Archive for the category “Economics”

Our economic growth system is reaching limits in a strange way

Gail Tverberg writes: We are experiencing a world economy that seems to be reaching limits, but the symptoms are not what peak oil groups warned about. Instead of high prices and lack of supply, we are facing indirect problems brought on by our high consumption of energy products. I have called it a double pump problem.

Gail Tverberg

Economic growth never seems to be as high as those making forecasts would like it to be. This is a record of recent forecasts by the International Monetary Fund:

Figure 1. World GDP Forecasts by the International Monetary Fund.

Figure 1. World GDP Forecasts by the International Monetary Fund.

Read more…

Paper: Sustainability Dynamics of Resource Use and Economic Growth

A Discussion on Sustaining the Dynamic Linkages between Renewable Natural Resources and the Economic System
Mihir Mathur & Swati Agarwal, TERI
systemIn this paper , we have used System Dynamics to test three popular policy options for sustaining Economic Growth, 1) Resource Efficiency, 2) Resource Efficiency and Green Growth, 3) Doubling of Resource Base due to technological advancement. The model outcomes indicate that the above policies fail to avoid the overshoot and fall of the economy due to resource depletion, but are successful in delaying it.

Read more…

Charles Eisenstein: Everything You’ve Been Told About Debt Is Wrong

With the United States’ household debt burden at $11.85 trillion, even the most modest challenges to its legitimacy have revolutionary implications.

Charles Eisenstein, Yes! Magazine

YES! illustration by Steve Brodner.The legitimacy of a given social order rests on the legitimacy of its debts. Even in ancient times this was so. In traditional cultures, debt in a broad sense—gifts to be reciprocated, memories of help rendered, obligations not yet fulfilled—was a glue that held society together. Everybody at one time or another owed something to someone else. Repayment of debt was inseparable from the meeting of social obligations; it resonated with the principles of fairness and gratitude. Read more…

News update

Parliamentary Standing Committee rejects TSR Subramanian report on environmental laws
Down to Earth
A Parliamentary Standing Committee (PSC) rejected a high-level committee (HLC) report that reviewed various Acts administered by the Ministry of Environment, Forests and Climate Change (MoEF&CC). The committee precisely noted that some of the essential recommendations made by the HLC “would result in an unacceptable dilution of the existing legal and policy architecture established to protect our environment”.

Over 450 projects being considered for environmental clearance: Government
The Economic Times
More than 450 projects in various sectors are presently being considered by the government for environmental clearance while more than 200 are awaiting forest clearance, Lok Sabha was informed. The number of projects under consideration for environmental clearance in the Ministry (of Environment) are 475 and for approval under Forest (Conservation) Act 1980 are 240, Environment Minister Prakash Javadekar said in a written reply.

Drop demand for finance from rich countries: Arvind Subramanian
Business Standard
Chief Economic Advisor (CEA) Arvind Subramanian has suggested Prime Minister Narendra Modi and Finance Minister Arun Jaitley to radically alter Indias climate-change policy and negotiation strategy before the new global climate-change agreement, to be finalised in Paris by December this year. In a note to the two ministers which has been reviewed by Business Standard Subramanian has recommended that India should stop insisting that the developed countries provide financing for poor countries to fight climate change, as they are required to under the UN climate convention.

Cochin Airport goes solar
Catch News
The Cochin Airport (CIAL) is now the first in the world to be fully powered by solar energy. No small feat, but one which they managed to accomplish in just six months. Thats exactly how long it took for them to install 46,000 solar panels across 45 acres of land, to achieve a 12MW plant. (Watch video) (Also read: Defunct Indraprastha power station to be converted into solar plant)

India’s war on Greenpeace
Samanth Subramanian, The Guardian UK
A simmering suspicion of foreign influences is written deep into the BJP’s nationalist DNA, and it plays marvellously with its most loyal voters – many of whom proclaim their belief, loudly and often, that western powers are eager to throttle India’s rise. In particular, Modi – who steers his government with stifling control – has never hidden his distaste for NGOs and their “five-star activists”, as he once labelled them.

