My Auntie is One Hundred Years Old

As of October 15, 2008, I have it on good information that my English auntie is one hundred years old. Time to celebrate! Good luck and congratulations, Auntie Stella!

The Challenge of Economic Adjustment and What to Expect

For a simplistic explanation read my comment!

Explanations of the present worldwide financial crisis are not so clear as to the adjustment process. Was has happened is the United States and many other countries have over invested in their respective domestic housing markets. This was made possible by lax lending practices which did not adequately take into account what borrowers could afford throughout their borrowing period.

Obviously, to make the financial equations balance either peoples' incomes have to rise, or they have to pay out so much of their current incomes for their mortgages that they can afford little else, or they have to receive further loans at concessional rates, or they have to rent out part of their homes, or they have to sell their homes.

To mitigate the overall problems, governments have decided that they will help out by making available more money at concessional rates so that more people can hang on to their homes. What happens in reality is that people try to make ends meet by getting better paying jobs, by getting second jobs, by working longer hours, by divorcing and selling their homes, by declaring bankruptcy, etc.

In some communities, banks have allowed people to remain in their homes but become shareholders. This seems like a reasonably good solution since the debt of the bank is no longer a purely bad debt, but an asset of lower yield, i.e. lower profit. The problem is that the banks have sold on their loans to other entities who are not in a position to dictate the terms of shareholding in the housing market. Indeed in buying the 'housing' paper, speculative buyers, which means banks wishing to convey at the time to others they were in the 'profitable' housing market, leveraged themselves into a crisis. But, what if the original lenders were required to buy back all their housing loans that did not perform! At least then there would be some accountability.

The impact of over-investment in the housing market, which is a long term market, is probably over investment in almost every other market, especially the longer term markets, such as vehicles and all what fills new houses, such as furniture. What this means is that the value or prices of the product of these over invested markets will decline. Those that have over invested will probably under invest as a precautionary rule. This means that the recovery out of this period of over investment could take a very considerable period.

Meanwhile governments will try by various means to soften the impact of recession. If they soften too much people will continue to over invest and a correction to sustainable investment will not happen. That is the problem of low interest rates and easy money. It encourages over investment and pushes against correction to sustainable spending and investment.

Perhaps, if governments focused on redirecting the economies towards CO2 saving industries where there is now under investment, we might just be spared the repeat of over investment.

My Political Leadership Wish List

If the last few weeks of turmoil and bubble bursting have taught us anything, it is that economic, financial and political policies of communities and governments do matter. The failings of the leadership of Blaire, Brown, Harper and Bush are now very apparent. The most obvious fact is that they need to seriously re-read the histories of their own countries to understand what they did wrong. Perhaps, they should also take courses in ethics. This is so they don't embarass us when they write their memoires.

I don't think they should write autobiographies or memoires until they really understand how serious their failings were for the three countries they led or continue to lead. They should pay particular attention to the interwar period and try to understand the way things work in desperate societies and why they now have contributed or continue to contribute to the creation of a world environment that is poised for religious, social and then nationalistic warfare. In my view, they do not understand the sources/causes of war. This is why they really need to go back to school so that they can see the extensive damage that they have done.

Of the present candidates for leadership of the free world my present preference is for Dion (Canada), Obama (USA) and Cameron (UK). What strikes me about these candidates is their honesty, sobriety and genuine ethical approach. What worries and worried me most about the Blaire, Brown, Bush and Turner leaderships was their dishonesty. It seems/seemed as if they are/were caught up in a world that they do/did not really understand.

I am particularly distraught about the contradiction inherent in the right wing religious community of USA, which espouses the minimalization of government while promoting ideologies that promote the intrusion of government into everyday life and freedom of choice. They say governments should be reduced, but want governments to expand and then behave as though they are religious communities at war furthering obvious religious goals, such as have to do with reducing the influence and freedom of genuine scientific research while supporting rearmament, disengagement, warfare, prohibitions and ever more dangerous weaponry. By preventing the normal evolution of positive and open value development, they foster an ever more dangerous hidden criminality of mentality. Though they don't bless it, they undoubtedly do lead to its increased likelihood. By supporting gun ownership, they increase the role of government in defending people's rights and a growth of governments and related agencies focused on security and control. They see people being shot in the streets with guns that people should not own. They don't mind gun ownership and they let the fear mentality of gun ownership to dominate the mores of American society. In effect, they bring the old west mentality into an otherwise ethical modern society where it can do serious damage.

