Archive for the ‘Financial melt-down’ Category

Myth of Perpetual Growth is killing America

Monday, June 25th, 2012

– This article is from no less than the Wall Street Journal’s Market Watch.  

– Amazing, isn’t it, that any eight year old could tell you what the problem is with assuming that things can get bigger and bigger when they only have a fixed amount of space to grow in.  

– But, it has taken the mavens of Wall Street until now to smell the coffee.

– Dennis

– – – – – – – – – – – – – – –

Commentary: Everything you know about economics is wrong

SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, everything you know about economics is wrong. Dead wrong. Everything. The conclusions of economists are based on a fiction that distorts everything else. As a result economics is as real as one of the summer blockbusters like “Battleship,” “The Avenger” or “Prometheus.”

The difference is that the economic profession is a genuine threat, not entertainment. Economics dogma is on track to destroy the world with a misleading ideology.

Why? Because all economics is based on the absurd Myth of Perpetual Growth. Yes, all theories and business plans based on growth are mythological.

Economists are master illusionists who rely on a set of fictions, fantasies and forecasts that emanate from a core magical mantra of Perpetual Growth that goes untested year after year.

And yet it’s used to manipulate the public into a set of policies and decisions that are leading the American and the world economy down a path of unsustainable globalization and GDP growth assumptions that will self-destruct the planet.

– More…

NZ Asset Sales Policy Began On Wall Street

Saturday, June 23rd, 2012

 

– I love my new country but I do believe that New Zealanders can be naive.   Perhaps it is because of their long isolation.   But the stuff John Key, our current conservative PM, is trying to implement here is the same stuff that the Chicago Boys have tried around the world with repeatedly disastrous consequences.   

– And I’m reading that it will likely pass 61 to 60.   Isn’t it utterly amazing that not one of those 61 people will change their vote when the majority of New Zealanders clearly do NOT want asset sales.   One can only hope that the voters remember the transgressions of the 61 later at the polls.

– Read this analysis – it will curl your hair.

– Dennis

– – – – – – – – – – – – – – –

The Key government’s asset sales agenda is derived from the Washington Consensus – a set of Wall Street-driven policies that were pronounced dead after the global financial meltdown in 2008.[1] The New Zealand government, however, remains loyal to this failed ideology.

Why? The obvious link is Prime Minister John Key – a former investment banker for Merrill Lynch, the world’s largest brokerage failure.

In most other countries, state asset sales have become a last resort on the road to poverty and ruin, but for the Key government, asset sales are “business as usual.” [2]

So what’s really behind asset sales?
All wealth extraction is facilitated by international and national economic policies, coupled with the private banking system, which together deliver benefits to the financial elite by transferring wealth upward within and between nations.

 The state asset sales policy is just one of several reforms under the Washington Consensus, a set of monetary and economic policies designed to allow: the privatization of public resources and utilities, the removal of barriers to foreign investment and ownership, the sale of state assets, trade liberalization, deregulation, the lowering of business taxes, and cuts to public services.[3]

These “free market” reforms are collectively termed neoliberalism.[4] Simply, they provide big business with improved legal access to markets and assets worldwide.

The Key government’s asset sales agenda fits obediently into this ideology ? the same ideology that ushered in financial deregulation, record bank bailouts, and the Second Great Depression.[5]

Governments in New Zealand have succumbed to the neoliberal movement since 1987, when the first round of asset sales began, as a Reagan-Thatcher-Douglas experiment.

Under these policies since the 1980s, New Zealanders have experienced almost the greatest increase in income inequality in the OECD.[6]

The deep roots of neoliberalism 
Modern liberalism dates back to the end of World War II, when the Bretton Woods agreement formed the IMF and the World Bank, establishing the US dollar as a de facto world reserve currency, and installing policies aimed at stabilizing the world monetary system. Free private capital flows between countries were restricted because it was believed that international financiers had caused the Great Depression.[7]

For the next three decades, Western governments were characterized by liberal, socially democratic policies that sought to safeguard national economies by keeping trade in balance. The world achieved exceptional economic prosperity during this era known as “The Glorious Thirty” years.[8]

But by the 1970s, corporations began to exhaust the spending power of the “consumer society” as total debt increased under the mathematical bias of fractional reserve banking, exacerbated by the Vietnam War.

