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ECONOMIC GLEANINGS


July 13, 2009

FIVE LESSONS FROM THE RECESSION - RELEARNED (G&M, Tom Bradley) 

    ∙ Leverage is a two-way street - it’s great on the way up but painful on the way down;

    ∙ Don’t get carried away with a theme & stray from your long-term strategy- this is hard when others are making a bundle jumping on & off bandwagons;

    ∙ Don’t assume liquidity will be there when you need it - it is always there on the way up but by definition never once the market has gone ‘over the top’;

    ∙ Risk management systems work until they don’t - they are like Keynes’ bankers who will lend you an umbrella when the sun is shining but want it back when it starts to rain;

    ∙ It is not different this time - when people say that, run, not walk, to the exits. 

A while ago, Jeremy Grantham, founder of Boston-based Grantham Mayo van Otterloo which manages assets worth US$120BN, when asked by Barron’s if we would learn anything from the crisis, responded that the historical precedent shows that “we will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term.” 

AMERICA STRUGGLES TO GET OVER AFFLUENZA (NYT, Maureen Dowd) 

    ∙ This term was defined in a book with the same title as “a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more.” Americans like things super-sized but the push by Messrs Bush & Cheney to make America a hyper power has left it weakened & tapped-out, straining to defend its runaway capitalism even at the cost of desperation socialism. Obama is now expected to reconcile Americans’ visceral need for things super-sized with their cerebral recognition that survival requires becoming leaner & operating smarter. 

So he must magically cure Americans from their long-time addiction to the pursuit of instant gratification & to buying things they don’t need with money they don’t have? 

ECONOMISTS POINT TO RISING DEBT AS NEXT CRISIS (AP) 

    ∙ The country first got in debt during the Revolutionary War & has been debt-free only one year, in 1834. The national debt now is US$11.4TR, 80% of GDP, growing at US$1TR a year. Many economists warn this could trigger the next crisis & Bernanke recently told Congress “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth.” Debt service is now the fourth largest federal spending item after Medicare-Medicaid, Social Security & defense, and is threatening to crowd out other spending priorities 

The deficit for the current year is equivalent to an awe-inspiring 13% of GDP; while some of it is of a non-recurrent nature, too much of it isn’t. 
 

UNDERPANTS AS ECONOMIC INDICATORS? (MSN Money, Michael Brush) 

    ∙ Men seem to stop buying them when the economy tightens.  

After declining 12% in a year, men’s underwear sales have leveled off but need to start growing at a 2-3% annual rate before they are deemed to herald the onset of a recovery. 

TRAFFIC CONGESTION DIPS AS ECONOMY FALTERS (AP) 

    ∙ For the second year in a row, American drivers spent less time in rush hour traffic in 2007 (36.1 hrs), vs. 36.6 hrs in 2006 & a record 37.4 hrs in 2005 (this data series goes back to 1982 - three years after the second ‘oil price shock’). 

The 2007 number predates the crisis, the mid-2008 US$147 oil price & the recession. 

PICKENS CALLS OFF MASSIVE WIND FARM IN TEXAS (AP) 

    ∙ It would have been the world’s largest wind farm, with a 1,000MW generating capacity, to be quadrupled later). He is now looking for homes in the Midwest & Canada for the 687 40 story-tall wind turbines, on order for over a year from GE at a cost of US$2BN,  

China is building six big windfarms, each supposedly 15x that size. One more instance of insular American thinking that needs to change if America is to remain competitive. 

CAN I CLEAN YOUR CLOCK? (NYT, Thomas L. Friedman) 

    ∙ For years Chinese would say to me ‘Americans got to grow dirty for 150 years, using cheap coal & oil; why shouldn’t we?’ My response was ‘pollute all you want. We will develop the technology to keep you from choking to death on pollution & then sell it to you & clean your clock’. But they may be turning tables on us. For Beijing is finding it must ‘go green’ since its people can no longer breathe, fish, swim, drive or even see; so it is innovating more energy-efficient & clean power systems, planning to cut overall energy intensity by 20% over five years & setting ambitious energy targets for its industries (& is already ahead of schedule). Given its low-cost platform, we may end up buying not just our toys but also our energy future from China; for the US is now home to just two of the world’s largest ten solar photovoltaic-, two of the top ten wind turbine-, & only one of the most advanced battery-, manufacturers. So I question Obama’s decision to focus on healthcare at the expense of energy climate bill. 

