 2010, delivering power as far afield as Shanghai on the eastern coast.

On June 10, the water will be so low that they will have to stop discharges. Now, imagine pulling 15 nuclear reactors off the grid all at once in a country whose industry is already facing severe power shortages. A very telling quote from one of the linked articles states:

Power deficits in the 26 provinces and regions serviced by State Grid Corporation of China would total 30 gigawatts in the summer, even if coal supplies remained steady, water levels were normal and there were no persistent high temperatures.

So they are going to be short 30 gigawatts even if the Three Gorges Dam keeps running - which, as of June 10, it will not - and if coal supply keeps steady - which, if these reports are to be believed, is not the actual problem facing coal generation. Coal plants are running out of money in China because they are getting squeezed by electricity price controls on one hand and the rising price of coal on the other.

The drought is not a new story. Since mainstream media has the attention-span of a ferret, the story seems well nigh ancient. Yunnan, in the far south, has been affected. The Yangtze river basin, too, has been badly affected... but the antecedents go back for years:

China's north has been suffering from a lack of rain for nearly 15 years -- largely attributed to global warming -- while the south, especially the Yangtze river basin, has been prone to flooding during the annual summer rainy season.

So the Yangtze is experiencing extreme weather in line with global warming predictions, and this has been happening for 15 years. Now, the drying has gotten so extreme that even though the Yangtze flooded mid last year, it's now running far drier than before.

So what do we take away from this? A few things. The Chinese will need to buy rice and wheat this year, probably in record amounts. In order to do so, they may allow the yuan to appreciate in value. China may not be able to hold back the tide of inflation, a beast that has been licking its chops for years waiting to pounce on the Chinese consumer. Food prices will absolutely increase. If this is all combined with a fuel price shock, there will be dire problems in the Heavenly Kingdom. Not saying a fuel shortage will happen, but it could, given the volatile market. I'm not a betting man, but I do believe in Murphy's Law. Fuel could have a deep impact in this situation.

The further complicating factor regarding fuel is the transportation infrastructure. Transport monopolies/oligopolies in China are forcing a great deal of produce to remain in the fields because farmers spend all their profit on transportation and because produce prices have dropped. Transport companies can't make a profit margin unless they haul illegally, because road tolls are so steep. If a fuel price fluctuation jumped into that margin, trucking companies would make more money by closing shop. Farmers everywhere, it seems, are damned if they do and damned if they don't. An interesting aside: road tolls are, of course, provincial matters. Even though the central government wants to reduce them, the final decision rests in the provinces. China has had this same centre-versus-periphery problem for five thousand years. It's not going away just because of some measly nation-threatening drought... it's a tradition!

All my Chinese friends: if you can take a vacation somewhere with wheat, I highly recommend you do so for the rest of the summer. As a matter of fact, you should take an Alberta Break. By July, the Yuan will probably have been upgraded in value so you'll probably be able to buy a few extra steaks for your money before you head home for Autumn. Take it easy guys, we don't know exactly what the government is going to do to fight the inflation, but knowing China, it will be massive and centralised. I imagine they may just try to buy the Ukraine.

I'm only half joking.

More on Water

The New Scientist has something to say about water and national policy:

Take Saudi Arabia, for instance. Between 2004 and 2009, it leased 376,000 hectares of land in Sudan to grow wheat and rice. At the same time the country cut back on wheat production on home soil, which is irrigated with water from aquifers that are no longer replenished - a finite resource.

Meanwhile, firms from China and India have leased hundreds of thousands of hectares of farmland in Ethiopia. Both China and India have well-developed irrigation systems, but Woodhouse says their further development - moving water from the water-rich south to northern China, for instance - is likely to be more costly than leasing land in Africa, making the land-grab a tempting option.

The article is a good, short read, but underscores my contention that water and food are strategic resources. This summer, let's see how the Chinese wheat crop fares...

True Cost Accounting and Utilities

Let's say you work at a job where you are paid $24,000 a year to make widgets.

The problem is that your commute to work costs too much money. You report to your supervisor and say "Hey Steve, I need some kind of help to pay for my commute costs. I spend $400 bucks on gas each month and it's eating into my salary something awful!"

Steve replies, "Yeah, a lot of other people have been noticing that, so the company has decided to open up a staff gas station. If you buy gas at the station, then it will only cost you $200 per month, and you should have more of your paycheque left over at the end of the month."

"Great!" you say, and walk happily out of Steve's office.

Sure enough, the company has built a brand new gas station right in the company parking lot. It's not exactly under the umbrella of your widget factory, so it pays rent to the widget factory for the space in the parking lot it takes up, and buys its gas by itself. It's a real honest to goodness gas station... it just happens to charge less for gas. You fill up your tank, and sure enough, instead of costing $40 bucks per tank, it costs $20. You're pleased with yourself as you walk into the office and give Steve a high-five. Life is good.

Your paycheque comes around, and you notice a problem. Instead of being $2000, it's $1700. There's some entry on there that says "Energy costs" and they've docked you a full $300 bucks for it. You storm into Steve's office to ask him what gives. Steve, who talks too much and doesn't know how to lie (it's why he's still your supervisor and not Vice President), tells you: "well, because the company is offering these rebates on fuel, we had to recoup costs somehow. It's about sharing the burden."