Policymakers were faced with a choice between more intervention to protect local economies and social justice, or a more liberal business agenda – neo (new) liberalism. Wall Street interests mobilized to advance a host of “business first” policies that became the Washington Consensus, and the euphoria for deregulation ultimately placed Wall Street beyond the reach of democratic public accountability.

Rising poverty and debt for the majority
Multinational corporations proliferated and expanded, outsourcing cheap foreign labour, extracting oil and other mineral wealth, leveraging weaker economies and favourable exchange rates to monopolise global markets, often assisted by IMF and World Bank development loans.

Globalization is defended as a strategy to boost Gross National Product (GDP) and therefore investment in jobs. But in reality, free trade strengthens capital bargaining relative to labour, so that people who derive most of their income from returns on capital (the rich) gain, while people who earn most of their income from labour (the majority) lose.[9]

The outcomes of neoliberal policies have been similar everywhere in the world. Deregulated markets have benefitted the local educated elite who work with the corporations, while the majority of people have experienced a decline in living standards, with a permanent widening of the gap between the rich and poor.[10] [11]

Neoliberalism has been catastrophic. It has accelerated sovereign debt, collapsed the financial sector, and it has caused the highest ever level of global unemployment, described recently by the International Labour Organization as a worldwide crisis.[12]

Meanwhile, the corporations and the international banking aristocracy have amassed enormous unproductive wealth via their trickle-up incomes.

“Free trade” unlocks foreign assets
The post-World War II version of free trade promoted “fair trade” and often achieved a healthy balance of payments. But the Washington Consensus threw caution to the wind, allowing big business to dominate government policy, making deficits routine.

Free trade agreements, such as the North American Free Trade Agreement (NAFTA), have virtually destroyed US-based manufacturing, leaving Main Street America with a service sector economy.[13]

The Trans Pacific Partnership Agreement (TPPA) signals yet another secretive free trade deal intended to free-up access to foreign assets. The TPPA could render New Zealand government decisions subject to rulings by international tribunals, in the defence of investors from the negotiating countries of Singapore, Chile, Brunei, Australia, Peru, Vietnam and the United States. This is how “free trade” agreements pave the way for the extraction of wealth ? by the erosion of economic sovereignty.

The Key government’s privatisation agenda is well advanced, with various private public partnerships (PPPs) already being developed. This neoliberal doctrine includes the privatization of prisons, schools, water resources, and all infrastructure.

Ultimately on offer is $5-20 trillion[14] in Crown mineral wealth, including gold, coal, lignite, phosphate, iron sand, oil, natural gas, and more, all under the fourth lowest royalty and taxation regime in the world[15] – a paltry 1% of the production value.[16]

“Mixed ownership model” is destined to fail
The Key government plans to sell 49% of four state owned energy companies – Mighty River Power, Meridian, Genesis, and Solid Energy, and a further 23% of Air New Zealand. It is claimed that $5–7 billion can be “freed up” to reduce debt.[17]

What really betrays these asset sales as an ideologically-based policy is the maths. Financial analyst Brent Sheather has calculated that the assets are earning a higher income than the cost of borrowing.

Currently, the cost of borrowing is 4% for ten years, so the cost of $6 billion would be $240 million. The forecast dividends of the four SOE energy companies average $449 million over the next five years, 49% of which is $220 million. Add $20 million for selling 23% of Air New Zealand and the lost dividends average $240 million a year.[18]

Now, add the sales related costs estimated at 3% or $180 million, plus the expected improved performance from substantial recent capital investment, and there is no way for New Zealand taxpayers to come out ahead.