The two go hand-in-hand : energy policy impacts healthcare spending & a more efficient health care could free up resources to fund new energy policy initiatives. A command economy can speed up change enormously; thus back in the early 80's, after the two oil price shocks of the 70's, MITI summoned the heads of Japan’s leading steel makers, told them that they were to cut the energy intensity of their products by 40% over five years & sent them packing to get on with the job.    

ALL THE GOP NEEDS IS ONE GOOD LEADER (FP, Sheldon Alberts) 

    ∙ South Carolina Governor Mark Sanford’s trip to Argentina to see his paramour at public expense (initially at least) & his steamy emails to her, have eliminated him as a potential GOP Presidential candidate in 2012. Milt Romney & Mike Huckabee are still trying to re-establish their political credentials. Nevada’s  John Ensign, the third-ranking Republican Senator, has admitted to an affair with the wife of a former staffer. Louisiana Governor Bobby Jindal faded after his weak rebuttal in February of Obama’s speech to Congress. Utah Governor Jon Huntsman, McCain’s campaign co-chairman, is now US Ambassador to China. And Sarah Palin is up to her ass in alligators, incl. her battle with David Letterman, her  feud with the father of her teenage daughter’s baby, her recently having had to pay back travel expenses for her children she had charged to the State & now her abandoning her power base as Alaska’s Governor. 

So what? These are early days still. Few people expected, even after his speech at the 2004 Democratic convention, that five years later Obama would be in the White House. 

THE PATIENTS DOCTORS DON’T KNOW (NYT, Rosanne M. Leipzig) 

    ∙ Medical students get clinical experience in pediatrics & obstetrics but not in geriatrics despite patients 65 & over accounting for 32% of work loads in surgical care & 43% in medical specialty care, and 48% of all inpatient hospital days. While Medicare spends US$8BN/year supporting residency training, it doesn’t require it to cover geriatric healthcare. But pneumonia symptoms in 50 year-olds differ from those in 80 year-olds, as do their antibiotic dosages. And when old people are overdosed with antibiotics, their kidneys may fail & they end up cured of their pneumonia but in worse physical condition than before. Ditto for heart attacks, in octogenarians they often present without chest pain. Medical students need geriatric healthcare training to be able to give old people adequate care. 

The writer is a professor at the Toronto’s Mount Sinai School of Medicine. 

$15.3MM IN MISSING GOLD NOT A BOOKKEEPING ERROR (CanWest, Philip Ling) 

    ∙ The Royal Canadian Mint in fiscal 2008 ‘lost’ 17,500 troy ounces of gold worth US$15.3MM. With accounting- or bookkeeping errors now ruled out, it was either lost somehow during refining or someone walked off with it from “one of the most secure facilities in Canada”. 

Despite a security system capable of keeping track of the metal content in employees’ dental work, in 1996 one worker absconded with 3½ kgs (120 troy ounces) of gold (but theft charges were never pressed - to avoid having to explain how he beat its security system?).  

TUITION ATTRITION? REPOSITION (G&M, Margaret Wente) 

    ∙ Students complain universities are cutting programs & charging more for less. But this is just a taste of things to come. For shrinking endowment funds, growing government deficits & competition from healthcare herald budget cuts for universities after years of almost automatic 5+% annual funding growth. Alex Usher, author of How the Recession of 2009 Will Affect Post-Secondary Education, says those who think this is a passing phase are dreaming. For him universities’ top challenge is productivity & addressing that issue requires more than just boosting class sizes, i.e. more standardized undergraduate programs & more specialization rather than offering a full menu of programs, less research of questionable  value, less egalitarianism & more merit pay (since a ‘shocking number’ of tenured professors with the highest stipends spend the least time in class rooms), & a shift in public funding focus from bricks & mortar to ‘buying out’ unproductive teaching staff to permit their replacement with qualified, younger, cheaper talent. While universities are vital to our standard of living, they are among our most hidebound institutions & have never been truly held to account as to whether they render value for money. For Canada to remain competitive it must join the global trend towards competency-based standards in education, “We’ve never had a really good debate about what we are getting for all this money. We’re into that now. And it’s not going to get nicer for the institutions.”  