Starbucks Coffee Shop - Blueberry Bar

Since I don't eat wheat, it was a shock for me to see Starbucks in Ontario selling donuts with their coffee. It seems that Canadians cannot get away from their favourite food fifth column.




If you don't think that donuts are bad for you, perhaps you are a bit of a carb addict yourself. In any event, I enjoy the Starbucks blueberry bar, and when I don't see it on display, I do ask for it and have not been disappointed in Ontario, yet! So far, I have not detected any digestive problems associates with any wheat lurking within the bars. I do believe that blueberries are cancer fighters, and that oats are good for your heart. The coffee contains caffiene, which helps keep me alert, but I think it dries me out a bit, so I also like a glass of cranberry juice with my meals.

A Personal Review of Tim Horton's Coffee and Donut Shops

This morning, I tried very hard to find something at Tim Hortons that I could enjoy because it would not make me either sick or uncomfortable. Most of the products at Hortons make me ill because my body cannot tolerate the wheat that seems to be in everything they sell! I think all this wheat in the form of white stuff is bad for one's health.

My choice was coffee with two milk and one sugar, plus a side of hash brown potatoe. I find the coffee at Hortons fairly acidic so the double milk was intended to offset that. I was risking wheat being with the potatoe, but thought it might be worth the risk.

Everything went sour when I noticed the 'chef' touching my hash browns with her fingers. I did not order germs, so was a bit put out. The coffee was tolerable and it really did give me an energy rush for my bike ride. I left the hash browns because its not a good idea to eat food that others have touched with their fingers.

By all means have your coffee break, but I would do a cycle around Tim Hortons to a place where the coffee is better tasting, has more aroma, and seems fuller. As for the finger work. Who asked for that!


Incidently, I tend to prefer Starbucks coffee, which is better from filler, taste and aroma aspects, and I find less acidic. The oceans have too much acid so why do I need it also (a stupid non-sequitor!).

What Leveraging Really Means to the Average Person

Excessive leveraging is what the Reserve Requirements of a Central Bank are supposed to limit. Obviously, there has been a big failure to communicate and inflation of house prices and stocks over the Bush period has been rampant. Without adequate Reserve Requirements throughout banking systems the US and UK will continue to create too much credit, and their currencies will weaken unless there is real economic growth, which is not likely in this holding period of adjustment.

Obviously, banks need to exact adequate reserve requirements (deposits, lower multiples of loans over income, percentage of income paying for interest and loans, etc.) from customers or they will fold like the economic system is folding right now. If your present loans are more than three times your salary, you should cut back spending or liquidate shares (i.e. loans to companies) to pay your loans down, no matter what the favourable interest rate, dividend percent or capital gain expected. That is prudence and not recklessness as has been common over the Bush administration period.

The problem is that more credit has been created over the last decade than what combined incomes can cover with interest payments. To get back to order, people need to sell assets, such as stocks and shares, houses, and liquidate deposits paying off their debts or as much interest as will keep the creditors happy (pretty high now!).

When this does not happen the debts become bad debts and the banks have to declare that they have bad debts. If everyone has bad debts at the same time, the assets that the bank is using to recover bad debts such as repossessed objects and homes fall in value because everyone is selling stuff at the same time.

When the Fed helps the banks it does not mean that the bad debts disappear, but that the fall in asset values is more orderly over time as sales of assets progress. Prices of stocks and shares, houses, and other assets will continue downwards until the full correction point has been reached.

For the average person, this means that the sale of a property that cannot be financed can to be delayed on a downward moving market. The problem is that people will race to sell while the market is on the upper end of its downward slide. Furthermore, people will delay acquisition of assets on a market moving downward because they prefer the higher valuation. There is consequently no easy solution, just the mathematics of human and market behaviour.

We do not know what the full correction point is, but one can be suspicious that the leveraging went forward some seven years beyond reason. So perhaps values of the past seven years adjusted for some small growth in value would appear to be about right. Not very nice, but more stable than continuing to live with the fear of a rush to sell rather than more certain modest growth in value! The appropriate correction period is the next nine months not years from now as the bad bailout dynamics might induce. Laws and money cannot really buy US banks out of stupidity, just time so that they can become smarter investors in people and assets.