As the Green’s co-leader Russel Norman has said:
“We have seen this before. Like our energy SOEs, Telecom had invested significant amounts of capital in building a modern telecommunications network in the years before privatisation. In the years following Telecom’s privatisation, dividend streams for its new private owners doubled, then tripled within six years. History now seems to be repeating itself with our energy SOEs. National has allowed the taxpayer to build up the asset, only to then on-sell it to the benefit of others.” [19]

The initial public offerings (IPOs) will be snapped up and passed on to larger offshore players, who with only a combined holding of 25% will enjoy foreign-owned status under the Overseas Investment Act (2005),[20] with ample influence at 49% to sway policy. So expect higher power prices.

Over the longer term, asset inflation will provide a mega windfall for shareholders.

In 1999, the NZ Herald reported that: ‘Over the past 12 years 40 state-owned commercial assets have been sold, realising $19.1 billion. As at August 31, 1999 these assets had an estimated value of $35.7 billion, $16.6 billion above their original sale price. … The privatisation programme has been a huge windfall for overseas investors. Just over 79 per cent, or $13.1 billion, of the increase in value has gone to offshore interests.’ [21] [22]

No political party can beat debt under our monetary system
New Zealand’s government debt is presently modest compared to private debt. In the short-term, tax reforms that enable a fairer redistribution of income would slow the deepening tide of all New Zealand debt ? if only the Key government would allow this.

But in our post-peak oil world, without cheap oil to fuel high productivity, sovereign debt in New Zealand ? as elsewhere, will inevitably force austerity measures consistent with the Washington Consensus. The past failure of these policies will be ignored, because ultimately there is simply no other option under the debt-based system.

Under fractional reserve banking the rate of growth of debt must be higher than the rate of growth of income to avoid collapse. In aggregate, debt grows exponentially until it cannot be repaid. [23] [24]The world is literally attempting to engage productive overdrive in a hopeless struggle to satisfy unproductive debt servicing.

Almost half of the average earned income is already siphoned off via direct or indirect hidden interest, and in government debt taxes.[25] In sum, almost half of humanity’s productive effort is to serve useless debt, instead of solve the world’s problems.

The pressure to leverage fiscal advantage from assets, of all kinds, comes directly from the ruling power – the international banking elite. No political party can entirely avoid asset extraction under the fractional reserve system. Governments can adjust the debt hand-brake, but the foreign bankers are in the driving seat.

The world is sliding toward zero and eventually negative growth. Sovereign debt can only speed up. New Zealand will join the economic train-wreck down the track.

The only escape route is a public medium of exchange that is debt-free.[26] Every sovereign nation can issue its own currency without debt or interest, but nearly all governments align with the international bankers to extort the “common wealth.”

The Reserve Bank of New Zealand issues less than 2% of the nation’s money debt-free,[27] serving the global central banking cartel, not ordinary Kiwis.

Selling public assets amounts to economic suicide
The European Central Bank (ECB) is clearly demonstrating how economic sovereignty can be wrested from countries through debt peonage.

The world on its present course cannot avoid fuel shortages, debt-deflation, fiscal austerity, increasing poverty, political and environmental conflicts over energy and essential commodities, unprecedented global protests against Wall Street financial injustice, political and legal challenges for full reserve monetary reform, climate and humanitarian disasters, further revolution and war.

We are facing the perfect economic storm, in which sacrificing long-term high performing income would guarantee poverty for the majority. Selling public assets amounts to economic suicide.

Most New Zealanders don’t realize that their country, and their future, is being sold.

________________________________________

[1] Anthony Painter. (2009, April 10). The Washington Consensus Is Dead. The Guardian., Kings Place, 90 York Way, London N1 9GU, UK.
http://www.guardian.co.uk/commentisfree/cifamerica/2009/apr/09/obama-g20-nato-foreign-policy

[2] Mixed Ownership Monitoring Unit(2011, December 15). Mixed Owner Model For Crown Companies. Crown Ownership Monitoring Unit , 1 The Terrace, Wellington 6011, New Zealand.
http://www.comu.govt.nz/publications/information-releases/mixed-ownership-model/

[3] John Williamson. (2004, September 24-25). A Short History of the Washington Consensus.
http://www.iie.com/publications/papers/williamson0904-2.pdf