Universities have finessed politicians’ predilection for hard assets & research rather than more mundane things like infrastructure maintenance. So research facilities have mushroomed and teaching facilities & essential infrastructure let go to hell in a hand basket (which now creates a need for money to correct that self-induced calamity). 

MELTDOWN BURNS ST. FX ENDOWMENT FUND (G&M, Elizabeth Church) 

    ∙ St. Francis Xavier University is a small Nova Scotia university with a good reputation that counts former Prime Minister Brian Mulroney among its alumni. On July 6th, 2008 its endowment fund hit a high of $100.1MM but by yearend had slumped to $50.1MM, down 43% on the year, about twice the average loss for Canadian university endowment funds. This was caused by its policy of 100% exposure to equity markets, in place since the fund’s inception in the 60's (that in the past 15 years produced stellar returns & permitted ‘generous’ annual payouts). But now, upon the advice of an external consultant, it has cut its exposure to the equity markets by 15%, & plans to cut it further. 

Presumably the consultant never calculated what the fund’s size might have been with a more ‘conservative’ investment strategy over the past 40+ years (likely a whole lot less than $100.1MM & with less “generous” payouts (likely a lot more). It’s irrational to abandon a strategy that had served it so well so many years because of a bad six months. And if interest rates were to rise, the university will regret this strategy switch – most such consultants are not worth the powder to blow them to hell, because like so much of the financial community broadly defined, they are more like lemmings than independent thinkers. 

SCIENTISTS LINK DAM TO QUAKE (NYT, Sharon Lafraniere) 

    ∙ After China’s Sichuan province’s devastating earthquake more than a year ago, Leonardo Seeber of Columbia University’s Lamont-Doherty Earth Observatory suggested it might have been triggered by the weight of the 1BN cubic metres/290MM tonnes of water behind the fifty storey-high Zipingpu Dam, one kilometre from a well-known seismic fault & 5.4 kilometres from the quake’s epicentre. But the authorities deny this since “no reservoir-triggered quake with a magnitude eight has ever occurred in history”. Such claims are problematic for them not just because of the anger of Sichuan parents at the loss of their children in school buildings that collapsed due to negligent or corrupt officials allowing them to be built in an unsafe manner (& due to the one child policy losing a child amounts to a total loss of one’s offspring), but also because they want to ‘max out’ the potential of the abundant water resources of the country’s Southwest. Thus the US$750MM Zipingu Dam was part of a massive dam building program in the region to generate electricity, irrigate farmland, control flooding & provide water to the nearby 10MM-inhabitant city of Chengdu.  But as far back as 2001 already, one expert, Li Youcai, voiced concerns that officials were downplaying the risk of major earthquakes in the region & later a chief engineer with the Sechuan Geology & Mineral Bureau noted that in the twelve months to late 2005 there had been 730 minor quakes (of 3.0 magnitude or less) in the region.   

Given the evidence of shoddy construction practices in the building of many dams across the nation, this could herald many more headline-making, man-made calamities 

CHINA : A GREEN ENERGY SUPERPOWER? (NYT, Keith Bradsher) 

    ∙ Beijing is changing the way China generates electricity. While coal will remain its main source of power, it wants renewable energy to help slow the growth in its greenhouse gas output. While the US Congress recently passed a bill requiring US utilities to generate more power from renewable sources, China two years ago already instructed power companies to produce at least 3% of their power from non-hydro renewable resources by late 2010. This year China will surpass the US as the world’s largest market for wind turbines & companies are vying to build the most solar plants fastest. The town of Dunhuang, deep in the Gobi desert, is part of this drive to lead the world in wind & solar energy; for nearby one of China’s six immense windpower projects is being built, each capable of producing as much power as 16 large coal-fired plants. China nevertheless won’t become a green power; for total power consumption will rise steadily over the next decade as more non-urban Chinese get the power-hungry “mod cons” their city dwelling brethren already possess.  