Sensitivities

Each morning, I have been in the habit of taking my bike for a ride to Lake Huron and along the coast. The past week has been amazing. Temperatures were around 70 degrees fahrenheit, and there was just a slight breeze.

The sun broke through the leaves of the tall oaks splitting a hundred times within the woods to create a dazzling array of little lights and many shades of green. Acorns fell spontanously and seemingly dangerously from lofty branches a hundred feet overhead, smashing with a hard cachunk on the pathway and anyone or anything below.

I love to watch chipmunks, and these were really having a wonderful time, very excited by the warmth of the day and full of fun.

The Numbness That CNN Coverage of the Credit Crisis Brings to One

I have yet to decide whether it is the way that CNN covers the news or the news itself. Either way the CNN news and coverage of the attempts by Congress, the Fed, the President and the others to 'save the American main/high street and Wall Street' leave me quite numb.

The bottom line to me seems to be that leveraging of debt by all entities in the US and UK economies reached record levels growing alarmingly throughout the Bush administration period. What is clear is that nominal incomes of individuals and companies are insufficient to meet the requirements for interest payments and that the leveraging is collapsing everywhere like a deck of cards. One is quite foolish to think that such a collapse can be paid for by further leveraging by the US congress.

The fact is that the US and UK economies are now so highly geared up that a big crash in confidence will follow in October 2008. During the remainder of 2008, the result of this excess has got to be pressure on interest rates otherwise the result will be inflation during 2009, further job losses and unions pressing wage demands.

What could happen is all out war within society for what remains of income streams after the best creditors have had their share.

Can we really believe that the lenders in Asia will want to lend to dollar holders?

Finally Hope of Ending the US Economic Depression

My take on the credit crunch and the failures of US banks and banks that had bought into the speculative excesses of the financial markets is as follows:

Dance in the streets. Why? Because we are witnessing the unravelling of a monster misguided and misdirected economy that was leading nowhere but greater uncertainty. Based on bad economics and technology, the US economy was a disaster waiting to happen. It has to happen so that we can see the US economy rebuild itself, just as it will rebuild the twin towers, but rebuild on a sound financial and energy basis. We may be seeing the shock that will lead to sounder economics and financing and better energy technologies moving away from those that are based on oil, gas, coal and nuclear energy. Hopefully, we won't see nuclear plant shipped around the world in big lead boxes!

Go Green. Why? Because we have the opportunity to end the conflict with Russia and get rid of those insane Bush energy and war causing policies that are driving us into further war. We need to develop vehicles based on electric engines that will completely remove the need for oil from the middle east and reduce the pollution that is poisoning our children's future. GM is on the roght track with its strong battery technologies. We need to buy into the new technologies quickly and adopt solar, wind and water based turbines for the home that can produce the electricity that will drive our motor bikes and small vehicles. Give the middle east a break and go green.

My Friend Ed

Such talent! Enjoy!

Saving Energy Resources

In an ideal world, we could reduce the energy costs of moving ourselves and the objects that we use or consume by doing less moving and consuming.

1. We eat too much. Reduce our food consumption and we can make big savings.
2. We commute too far. Reduce the commute to and from work by say working at home more, we can reduce family costs and company costs, and reduce travel accidents.
3. We don't get enough exercise and recreation. By cycling more and locating in places that are more suitable for living, we can greatly improve our health and reduce the costs of the health services. Less time mixing with others in a commute reduces the opportunity for down times resulting from the spreading of disease. By not commuting, we would save time that could be used in recreation.
4. We bypass bad places. If we located closer to where we had a real interest in the environment, we would not bypass the bad places of our environment. We would see them and we would want to clean them up because they are near where we occupy space.

Commuting to Work Electronically

Before companies go willy nilly locating in foreign places to reduce their costs, they should ask whether they are located in the right place locally. By reducing the costs of commuting for their employees, companies can alter the family economics of their employees. One way that companies can alter the economics of the credit crunch is to think about helping their employees ride the credit storm. This does nothing to alter the physical costs of commuting and the wasted energy of driving to and from work.