"But you docked me $300 bucks! I already paid $200 for gas, that's $500 total where before I used to pay $400!"

"Well, yeah," continued Steve, "it's cost sharing, so some people drive more than you and some dive less, but we all have to share the load equally, right? I mean, teamwork and all!"

You cast a sideways look at John, who drives his Humvee three hundred kilometres every day to the office and back. He shrinks under your gaze. Your blood starts to boil. You realise you're paying for his gas. But wait... not everyone has that kind of commute. The average amount of gas has to be about the same as you. There's no way that EVERYONE in the office uses that much fuel. You challenge Steve on his murky accounting.

"No, no, no..." says Steve, "that's not the total cost of the deduction. You see, in order to allow the gas company to make money, we decided to waive its rental fee for the lot where it's sitting. Since the company has to recover that cost somehow or another, we added that rental fee to the deduction."

By now, you're mad. "But that's just rent! There's no WAY that would come up to three hundred bucks!"

Steve doesn't break pace, explaining calmly and exasperatingly patiently: "well, there is more to it than that. You see, the gas is hard to control. In order to get the pumps here, we had to cut corners on some of our valves and switches. The truth is, the system is really hard to stop pumping, and there's very little capacity to store the actual gas itself onsite. The problem is that even if there isn't a car at the pump, the pump has to keep pumping for a little while because it has to be shut off at a completely different location. We lose about 9-10% of the gas that way... so we have to pay for that, too..."

Steam is gradually billowing out your ears.

"...and then there is the matter of upkeep of the equipment, payment for the gas itself, and the central administration of the program. We all have to work together to make the savings happen."

Now... let's stop this madness for a moment. What I was talking about wasn't actually gas... it's electricity. It's generated by central power stations and transmitted over wires to get to your house. In the process of transmission, there are current losses due to inefficiency of the system and the fact that some of the electricity has to be discharged. In the US in 2007, the total system loss was about 9%. Also, the system is administered (in the case of Alberta, for example) by a government-run agency: AESO. AESO has to pay for the construction of new electrical capacity in the form of grid improvements. The grid, after all, is a "public good" they say.

Who pays for AESO? Well, one way or another, the end user does. Either we're taxed to pay for it (Alberta spent $500+ million on utilities in 2009) or we're charged for it through end user fees. One way or another, we will pay - it just comes out of a different budget line. Even if you were completely off-grid, your Alberta provincial taxes and levies will go to pay for the grid. Even if you use extremely energy-efficient appliances, you still pay for the people who don't. There's also the question of the Alberta Utilities Commission, which is the administrative arm of the utilities issue.

So let's think about this. Per year, each household in Canada spent an average of $2204 in 2009 for utilities. That's not a small chunk of change. Over the life of, say, a photovoltaic panel (25 years plus), that would be $55100... not counting increases in utility prices. Also, a portion of your tax goes to pay for utilities without you being able to say anything about it... so if we were talking real cost of utilities, this amount of money would be higher.

In Alberta, your average detached house uses 7453 kWh electricity and 140 GJ natural gas.

A GigaJoule is about 278 kWh electricity. 140x278=38920.

If you had to replace all that heating and electricity with something like photvoltaics, that would be nigh impossible. A 30,000 kWh system costs about $150,000, and is huge in size. That kind of expenditure is just plain stupid. But what about using energy efficiency combined with local generation? For example, the PassivHaus specification states that a house cannot use more than 15kWh/m.sq. of heating per year. Since there are over 25000 houses in the world that meet this specification, it's possible. That's a grand total of 2787 kWh/year in heat for a 2000sq.ft. house. Calgary houses do not need air conditioners.

If we add the typical energy use (7453kWh) plus the heating (2787kWh) all of a sudden we have a much more manageable 10240kWh for a regular dwelling. That's doable within the budget for less than $30k in PV alone.Mix it up a bit with wind (ample in Alberta) and you could really pump out the juice for that price and make money back. Add 14% to the price of the house for PassivHaus certification, and you're off-grid. You can even save more energy, because with energy-saving appliances and the proper systems, you can be using far less electricity than a normal detached dwelling does. Don't forget to calculate in your $4500 rebate for energy efficiency. Plus you never suffer the cost of a price increase in fossil fuels again (or suffer the cost of simple inflation on energy prices).

Right now, in-situ generation seems to be only a break-even scenario, but the reduction in costs over all is far greater than the sum of its parts. That's because, like in our stupid gas example above, the actual cost of the grid, utility administration, and inefficiencies, are actually passed on in your tax dollar, not in your energy bill. Imagine Alberta no longer having to repair power lines? In Calgary, where the lines are underground, imagine the avoidance of repair costs... if you've ever seen a power line repair in Calgary, you know: they have to dig in under the asphalt to get at the wires and then patch the whole thing up again. It's labour intensive. What if we simply didn't have to pay for the grid anymore? It's possible. It costs less over all than the grid does, and it would actually create jobs for installers, repairmen, and retrofitters. I know that on the face of it the math just comes out about even out between the two scenarios over an amortisation of 25 years... but that's only because nobody counts the hidden costs that come at us in our tax bill rather than our electricity bill. With real cost accounting, and a full reckoning of system costs on your electricity bill, you'd be saving FAR more money with a home system. Now, just to make the government include all the costs in the bill rather than in hard-to-find nooks and crannies in your tax bill.