[4] Neoliberalism. Wikipedia.
http://en.wikipedia.org/wiki/Neoliberalism

[5] Steve Keen. (2011, December 3). We’re Already In The Second Great Depression, We Just Don’t Realize It Yet.
http://articles.businessinsider.com/2011-12-03/markets/30471134_1_second-great-depression-hope-new-jobs

[6] OCED. (2011, December 5). Governments must tackle record gap between rich and poor, says OECD.
http://www.oecd.org/document/40/0,3746,en_21571361_44315115_49166760_1_1_1_1,00.html
‘The gap between rich and poor in OECD countries has reached its highest level for over 30 years, and governments must act quickly to tackle inequality, according to a new OECD report. “Divided We Stand: Why Inequality Keeps Rising” finds that the average income of the richest 10% is now about nine times that of the poorest 10 % across the OECD.’

[7] Jan A. Kregal. (2003, April). The Perils of Globalization: Structural, Cyclical and Systemic Causes of Unemployment
http://www.cfeps.org/pubs/sp-pdf/SP13-Jan.pdf
‘In the view of US Secretary of the Treasury Morganthau the creation of the Bretton Woods institutions was to keep the control of the international financial system out of the hands of international financiers who were considered to have caused the Great Depression. Keynes agreed that free private international capital flows were incompatible with a stable international financial system and this similarity of views produced a post-war system in which it was presumed that there would be virtually no private international capital flows.’

[8] Embedded Liberalism. The Glorious Thirty years. Wikipedia.
http://en.wikipedia.org/wiki/Neoliberalism
‘The period of government interventionism in the 1950s and 1960s was characterized by exceptional economic prosperity, as economic growth was generally high, was contained, and economic distribution was comparatively equalized. This era is known as les Trente Glorieuses (“The Glorious Thirty [years]”) or “Golden Age”, a reference to many countries having experienced particularly high levels of prosperity between (roughly) World War II and 1973.’

[9] Ian Fletcher. (2011). Free Trade Doesn’t Work, Why the Theory of Comparative Advantage is Wrong.
http://www.worldfinancialreview.com/?p=866
‘As a result, people who draw most of their income from returns on capital (the rich) gain, while people who get most of their income from labor (the rest) lose.’

[10] Richard C. Cook. (2007, June 2). Monetary Causes of the Immigration Crisis. The “Washington Consensus” has wrecked their economies. Global Research.
http://www.globalresearch.ca/PrintArticle.php?articleId=5862
‘The conditions also include a shift of indigenous economies to the production of export commodities, away from local self-sustaining agriculture and small business. This typically results in a mass exodus from rural areas to urban slums and causes poverty, unemployment, and crime. These financial programs benefit the local educated elite who work with the Western agencies and global corporations but cause a deep and permanent stratification among social classes.’

[11] OCED. (2011, December 5). Governments must tackle record gap between rich and poor, says OECD.
http://www.oecd.org/document/40/0,3746,en_21571361_44315115_49166760_1_1_1_1,00.html

[12] ILO. (2011). Global Employment Trends 2011. International Labour Office, CH-1211 Geneva 22, Switzerland.
http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_150440.pdf

[13] Robert E. Scott. (2011, May 3). Heading South: US-Mexico Trade And Job Displacement After NAFTA. Economic Policy Institute, 1333 H Street NW, Suite 300 East Tower, Washington DC 20005, USA, www epi.org.
http://www.epi.org/page/-/BriefingPaper308.pdf

[14] Dr. Don Elder. (2010, September 21). CEO, Solid Energy. Day 2 presentation at the 2010 New Zealand Petroleum Conference, Skycity Convention Centre, Auckland, during which Dr Elder has been quoted as stating that New Zealand has NZ$ 5-20 trillion in Crown minerals.
http://www.nzpam.govt.nz/cms/pdf-library/petroleum-conferences-1/2010-nzpc-speaker-presentations/Don%20Elder.pdf
[15] IPENZ, authorship withheld. (2011, December). Realizing Our Hidden Treasure: Responsible Mineral and Petroleum Extraction. The Institution of Professional Engineers New Zealand Inc., PO Box 12 241, Wellington 6144, New Zealand.
http://www.ipenz.org.nz/ipenz/media_comm/documents/IPENZMineralsandPetroleumFinalDec2011.pdf