Four charts that show how India and the world are living beyond their ecological means
Nayantara Narayanan, Scroll.in 
As of Thursday, August 13, 2015, we have used up all the ecological resources that the earth could generate through the entire year, according to calculations by sustainability think tank Global Footprint Network. In other words, from this day – called the Earth Overshoot Day – on we will be overdrawing from our global annual budget of natural resources. (Also read: Earth Overshoot Day: a reminder that our world is dying and we are killing it)

The future isnt what it used to be
Kurt Cobb
The Mad Max franchise survives not because people take its prognostications seriously, but because it is good entertainment. Most moviegoers unconsciously project their apocalyptic fears onto these films to obtain a catharsis. This allows them to put aside any serious concerns about the future as mere fantasy.

How Economic Growth Fails
Gail Tverberg
The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world? Many people imagine that we will “run out” of some necessary resource, such as oil, but I see the situation differently.

 

News update

OMG… Greenland’s ice sheets are melting fast
The Guardian UK
An urgent attempt to study the rate at which Greenland’s mighty ice sheets are melting has been launched by Nasa. The aim of the six-year project, called Oceans Melting Greenland (OMG), is to understand how fast the world’s warming seas are now eroding the edges of the island’s vast icecaps. Warming air temperatures are already causing considerable glacier loss there, but the factors involving the sea that laps the bases of its great ice masses, and which is also heating up, are less well understood.

Snatching Defeat
Albert Bates, The Great Change
Last week we concluded our post on climate change with a quote from James Hansen, the matter is urgent and calls for emergency cooperation among nations. All this year we have been leading up to our collective fin de seicle moment in December, the grand denouement of the Framework Convention on Climate Change and Kyoto Protocol in Paris. At this late date, we are frankly pessimistic for the outcome there.

Undamming Rivers: A Chance For New Clean Energy Source
John Waldman & Karin Limburg, Yale Environment 360
Many hydroelectric dams produce modest amounts of power yet do enormous damage to rivers and fish populations. Why not take down these aging structures, build solar farms in the drained reservoirs, and restore the natural ecology of the rivers?

The Devil in Obama’s New Emissions Target for the US Lies in Base Year Details
Vasudevan Mukunth, The Wire
The US’s carbon dioxide emissions peaked in 2005, at 5,828.63 million metric tons. This convenient choice of a base year allows the US a leeway that’s 18.64% higher than its 1990 emissions – 1990 being the year that the Kyoto Protocol uses as a base. The absence of any rules on what can or can’t constitute base years is leveraged by many countries. In Europe, for example, the base year is 1990 because that’s when emissions peaked followed by a steady decline in industrial activity as well as a growing adoption of renewable energy options.

Japan restarts first nuclear reactor since Fukushima disaster
The Guardian UK
Japan has begun a controversial return to nuclear power generation with the restart of a reactor in the country’s south-west, four and a half years after its faith in atomic energy was shattered by the triple meltdown at Fukushima Daiichi. Kyushu Electric Power, the operator of the Sendai plant, said it had restarted one of the facility’s two reactors on Tuesday morning, in defiance of strong local opposition. The move marks the first time Japan has generated nuclear power since a post-Fukushima shutdown of all its 44 operable reactors two years ago.

Space mining is closer than you think, and the prospects are great
Andrew Dempster, The Conversation
Recently, the American cosmologist Neil deGrasse Tyson gushed about the prospects of mining in space, and the benefits that might afford humanity. Is this really plausible? What can we mine in space? And will it really deliver world peace, or just another realm for competition and conflict? Perhaps a look at the immediate past and near future may help us answer some of these questions.

Sustainable development is failing but there are alternatives to capitalism
Ashish Kothari, Federico Demaria and Alberto Acosta, The Guardian UK
In the face of worsening ecological and economic crises and continuing social deprivation, the last two decades have seen two broad trends emerge among those seeking sustainability, equality and justice. First there are the green economy and sustainable development approaches that dominate the upcoming Paris climate summit and the post-2015 sustainable development goals (SDGs). To date, such measures have failed to deliver a harmonisation of economic growth, social welfare and environmental protection. Political ecology paradigms, on the other hand, call for more fundamental changes, challenging the predominance of growth-oriented development based on fossil fuels, neoliberal capitalism and related forms of so-called representative democracy.