China seems to be much better than the former Soviet Union at capitalizing on the competitive potential of a command economy. This move by Beijing could become problematic for the US at next December’s Kyoto follow-up discussions in Copenhagen if it were to use its move towards more ‘green’ power to hoist Obama on Bush’s petard (since the latter’s opposition to Kyoto was largely based on China - & India & the rest of the Third World - not having greenhouse gas reduction targets). 

‘JELLYFISH TYPHOON’ MENACES JAPAN’S FISHING INDUSTRY

(McClatchy Newspapers, Koichi Yasuda) 

    ∙ Swarms of Nomura’s/Echizen jellyfish, weighing as much as 200 kgs & measuring up to 2 metres in diameter, are expected in its coastal waters this year for the first time since 2007. They are a fisherman’s nightmare, tearing their nets, harming fish in their nets with their toxins & stinging fishermen as they try & remove them from their nets.  

Their fertilized eggs turn into flower-like polyps, called ‘podocysts’, that ‘hibernate’ on the sea bottom until conditions are favourable for them to turn into jellyfish. Last year they obviously weren’t.  

RUSSIA AMONG WORLD’S MOST CLOSED ECONOMIES (WSJ, John W. Miller) 

    ∙ A study by the Davos-based World Economic Forum ranked Russia 114th out of 121 nations in terms of ease of trade, behind Ethiopia, Mauritania & Pakistan, but ahead of 118th place Zimbabwe. It ranked Canada 6th (after Singapore, Hong Kong, Switzerland, Denmark & Sweden), Germany 12th, the US 16th, France 17th, China 49th &  India 76th. 

It has suspended its WTO membership bid pending completion, next year, of the creation of a customs union with Belaurus & Kazakhstan. 

POLLS SUGGEST UKRAINIANS LEANING TO EAST (EJ, David Marples) 

    ∙ Parliament has set January 17th for the next presidential election. Former prime minister Viktor Yanukovych, who lost in 2004 to President Viktor Yushchenko, leads in the polls with  26.8%, followed by Prime Minister Yulia Tymoshenko with 15.8%, former Foreign Minister, & now Chairman of Parliament, Arsenii Yatsenyuk 12.3% & Yushchenko 2.1%. Yanukovych would beat Tymoshenko 38.8 to 28.8 in a run-off & Yatsenyuk, a 35 year-old former  Yushchenko protégé financially backed by two ‘oligarchs’, 36.7 to 30.8. Another poll showed that 35% want Ukraine to join up with Russia, Belaurus & Kazakstan, 20% with the EU, and 23% for it to remain independent, that 58% think positively of Putin, 56% of Belaurus’ hard-line president Alyaksandr Lukashenka & 55% of Russian president Medvedev, that the highest-rated Western leaders are Barack Obama (31%), Angela Merkel (29%) and Nicolas Sarkozy & Poland’s Lech Kaczynski (22% each) & that 57% felt positive about Russia, 45% about Belaurus & 20% about Germany but just 3% about Georgia (which Yushenko supported strongly in its 2008 war with Russia). This leads to four conclusions. The economy hasn’t changed people favouring strong leaders over weaker, more democratic ones, & Russia over the US & EU. Tymoshenko’s endless squabbles with Yushchenko & her single-minded pursuit of the Presidency have turned people off. The country’s  western half is far more pro-Europe & anti-Russia than the east. And people are deeply unhappy with Yushchenko who seems increasingly isolated & unable to communicate effectively with the electorate but nevertheless determined to run again despite being clearly unelectable. 