[16] Taxation & Royalties for Mining Companies. New Zealand Mineral Industry Association. PO Box 24315, Wellington 6142, New Zealand.
http://www.minerals.co.nz/html/main_topics/overview/taxation_royalties.html
‘The Ministry of Commerce has recently imposed a royalty on minerals owned by the Crown. The royalty is the greater of 1% ad valorem (value of production) or 5% of accounting profits.’

[17] Mixed Ownership Monitoring Unit(2011, December 15). Mixed Owner Model For Crown Companies. Crown Ownership Monitoring Unit,1 The Terrace, Wellington 6011, New Zealand.
http://www.comu.govt.nz/publications/information-releases/mixed-ownership-model/

[18] Gordon Campbell. (2011, November 24). Gordon Campbell: financial analysts jump ship on asset sales.
http://www.scoop.co.nz/stories/HL1111/S00215/gordon-campbell-financial-analysts-jump-ship-on-asset-sales.htm

[19] Dr Russel Norman. (2011, November 23). National Set To Repeat Telecom Privatisation Mistake.
http://www.voxy.co.nz/politics/national-set-repeat-telecom-privatisation-mistake/5/108571

[20] Overseas Investment Act (2005). Section 7 (1). ‘…or they are 25% (or more) owned or controlled by an overseas person or persons.’ Parliamentary Counsel Office., PO Box 18070, Wellington 6160, New Zealand.
http://www.legislation.govt.nz/act/public/2005/0082/latest/DLM356881.html

[21] Bryan Gaynor, NZ Herald. (1999, October 2). Analysis: Filling Foreigner’s Pockets. The New Zealand Herald, PO Box 32, Auckland, New Zealand.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=15142

[22] The Treasury. (1999, September 30). Income from State Asset Sales. Historical information on the sale price and background to New Zealand Government asset sales as at 30 September 1999. The Treasury, Level 5 (Reception), 1 The Terrace, Wellington 6011, NEW ZEALAND.
http://www.treasury.govt.nz/government/assets/saleshistory

[23] Michael Hudson. (2004, January 24). The Mathematical Economics of Compound Rates of Interest: A Four-Thousand Year Overview Part I.
http://michael-hudson.com/2004/01/the-mathematical-economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-i/
‘Orthodox academic models rarely acknowledge the problems posed by the exponential growth of debt overhead. Such models typically make government policies appear unnecessary to cope with this problem, by focusing on the kind of world that might exist if the financial overgrowth of savings and debts did not double every decade or so, having multiplied again and again over the past century. It thus has been left mainly to non-mainstream writers to address the structural problems created by an accumulation of interest-bearing debt.’

[24] Debt Grows Exponentially. (2010, October 30). The Elephant In The Room: Debt Grows Exponentially, While Economies Only Grow In An S-Curve. Washington’s Blog.
The Elephant In The Room: Debt Grows Exponentially, While Economies Only Grow In An S-Curve
‘Hudson says that – in every country and throughout history – debt always grows exponentially, while the economy always grows as an S-curve. Moreover, Hudson says that the ancient Sumerians and Babylonians knew that debts had to be periodically forgiven, because the amount of debts will always surpass the size of the real economy. … One thing is for sure. The exponential growth of debt is a structural problem which – unless directly addressed – will swallow all economies which try to ignore it.’

[25] Margrit Kennedy. (1995). Interest and Inflation Free Money. Creating an exchange medium that works for everybody and protects the earth. Published by Seva International, ISBN 0-9643025-0-0.
http://kennedy-bibliothek.info/data/bibo/media/GeldbuchEnglisch.pdf
‘On an average we pay about 50% capital costs in the prices of our goods and services. Therefore, if we could abolish interest and replace it with another mechanism to keep money in circulation, most of us could either be twice as rich or work half of the time to keep the same standard of living we have now.’ (Other estimates are 40-45%.)