Why the Greek Tragedy is Just the Opening Act

Sajai Jose

Alexis Tsipras, the first Left Greek Prime Minister. Credit: SpaceShoe/Flickr, CC 2.0.

Alexis Tsipras, the first Left Greek Prime Minister. Credit: SpaceShoe/Flickr, CC 2.0. Cover image of old woman in Athens is also by Spaceshoe

Greece has become the first developed country to default on an International Monetary Fund loan, itself a fraction of a €323 billion national debt equivalent to more than 175% of the country’s GDP.

Responsibility for the crisis has been pinned on, among others, the “Gucci-wearing thieves” of Goldman Sachs, one of the world’s largest investment banks. Whereas, Greece’s creditors, together known as the troika”- the European Central Bank, the International Monetary Fund and other European countries (represented by the EU commission) blames it on Greek profligacy.

In a way, both sides are right, but the question worth asking is why a default by tiny Greece, with a mere 2% of the EU’s population and 1.2% of its GDP, gives the impression of such high stakes riding on it. And if Greece is such a small player in the EU, it’s still smaller in global terms. So what explains the world’s overwhelming interest in Greece? Read more…

Financial crash alert!

(Note: As the world watches the unfolding crisis in Greece with bated breath, heres a look at other, perhaps lesser known trends that indicate a global financial crash is in the offing. Heres a collection of articles by prominent economists and analysts that  make that case. Some pieces are dated, but have been included here for their insight on the malaise plaguing the global financial system.)

World economy may be slipping into 1930s Great Depression problems: RBIs Raghuram Rajan
The Economic Times
When Raghuram Rajan warned about a looming financial market crisis a decade ago, former US Treasury Secretary Lawrence Summers said he was being Luddite. In the event, Rajan was right. Now the Reserve Bank of India governor is sounding the alarm again — the very efforts of central banks in the developed world to avoid another Great Depression by keeping interest rates at zero may lead to precisely that outcome.

Has Chinas Stock Bubble Popped?
Jesse Colombo, Forbes.com
China’s red-hot stock market fell approximately 25 percent in the past couple weeks due to increasing regulatory scrutiny and growing bubble fears. The 145 percent rally began last summer after the government further opened the nation’s equity market to foreign investors, and domestic retail investors have scrambled to get a piece of the action.

New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth
From Zerohedge.com
A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report warns.The 16th annual Geneva Report, commissioned by the International Centre for Monetary and Banking Studies and written by a panel of senior economists including three former senior central bankers, predicts interest rates across the world will have to stay low for a “very, very long” time to enable households, companies and governments to service their debts and avoid another crash.

The Coming Crash of All Crashes – but in Debt
Martin Armstrong, Armstrong Economics
Why are governments rushing to eliminate cash? During previous recoveries following the recessionary declines from the peaks in the Economic Confidence Model, the central banks were able to build up their credibility and ammunition so to speak by raising interest rates during the recovery. This time, ever since we began moving toward Transactional Banking with the repeal of Glass Steagall in 1999, banks have looked at profits rather than their role within the economic landscape.

The case for a global recession in 2015
Chris Matthews, Fortune
Optimists hope that an accelerating U.S. economy will have what it takes to drag the rest of the world out of the doldrums, as it has done during so many past recoveries. But David Levy, economist and chairman of the Jerome Levy Forecasting Center, argues that the problems of the rest of the world will end up taking the U.S. down, rather than the other way around.

Is a global economic recession coming? Copper price say yes
Debbie Carlson, The Guardian UK
The copper market crashed overnight to its lowest level since the middle of the financial crisis in 2008, fueling fears that the global economy is slowing more sharply than many experts had anticipated. Like oil, copper has a deep effect on the world economy because it is key for phone lines, cables and other infrastructure. It is also important to several world economies; the world’s largest copper producers, in order, are Chile, China, Peru, the US and Australia. The copper market is just the latest commodities market to suffer from a kind of panic, as oil prices have halved in just a few months.