The problem for the West is that the pro-Western Western half of the country is home to only about one-quarter of the population. 

SOLAR FLIGHT TO SPAN GLOBE (EJ, Business Browser) 

    ∙ On June 26, at an airport near Zurich, did Bertrand Piccard. unveil a prototype of the solar-powered plane he plans to fly around the world to highlight the potential of alternate energy sources. It has the 120 ft wingspan of a jumbo jet but the 3,500 lbs weight of a family car. It’s propellers are driven by four electric motors & it can operate by day or night since any surplus power produced by its 24,000 solar cells is stored in high performance batteries. He says “If an aircraft is able to fly day and night without fuel, propelled ... by solar energy, let no one ... claim that it is impossible to do the same for motor vehicles, heating and air conditioning systems, and computers.”  

Physical possibility doesn’t presage commercial viability. Still, people like Piccard are needed to show the way to new commercial technologies. He is credible because he captained the first non-stop, around-the-world balloon flight a decade ago. The plane has been in development since 2003 and is expected to make its first test flight later this year & its around-the-world flight by 2012. 

CELIAC SURGE (G&M, Marina Jimenez) 

    ∙ Celiac disease is an auto-immune disorder that attacks the small intestine. Sufferers cannot tolerate gluten, a protein found in wheat, rye & barley. Once relatively rare, research by Minnesota’s Mayo Clinic suggests that today one in every 100 people has it, 4½x the rate half a century ago, although as many as two-thirds may not know that. 

One can only wonder whether the higher incidence is a function of lifestyle or of better diagnostics. 

GOING ORGANIC (The Week) 

    ∙ Under USDA rules fruits & vegetables can only be called “100% organic” only if they are raised completely without man-made pesticides & fertilizers, and meat & dairy products can only be labeled organic if it comes from animals fed only organic feed & “allowed access to pasture”. But on the whole, according to an official  of a company that certifies organic labeling claims, “It’s kind of like the Wild West in there”. The market is small but growing rapidly; sales currently are about US$23BN & growing at over 3x the less than 5% annual rate of conventional foods. President Obama has appointed an organics food expert to the No. 2 slot in USDA & earmarked US$50MM to promote organic farming. Most consumers believe organic food is safer & does less harm to the environment, and it has become somewhat of a status symbol among affluent shoppers. The jury is still out on whether it is really healthier : while there is some evidence to suggest that it is, the evidence is not conclusive & skeptics think it’s  a big ‘con’. Agribusiness using industrial-farming techniques on their organic farms is a long way removed from the movement’s original small-scale philosophy. It’s unlikely that all the food we eat will eventually be organic because organically-grown crops yield less than conventional ones. 

The latter may be the biggest con of them all; for there is a growing body of evidence suggesting that after a lag, once a farming operation has settled into a proper organic farming routine, yields are as high as those on industrial farms (& farmers have a much lower overhead, and hence much less exposure to risk, due to the elimination of the expense of various chemical products). As to the credibility of many organic claims, last year a big California 10,000 cow dairy operation was stripped of its organic designation (which it should never have gotten in the first place because anyone who knows anything about the diary business that it is physically impossible to give cows in a dairy operation that size “acees to pasture”.  

U.S., CHINA PONDER CUTTING CO2 EMISSIONS (Reuters) 

    ∙ At the forthcoming G-8 Summit in Italy discussions will focus on halving greenhouse gas emissions by 2050, on doubling public investment in low-carbon technology by 2015 & on boosting funding from both public & private sources, and carbon markets. 

President Obama’s environmental stance at the G-8 constituted a refreshing change from his predecessor’s. Meanwhile, in Australia, with Canada one of the world’s biggest per capita greenhouse gas producers , Prime Minister Rudd’s carbon trade scheme for the country’s 1,000 biggest polluters hit a snag when the Senate deferred its vote till later in the year. 