There are a growing number of technologies that firms can now use that would allow employees to work from their homes or from places closer to home. We have seen how the Nintendo Wii allows a child to manipulate an image on a screen by moving an controller up and down. It would seem that there is now technology sufficient to allow people to carry out actions robotically even though they might not be located in the work place. For example, a person could move things in a central location even though they are located remotely. By visually be able to see things electronically at a distance they can set in motion processes that are controlled at a distance. The economics of this is improving steadily.

Reducing Wasted Energy Resources by Relocation of Firms

After watching the mass destruction of homes in the hurricane allies of world, we should consider assisting those living in these areas to move to safer locations and the businesses located in these areas to be ones that are more suited to a harsh environment.

People want to locate near to where they work and earn a living. It seems ridiculous for industries to locate in regions that are very likely to be swamped by sea water.

While there is a housing and credit crisis, it might be appropriate for authorities to encourage firms to locate in safe areas and design bases of industry that get the mathematics of commuting closer to what employees need as compared to what employers need.

What happens frequently is that the employees of a firm have to bear the 'hidden' costs of commuting and damage by nature when these costs could be reduced significantly by a better choice of location by the employer.

To get the employer to pay up, one needs to ask that employers cover a significant portion of commuting and home insurance costs of their employees.

Do firms consider the costs that their employees must bear to work at the location the employer chooses for locating the work place?

A Proposal to Tax Commuter Travel

My proposal is that employers pay a significant proportion of the costs of their employees moving to and from work each day. I think that this tax would alter the way employers view commuting time.

A variant on my tax proposal is that the distance of each persons commute to and from work be provided to the local municipality and the municipality be able to charge people for using the roads going to and from work. This would help recover some of the economic cost of people using fuel on the roads as they commute to and from work.

The benefit of the tax if sufficiently punitive would be to alter the way that people think of their environment. If you lived closer to where you work, you would think more about improving that area of the community to make it more pleasant. As it now stands, people will drive past slums and think nothing about how to improve the lot of the people living in those slums. This is at the root of inequalities within our environment.

We wonder why people live in bad areas, and we know that it is because they are poor. The problem is that skilled people bypass the poor areas and bypass improving the lot of people they could be helping. They bypass because they commute to work. If one reduces commuting, one forces people to think more about average neighbourhoods and give incentives of people in neighbourhoods to improve them because they must endure them all the time.

A World at the Cross Roads

Habit persistence is a known phenomenon. It governs what economists refer to as the consumption function, which is a mathematical representation of our behaviour. Even if we move away temporarily from what we thinks good, correct and right, we tend to ratchet back to earlier patterns of behaviour.

Fundamental changes in the way we do things come not from within ourselves but from the environment around us that force us or lead us to new behaviour. If the environment were like us, and predisposed the way we are to copy cat behaviours and to habit persistence, then we would be in a stable equilibrium world. Fact is our environment changes and we change as a response to our environment. Only difficulty is that our environment is not moving in the direction of change that it should be moving in. This means that we are having to adapt to a world that is full of hidden dangers that our weakness in choosing appropriate technologies have created.

There is a way that we can have some control over our behaviour and that is through making the correct technological decisions that eventually feed back into our environment. I am of the opinion that technological innovation and thus our behaviours have been stifled by the inability of human beings as a sufficiently large group to make the correct technological decisions. This means that societies tend to persist in their bad behaviours and it becomes extremely difficult for individuals of societies to move towards improved behaviours.

The world is at a technological crossroad. We are being offered the opportunity to redirect change towards good and wholesome technologies. I have no faith in the process because those people who define the most appropriate directions are being ignored or vilified while those that ratchet us back to habitual and bad behaviours are almost worshiped as saviours. It does not take a very high intelligence to understand that we need to move towards an enormous restructuring of our between work and home habitat travel.

We have technologies that could reduce travel between work and home, but we are persisting in continuing the twice daily mass movement of bodies to and from locations that are in many cases enormous, but in most cases could be greatly reduced.

What if a limit were imposed that forced people to live close to work if their physical bodies were needed at the workplace? What if employers were required to pay for peoples' travel costs to and from work? That would force a big change on our wasting of resources travelling between home and work.

Ok! My proposal is that a law be passed that requires employers to pay one third of the cost of peoples' commute to and from work each day.