[26] Positive Money NZ. A campaign for Full Reserve Banking, based on similar campaigns in the UK and USA.
http://www.positivemoney.org.nz/

[27] Deirdre Kent. (2011, November). Money For Nothing. New Zealand Investor.
http://most0010122.e-xpert.co.nz/includes/download.aspx?ID=118572

 

– To the original article…

– Research thanks to Kierin  M.

 

We’ve been brainwashed

Friday, June 15th, 2012

It’s no accident that Americans widely underestimate inequality. The rich prefer it that way.

How, in a democracy supposedly based on one person one vote, could the 1 percent could have been so victorious in shaping policies in its interests? It is part of a process of disempowerment, disillusionment, and disenfranchisement that produces low voter turnout, a system in which electoral success requires heavy investments, and in which those with money have made political investments that have reaped large rewards — often greater than the returns they have reaped on their other investments.

There is another way for moneyed interests to get what they want out of government: convince the 99 percent that they have shared interests. This strategy requires an impressive sleight of hand; in many respects the interests of the 1 percent and the 99 percent differ markedly.

The fact that the 1 percent has so successfully shaped public perception testifies to the malleability of beliefs. When others engage in it, we call it “brainwashing” and “propaganda.” We look askance at these attempts to shape public views, because they are often seen as unbalanced and manipulative, without realizing that there is something akin going on in democracies, too. What is different today is that we have far greater understanding of how to shape perceptions and beliefs — thanks to the advances in research in the social sciences.

It is clear that many, if not most, Americans possess a limited understanding of the nature of the inequality in our society: They believe that there is less inequality than there is, they underestimate its adverse economic effects, they underestimate the ability of government to do anything about it, and they overestimate the costs of taking action. They even fail to understand what the government is doing — many who value highly government programs like Medicare don’t realize that they are in the public sector.

– More …  

 

Stigmatize the Money

Wednesday, May 30th, 2012

– Good article over at Truthout on the subject of how big money corrupts American politics and what one alternative to the system might look like.

– Dennis

– To the article…

Top (American) CEO pay equals 3,489 years for typical worker

Sunday, May 27th, 2012

WASHINGTON — David Simon of Simon Property received a pay package worth more than $137 million for last year, and the typical CEO took home $9.6 million, according to an analysis by The Associated Press.

Here are some ways to think about just how much money those salaries represent.

Simon’s $137 million is almost entirely in stock awards that could eventually be worth $132 million. The company said it wanted to make sure Simon wasn’t lured to another company.

HOW LONG IT TAKES OTHERS TO MAKE THAT MUCH: A minimum wage worker — paid $7.25 per hour, as some workers at Simon malls are — would have to work one month shy of 9,096 years to make what Simon made last year. A person making the national median salary, $39,312 by AP calculations, would have to work 3,489 years.

BY THE HOUR: Assuming Simon worked a 60-hour week, his pay was $43,963.64 per hour, or $732.73 per minute. To put that in perspective, the minimum-wage worker would have to labor for nearly three years to make what Simon earns in an hour. The average U.S. worker makes slightly less in one year than Simon makes in an hour.

COMPARED WITH AMERICA’S CEO: Simon makes about 342 times the $400,000 annual salary of President Barack Obama. In fact, if you add the salaries of Obama, Vice President Joe Biden, the Cabinet, the Supreme Court justices, all the members of the Senate and House of Representatives and all 50 governors, it is less than $110 million, so Simon makes well more than government’s top 600 leaders. In the past 100 years, U.S. taxpayers have paid a total of $80.6 million, adjusted for inflation, to presidents from Woodrow Wilson to Obama.

The median CEO salary of $9.587 million:

HOW LONG IT TAKES OTHERS TO MAKE THAT MUCH: A minimum wage worker would have to work 636 years to make that much. A person making the national average salary would have to work 244 years to make the median CEO salary.