IT’S TIME TO LEARN FROM FROGS (NYT, Nicolas D. Kristof) 

    ∙ Frogs, salamanders & other amphibians are sprouting extra legs. In Florida’s Lake Apopka male alligators have stunted genitalia. In the Potomac watershed 80% of male small mouth bass are producing eggs. Among newborn baby boys in America up to 7% are born with undescended testicles & up to 1% with a condition in which the urethra exits the penis anywhere but at the tip. While the chemical companies argue the scientific case isn’t proven, many scientists worry all this is caused by a class of chemicals called ‘endocrine disruptors’ in common use in agriculture, industry & commonly found in consumer products.  

There have now been several documented cases of Canadians with dozens of chemicals in their blood streams that have absolutely no business being there, incl. known carcinogens & gene-altering compounds. This is boosting the trend towards organic foods, urban farming & grow-your-own vegetable plots (but these can only mitigate the problem since rain water too is now adulterated & no amount of washing produce can remove the rubbish that enters plants though their root systems. 

‘THE ICE IS NOW THINNER THAN EVER’ (CanWest, Margaret Munro) 

    ∙ Arctic ice reaches its maximum thickness as spring begins in the Northern Hemisphere. While this year it maxed out thicker than in four of the last five years, it was still the fifth-lowest thickness on record & 90+% of it was one- or two year-old ice more prone to summer melt than older ice (vs. a long-term average of 70%). While most scientists still doubt the Arctic will be nearly ice-free by 2013, it’s no longer deemed “out of the realm of possibility.” 

The issue is not whether or not whether it manmade but that it is happening. 

GLOBAL WARMING : NOT BY MAN ALONE (OC, Tom Spears) 

    ∙ Some time ago the U.S. National Oceanic and Atmospheric Administration published a study, Reanalysis of Historical Data for Key Atmospheric Features, of climatic data for a period ended December 31st, 2007. It found that natural causes are a factor, that over the 56-year period temperatures had risen on average 0.9̊C, that seven of the warmest ten years had occurred in the decade ended in 2006 & that the Western half of the continent had experienced most warming. It concluded that almost half of all warming in North America appeared due to “natural” causes, such as shifts in ocean currents, but raised  some interesting & relevant questions.  

The climate debate often seems like a prime example of our inability ‘to accept things we cannot change, the courage to change things we can & the wisdom to tell the difference’. 

‘TIME TO DITCH CLIMATE POLICIES’ (BBCNews, Roger Harrabin) 

    ∙ A study by an international group of academics, How to Get Climate Policy Back on Course, sponsored by LSE’s Mackinder Programme & Oxford’s Institute for Science, Innovation and Society, wants world leaders to ditch their current policies on climate change; for they think emission cut-based strategies have failed & will continue to fail. They propose shifting to an approach focused on improving energy efficiency & decarbonizing the energy supply. Mackinder Programme Director Gwyn Prins says capping carbon emissions & allowing the trading of  emission permits will lead to emissions actually continuing to rise and that carbon trading, & channeling  billions of dollars into clean energy technologies, won’t work. And he says that “Worthwhile policy builds upon what we know and upon what is feasible rather than trying to deploy never-before implemented policies through complex institutions requiring a hitherto unprecedented and never achieved degree of global political alignment ...(and) the world has been recarbonizing, not decarbonizing.”

    ∙ Prof. Tom Burke of the Imperial College London, a former government adviser, in rebuttal said  “They are ... right to identify significant weaknesses in the major policy instruments currently being renegotiated ... But nothing could be more harmful than to ...  stop doing on climate change and start working again in a different way ... This is neither practical nor ... defensible  and ... seems to have been born more out of frustration than understanding of the nature of the political processes involved ... This is a far more complex, and urgent, diplomatic task than the strategic arms control negotiations and will require an even more sophisticated … approach to its solution. Stop-go is not sophisticated.”  