The Importance of Linkages Between Financial and Real Markets

It is sometimes easy for those in the financial world earning salaries in excess of one million pounds sterling to forget crucial linkages that define the success or failure of specific issues of financial instruments, whatever their role. These linkages are bridges between the real and financial economies. It seems that in the current credit crisis, many financial managers have forgotten that the main goal of a central bank is to ensure that inflation is kept in check. This role almost certainly ensures that incomes are also kept in check and with that the profitability of companies. It means that actual financial income growth correlates very closely with non inflationary growth in the real sector. The bottom line is that real incomes need to grow if finacial incomes are to grow and if financial incomes get out of line with real incomes a correction is almost certainly going to happen.

Oil, Gas, Coal, and Nuclear Interests are Special Interests

Sometimes, we need reminders of what these special energy interests are about! There are systems by which large polluting firms create toxic waste, such as CO2 gas and yet still escape the full costs and consequences for other forms of toxic waste and sickness creating by-products of their activities.

We should question the political processes of the wood, oil, gas, coal, and nuclear industries, those energy producers that have amassed enormous wealth over the last century. In each case, the effect of these industries has been energy, but also an enormous amount of pollution and toxic waste. It has taken these industries several generations to accept that they are major cost creators in the form of negative externalities that the public has to bear and the 'free' market does nothing to address. If a large portion of the past profits of these energy producers had been set aside for the damage they have caused our environment and the health of humanity, we would be a much safer, healthier and cleaner world. Instead, we are being pushed into a new generation of side-stepping the real costs of these energy forms.

At one time, earth had a surplus of wood resources .... no longer. Where there once were forests, we now have vast open areas that require huge amounts of fertilizers to sustain agricultural production. The fertilizers and pesticides seep into our water and we get polluted water and people get sick. Who pays for the bad water and the sickness from fertilizers and pesticides. We do! And, who mostly gets the profits from production using these technologies; farmers, retailers, and big business. But, who pays for clean water and sorts out the health issues from pollution of the environment. We do... not big business! Who has to clean up the filth in lakes and streams?

Big business produces products that are intensively energy using and pollution creating. Economic growth is based on a partial view of what it takes to live comfortably. The partial view does not take into account the human costs arising in the form of disease and pollution. We have seen what tobacco has done to the health of people, and we assessed that responsibility, but we still produce tobacco and the health costs of human disease arising from tobacco use continues. Yes! The commercial markets may be free, but they are not accountable, and they do not account for the total costs to communities of the products bought and sold.

Taxation and Who Directs Development of Energy Resources?

Smart Taxes

People curl up like babies when they hear the word taxation, and that is because of a frequent misuse of taxation power to pork belly projects with business as usual objectives. Taxation, however, is an important instrument for redirecting an economy towards smart objectives and away from waste and corruption. We all see waste in government spending when it is not directed towards goals that favour our objectives. That is why big energy business attacks taxation because their objectives are not those of the ordinary man, which is a decent job and secure future.

Their only goal is to use the existing technology wherever they can and they don't engage in redirecting effort into shared science and better technologies. That would be competitive suicide. Only taxes and publicly funded research redirects the science towards better technologies. Witness how the big energy companies have ignored and continue to play down solar power while they can reap more profit from gas, oil and coal. Yes, they need to be taxed more heavily and their customers made to pay the 'real cost and price of buying their toxic products.

When big businesses come into an economy from outside the last thing on their mind is how to treat working people fairly and promote the objectives of working people. Instead they are gold rushers trying to pick the big nuggets without responsibility for whom ever they employ to do it. They have a strong 'army' of lawyers and business school graduates who asset strip and hunt out opportunities for easy riches, then figure out how to make a clean break. They are the modern aggressors against decency and sharing. They preach self help when they mean to help themselves, and their philosophy ends with I. The word we is not part of their limited vocabulary. Our goals are not their goals because they mean to take all our dignity away from us.

Smart taxes limit the powers of many big businesses, but these operators know about the weakest link which is the power they have to make and break a community. They come in and change the complexion of a community till it is not recognizable, siphon off the best resources and then leave with wealth having no qualms that they are the only game in town. They may even point to the losses they have to endure after they have pulled their resources out. Meanwhile, those that follow and feed off big businesses scape around for whatever is left and make do.