BY THE HOUR: If you assume the CEO works a 60-hour week, the pay comes to $3,072.84 per hour, or $51.21 per minute. To put that in perspective, the minimum wage worker would have to labor more than 10 weeks to make what the median CEO earns in an hour. It would take the average U.S. worker nearly a month to make what the average CEO makes in an hour.

COMPARED WITH AMERICA’S CEO: The CEO who made the median salary took in 12 times the total $789,674 in gross income that President Obama reported last year. But it is less than half the $20.9 million in income that presumptive Republican nominee Mitt Romney reported in his tax filing.

– To the original article…

 

Why increasing corporate control of our world is bad

Tuesday, May 8th, 2012

“According to the competitive exclusion principle, if a reinforcing feedback loop rewards the winner of a competition with the means to win further competitions, the result will be the elimination of all but a few competitors.”

For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath.  – Mark 4:25

From Thinking in Systems – a primer by Donella H. Meadows

Next Great Depression? MIT study predicting ‘global economic collapse’ by 2030 still on track

Sunday, April 29th, 2012

– Frankly, I think we’ll be damned lucky to get that far.

– Dennis

– – – – – – – – – – – – – – – – – – – – –

A renowned Australian research scientist says a study from researchers at MIT claiming the world could suffer from a “global economic collapse” and “precipitous population decline” if people continue to consume the world’s resources at the current pace is still on track, nearly 40 years after it was first produced.

The Smithsonian Magazine writes that Australian physicist Graham Turner says “the world is on track for disaster” and that current research from Turner coincides with a famous, and in some quarters, infamous, academic report from 1972 entitled, “The Limits to Growth.” Turner’s research is not affiliated with MIT or The Club for Rome.

Produced for a group called The Club of Rome, the study’s researchers created a computing model to forecast different scenarios based on the current models of population growth and global resource consumption. The study also took into account different levels of agricultural productivity, birth control and environmental protection efforts. Twelve million copies of the report were produced and distributed in 37 different languages.

Most of the computer scenarios found population and economic growth continuing at a steady rate until about 2030. But without “drastic measures for environmental protection,” the scenarios predict the likelihood of a population and economic crash.

However, the study said “unlimited economic growth” is still possible if world governments enact policies and invest in green technologies that help limit the expansion of our ecological footprint.

The Smithsonian notes that several experts strongly objected to “The Limit of Growth’s” findings, including the late Yale economist Henry Wallich, who for 12 years served as a governor of the Federal Research Board and was its chief international economics expert. At the time, Wallich said attempting to regulate economic growth would be equal to “consigning billions to permanent poverty.”

Turner says that perhaps the most startling find from the study is that the results of the computer scenarios were nearly identical to those predicted in similar computer scenarios used as the basis for “The Limits to Growth.”

“There is a very clear warning bell being rung here,” Turner said. “We are not on a sustainable trajectory.”

Correction: This post has been edited to reflect that MIT has not updated its research from the original 1972 study.

– to the original…

 

American Health Insurance … revisited

Wednesday, April 18th, 2012

– We’ve been here before, readers.   But I feel like I need to revisit the subject again for the edification and amazement of my U.S. readers.

– I just bought New Zealand Health Insurance to cover myself when I’m in the USA for 78 days from July 8th to September 23rd this year.

– Cost in New Zealand dollars was $386.55 which is currently about $302.00 in U.S. dollars.

– And this policy is much more than just simple healthcare coverage.   It’s also travel insurance for lost baggage, the consequences of cancelled flights and other things.  

– If I was to get seriously sick in the USA (a potentially very expensive thing to do), the New Zealand insurance folks will fly me home to New Zealand on their dime and I’ll be treated here.

– When I was still in the U.S., married and running a business, we paid each about $425.00 a month for our medical coverage.   There was a $2500 deductible on the policy so we had to spend that amount each up front before we ever got a dime back from the insurance company for medical expenses.   And, even then, when they did begin to pay, it was only 80% of our costs.