The group seems on solid ground on the need to improve energy efficiency but out of touch with reality when talking about “decarbonizing” the energy supply.  Ditto for Prof. Prins : he likely correctly expects carbon credit trading to become a boondoggle of epic proportions, but to suggest  that we build only on what we know is unworthy of a serious academic discussion (President Obama said in his July 4th speech ‘We ... did not get here by standing pat in a time of change ... (and) did not get here by doing what was easy”). Taking Prins’ idea to its (il)logical conclusion we would still be living in caves. As to warning of the need for for “a hitherto unprecedented and never achieved degree of global political alignment”, pollution doesn’t respect national borders & leaders all over the world are now seemingly starting to realize that we are all passengers on ‘Spaceship Earth’ & have only two choices, swim together or sink together.   

SHRINKING SHEEP? EWE’VE GOT TO BE KIDDING (CSM, Ben Quinn) 

    ∙ For some time animal scientists have been puzzled by the  shrinking size, about 5% over the past quarter century, of the sheep on Hirta, the largest island in the remote Scottish St. Kilda archipelago. But as reported in the journal Science, they now think they have found the answer : while once harsh winters acted as a genetic selector by killing off the weaker specimens in farmers’ flocks, milder winters, earlier springs and more & better summer grazing have enabled more ‘runts’ to live long enough to pass on their genes.  

The farmers are more pre-occupied with over-regulation by the EU. 

WHEN FAIL-SAFE INEVITABLY FAILS (EJ, Charles B. Perrow) 

    ∙ The disappearance of an Air France jet over the South Atlantic & the subway crash in Washington highlight the extent to which we have become dependent on technology - the ‘driver’ of Washington’s Metro train had but two tasks : to close the doors & to activate an emergency stop if the computer failed to sense an obstacle ahead. But in ‘integrated’ computer systems “unforeseen events” can have domino effects that bring the whole system down (in one case, a short in a coffee maker triggered a chain of events that almost caused a jet liner to crash).  But since such events are “rare”, systems continue to proliferate since they are cheap, ‘eliminate the human factor & leverage other technology 

As if Three Mile Island, Chernobyl & the Québec blackout weren’t enough, the July 5th crash of two monorail trains at Disney World disproved once again the technical hubris that systems can be made “fail-safe”. For them to collide was to have been “physically impossible” since they were supposed to run on different tracks& were equipped with systems to automatically halt them if they came too close to one another. 

STYROFOAM DILEMMA : CHEAP BUT FOREVER

(Montreal Gazette, Catherine Solyom) 

    ∙ Polystyrene foam, invented by Dow Chemical in 1938, is everywhere & will be for at least 200 years longer than the rest of us. It’s popular because it’s cheap, light, durable, waterproof & well-insulating. But according to the French Ministry of Ecology the 14MM tonnes of it manufactured (& typically discarded after a single use) in the world each year represents a staggering volume of material since it is 95% air. In the continent-sized ‘Great Pacific Garbage Patch’ where currents aggregate trash floating in the ocean, there is 6x as much plastic detritus as there is plankton, a hazard for aquatic life that cannot tell the one from the other. Americans throw away 25BN Styrofoam cups each year. The EPA says that three quarters of the 3MM tons/year of polystyrene produced in the US ends up in landfills & much of the rest clogging up waterways. According to the American Chemistry Council < 1% of all polystyrene in the US is recycled. California’s Department of Conservation pegs the cost of recycling it at US$3,000+/tonne, vs. US$89 for glass, limiting its scrap value (although Toronto has begun to collect it & send it to a facility that uses it to make picture frames construction moldings). It is now banned in 30 California municipalities & the state legislature recently had a bill before it to altogether ban the use of styrofoam & other non-recyclable containers in all of the state’s restaurants & retail food vendors. 

It’s “cheap’ only on a ‘micro cost accounting basis that ignores society-wide costs. One painful change likely facing North America in the not-too-distant future will be a shift to a stricter  application of the ‘user pay’ principle (which will cause polystyrene to go the way of the dodo bird). Already one major Edmonton retailer recently shifted from plastic- to biodegradable one-trip shopping bags.  And the industry is counter attacking; hence the recent headline that “research” (based on the examination of just 16 people’s multi-trip cloth shopping bags) showed such bags hosted a myriad of bacteria (as does just about everything else in life, incl. our skins). 