Not Smart Taxes

One of the major surprises of my generation is the major support of public gambling institutions which are used as forms of tax gathering. Such taxes can put leadership in the hands of those with suspicious objectives and sap those who have addiction problems and are unable in the normal way to think through appropriately the mathematics of risk.

I have studied the effects of new technology on economies for many years. Believe me when I say that one of our greatest problems may be the remarkable and unreasonable profits that the oil and gas companies have made over the past years.

Conservatives support wise taxation

At one time in the late 1970's, I worked for a major bank in the UK and the then Prime Minister Maggy Thatcher decided to tax the excessive profits of the high street banks. This was a wise move on the part of a very Conservative leader, so its not just 'liberals' that think of taxation. Taxation is a tool of the people to redirect resources towards goals and objectives where they are needed and away from resource wasters such as, and we are all guilty of this perhaps:

• big cars
• private jets
• private fuel-powered boats

What we need for leadership are statesmen that are out from under the influence of those energy practices that have been excessive and toxic. These statesmen will think of taxation as a tool for redirecting economies away from toxic practices and technologies towards clean practices and technologies.

Climate Modification Through the Wrong Energy Approach

Theory

If we don't address the problem of energy use appropriately, we will create a more temperate climate in which we experience the extremes of temperature much greater than at present.

Crunchonomics and the Future World Economy

Crunchonomics is the title of an editorial in the July 19 issue of The NewScientist and refers to the difficulties created by the US economists of the US banking sector that produced the present credit crunch and resulting economic misery around the world.

The US economists are at it again. They are producing a new economic crisis on top of the existing one. We are about to experience a second round of crunchonomics, and one that will be even more painful for everyone than the current crisis and world economic depression.

I call it a depression because it is like a hurricane and not a tropical storm. The next depression to move around the world could be a category 4 or higher. Why do I say this? What is the basis of this surprising statement?

Well, I make this statement because as I watched the National Republican Party Convention in Minnesota go through the rounds of launching the Republican campaign based on bad economic principles and notions of how to get the US economy moving forward. Their prescriptions for the energy sector should get every one's alarm bells ringing.

Mr. Lieberman's back stabbing of the Democrats and McCain's lack of understanding of basic economics suggests that we have a huge population in the US who will buy into very outdated and really bad ideas. Do you want an example?

Well, let me say that a solution to the earth's energy crisis will not come by lowering the price of oil, gas and coal. My how those promoting the exploitation of the economics of these resources were in your face all convention long.

The people who control these resources stand to make billions in economies of scale resulting from doing stuff which is hardly novel. They stand to gain a windfall profit out of know technology, basically doing bugger all other than reusing rehashed techniques for getting oil offshore and out of 'nature reserves'. Do we really want these resources and the fumes from the toxic wastes of these materials to pollute the world's environment?

I say that if they succeed hang on for a really bad depression. We have seen nothing yet, and the next disaster these 'boys' can create will topple anything we have seen to date. Roll on the next killing field of choosing a bad economic and technical solution.

What is my solution?

In my view, the way to avoid a monster depression in 2013-18, is to have a spend our way out of the current depression by creating new energy technologies based on the use of solar, wave, hydro, and wind resources, planting hardwood forests, and growing algae for fuel from CO2 spewing out of energy plants around the world.

We need to spend, spend, spend while we tax, tax, tax. By intelligent spending and taxation, we can steer the world economy away from oil, nuclear, gas and coal methods towards solar, wind, and wave. The taxes are need to balance the budget of spending to develop the new solar and wind technologies rapidly. Lets get our depression right now and avoid the monster republican depression of the next decade. Have these outdated American Republican ideas not already done enough damage to the world economy?

The items we need to tax are uses of gas, oil, coal, and nuclear energy. Put these sources of energy out of business and build our economies on a safer energy foundation that puts solar energy first.

We also must tax the loss of heat from homes by assessing heat pollution for every home that is in a cold climate.

We need to cool our world down even more than it is likely to be cooled. Our goal needs to be a friendly climate rather than an unfriendly climate.

Summary

We need to spend to create need synergies in energy technologies, plant hard wood trees, encourage farmers to create more shade by subsidizing natural shade creating environmental efforts. We need to tax ourselves away from gas, oil, coal, and nuclear energy methods and toxic waste products that these technologies create.