– So, in the U.S., I had to play $20.82 per day (see Note 1) to get 80% coverage and with this New Zealand policy, which is covering me on the other side of the planet, I’m paying $3.87 per day (see Note 2) for 100% coverage.   Interesting, eh?

– Some months ago, I had a small heart attack here in New Zealand.   You can read about it here:    

– The long and the short of it is I went to an emergency clinic, I had a ride in an ambulance, I spent two nights in the hospital, I had an angioplasty and I had a stent inserted into one of my coronary arteries.   My total cost was less than $200 dollars ($164.00 U.S.).

– Many in the U.S. have a hard time believing that the country has been so thoroughly captured by corporations.   And many still believe the country is a fully functional representative democracy.  But both assumptions are seriously flawed.  

– The outrageously high cost of medical care in the U.S. is because enormous profits are being taken from the system by the medical corporations.  

– And our representative democracy has been deeply corrupted by big money.  Money that pays to keep the country’s laws arranged so that the looting can continue.

– Don’t believe it?   Then ask yourself how the richest country in the world is also the only major western democracy in which this sort of stuff goes on?

– Dennis

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Note 1 – that’s $425/month * 12 = $5100.00/year and if I divide that by 365, it is $13.97/day.  But then in order to get any thing paid to me, I also have to spend the $2500 deductible which is another $6.85/day so the total I have to spend per day in the U.S. to get to the 80% coverage point is $13.97 + $6.85 = $20.82/day.

Note 2 – I’m paying $302.00 (in U.S. dollars) for 78 days so I’m paying $3.87/day to get to the 100% coverage point.

The Middle Class Really Is in a Three-Decade Slump

Thursday, March 15th, 2012

– I’ve heard/read this before; that the average working man in the USA has seen what he/she can buy with their wages drop year by year ever since the mid-70’s.    Where might all that money be going?   Ask the 1%.

– Dennis

= = = = = = = = = = = = = = =

Did middle-class incomes really decouple from overall economic growth in the mid-’70s? If you look at median family income vs. GDP per capita, the answer is yes. From 1950 through 1975, both grew at about the same rate. After that, median family income grew quite a bit more slowly than GDP per capita.

But wait! You need to make sure to calculate inflation the same way for both measures. And maybe GDP per capita is a bad measure. Plus you need to account for health insurance and other benefits when you calculate median income. And the number of people per household has changed over time. These are all legitimate issues. So Lane Kenworthy redrew the chart to compare apples to apples: median household income vs. average household income. Medianincome shows only the movement of households that are smack in the middle of the middle class, while average income is similar to overall economic growth since it depends on total national income.

In the chart below, the black lines are the original comparison. The red lines are the new comparison. As you can see, there’s really not much difference. “Decoupling,” say Kenworthy, “is real and sizable.” The rich really are hoovering up a much bigger share of national income than they used to. The only thing left to argue about is why, not whether.

– To the article and its charts…

 

 

Chinese economic crash could create big bang

Wednesday, March 14th, 2012

Anyone who stands in the middle of Guangzhou’s high-rise district and looks up is liable to suffer dizziness.

The 600m Canton Tower, China’s tallest structure, sits across the Pearl River from several other newly-constructed giants, including the 103-storey International Finance Centre. The sensation is akin to strolling through a forest of enormous metal trees.

If the Chinese economy – represented by these vertiginous monuments – does fall to earth, one cannot help thinking that it would create a very large bang indeed; one that would be felt in every corner of the earth.

And fears have been spreading in recent months that China might be heading for precisely such a scenario. Economic indicators have been flashing red in recent months. There has been a sharp drop in residential property prices and a succession of disappointing car and retail sales figures.

But the most alarming news came at the weekend with the revelation by the customs department that China experienced a dramatic fall in exports in February.

Much of this was attributable to the Chinese New Year holiday, when factories traditionally shut down.

But concerns have also grown that China – the world’s workshop – is beginning to suffer from falling demand from Europe and America. China’s gigantic export sector is simultaneously the source of China’s strength and also its great weakness. Even the most prosperous of shops cannot remain in business if its customers decide to stop buying.

– More…