STRAWS IN THE WIND 

    ∙ Director Robert Murray’s documentary The End of the Line now playing in art houses across the US & UK postulates that consumer ignorance, fishing industry clout & the West’s growing taste for sushi are causing the “total collapse” of many fish populations (& Canada’s cod experience suggests that, once collapsed, fish populations can stay collapsed).  

This is not news for anyone who has been paying attention. Fish in the ocean are  a “free good”. No one owns them, so it becomes a race to catch them before someone else does. Fishing fleets move almost in lockstep to rape, pillage & fish to death one fish stock after another.  For years already the global fish catch has exceeded sustainable levels. The amount of “bycatch” (of unwanted marine life that is dumped back, dead, into the sea) can run as high as 70% of the total catch. In Canada’s cod fishery the writing was on the wall when the maze of the nets made so fine that cod was caught before it was old enough to reproduce. The destructive effect of trawler nets on the coral beds, a nursery for the young of many species & a hiding place for many older ones, is said to be akin to that of a steam roller. Growing pollution levels are boosting jelly fish populations & oxygen-poor “blooms”, neither of them conducive to good fish habitat. Nature.com sets the date the oceans will be “fished out” at 2048. And yet the Vice-Chairman of Japan’s National Union of Sushi Chiefs can only complain that Japan without sushi, “It’s like America without steak.”  

    ∙ For two decades Ireland experienced GDP growth rates as high as 9%, making it Europe’s “Celtic Tiger”. But after years of 4% unemployment, in the past 18 months it has tripled. 

And the government has been forced to effectively nationalize the banks. 

    ∙ North American food retailers are finding that shoppers have become more price conscious, stocking up when there are sales & shifting from ‘name-’ to ‘house’- brands. 

This will hit manufacturers’ earnings harder than retailers’; for they often subsidize the stores’ sales & house brands are more profitable for retailers, & hence by definition less so for manufacturers. 

    ∙ The UN document The World Water Development Report published earlier this year said global demand for water is rising rapidly due to industrialization, rising living standards & the dietary effect of the latter. It warns that squabbles over water in politically unstable areas, such as Israel & the occupied territories, Haiti, Sri Lanka & Columbia could turn nasty & that water shortages are starting to constrain economic growth in places as varied as China, India & Indonesia on the one hand & Australia & the US on the other. It expects that within 30-50 years water shortages will create a new category of “climate-change refugees”. 

It also provided statistics on the total ‘water intensity’ of common staples (i.e. the total used in growing & mining, manufacturing & processing, and distributing, marketing & consuming them). Paper takes 80-2000 liters of water per kg. of product, sugar 3-400, steel 2-350, petrol 0.1-40, soap 1-35 & beer 8-25. But it doesn’t mention how often it is a case of ‘clean water in, polluted water out”.

    ∙ Once MIT researchers forecast temperature rises of 4̊F (2.2̊C) by 2100. Now they have doubled that, due to a faster-than-earlier-expected rise in greenhouse gas emissions, a lower takedown of CO2 by oceans & more Arctic permafrost melting releasing more CO2. 

The long-term risk of ignoring such views appears to increasingly outweigh the short-term benefits. 

    ∙ Researchers have found that consuming large amounts of cola can cause a potassium deficiency that can bring on major health problems, and that its high sugar- & caffeine content can change people’s blood chemistry in other dangerous ways. 

This must be compounded by the trend towards the ‘super-sizing’ of soft drinks. 

    ∙ Recently, at a conference in London, US Energy Secretary Steven Chu said that, if every roof in the world were painted white, the sunlight reflected back into space would have an environmental effect equal to turning off every car in the world for a decade (& would reduce the need to use energy for cooling buildings & running air-conditioning systems). 

This idea may seem far-fetched but has a stellar pedigree : it originated among researchers  at California’s Lawrence Berkeley National Laboratory & Chu himself is a Nobel laureate in physics.

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