Monetary Policy for the Next Recession
Clive Crook, Bloomberg View
By pre-crash standards, the big central banks have made and continue to make amazing efforts to support demand and keep their economies running. Quantitative easing would once have been seen as reckless. The world avoided another Great Depression. Yet even in the U.S., this is a seriously sub-par recovery; growth in Europe and Japan has been worse still. Now imagine a big new financial shock. Its quite possible that all three economies would fall back into recession. What then?

The Liquidity Time Bomb
Nouriel Roubini, Project Syndicate
A paradox has emerged in the financial markets of the advanced economies since the 2008 global financial crisis. Unconventional monetary policies have created a massive overhang of liquidity. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity.

The Dollar Will Die with a Whimper, Not a Bang
James Rickards
The decline of the dollar as a reserve currency started in 2000 with the advent of the euro and accelerated in 2010 with the beginning of a new currency war. That decline is now being amplified by China’s emergence as a major creditor and gold power. Not to mention the actions of a new anti-dollar alliance consisting of the BRICS, Iran and others. If history is a guide, inflation in U.S. dollar prices will come next.

The Insatiable God
George Monbiot
Another crash is coming. We all know it, now even David Cameron acknowledges it. The only questions are what the immediate catalyst will be, and when it begins. You can take your pick. The Financial Times reports today that China now resembles the US in 2007. Domestic bank loans have risen 40% since 2008, while “the ability to repay that debt has deteriorated dramatically”. Property prices are falling and the companies that run China’s shadow banking system provide “virtually no disclosure” of their liabilities.

Book Extract: The Ingredients Of A Market Crash
By John Hussman, Zerohedge.com

Peak Oil from the Demand Side: A Prophetic New Model

Avery Morrow, Peak Oil Barrel

The most attention-grabbing attempts to predict oil futures have come from geologists and environmental activists, who tend to look solely at production. An overlooked doctoral thesis by Christophe McGlade, Uncertainties in the outlook for oil and gas, in contrast, focuses on how both supply and demand might be constrained in the coming decades. Peak oil researchers should take note of McGlade’s thesis because he predicted, in November 2013, that oil prices would sink, and that they will stay low throughout the second half of this decade. I found this paper on Google Scholar and have no connection with the author, but I appreciate his careful consideration of peak oil arguments, and his ability to distance himself from the more narrow-minded aspects of both economic and geological thinking. Here’s a representative quote from the middle of the thesis, p. 216:

The focus of much of the discussion of peak oil is on the maximum rates of conventional oil production. Apart from issues over how this term is defined, results suggest that focussing on an exclusive or narrow definition of oil belies the true complexity of oil production and can lead to somewhat misleading conclusions. The more narrow the definition of oil that is considered (e.g. by excluding certain categories of oil such as light tight oil or Arctic oil), the more likely it is that this will reach a peak and subsequent decline, but the less relevant such an event would be.

Read more…

News update

Fossil fuels subsidised by $10m a minute, says IMF
The Guardian UK
Fossil fuel companies are benefitting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund. The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments. The vast sum is largely due to polluters not paying the costs imposed on governments by the burning of coal, oil and gas.

The IMF Tells a Half-Truth
Richard Heinberg
It’s certainly helpful to have an accounting of the externalities of our collective fossil fuel consumption. But the choice of the word “subsidies” over the more precise “externalities” makes a difference: governments can cancel subsidies in the forms of tax breaks and gifts, but they can’t so easily cancel fossil fuel externalities without curtailing fossil fuel consumption—and that’s a big job, if they’re to do it in a way that doesn’t entail the rapid, uncontrolled collapse of society.

Can the world economy survive without fossil fuels?
Larry Elliott, The Guardian UK
In terms of reducing global poverty capitalism has been a success, but this growth has put pressure on the planet. The question, therefore, is whether it is possible to marry two seemingly contradictory objectives. Can we imagine a future that is cleaner, greener and sustainable – one that avoids climate armageddon – without abandoning the idea of growth and, thus, forcing living standards into decline? The answer is that it will be hellishly difficult, but it is just about feasible if we make the right choices – and start making them now.

Seven Surprising Realities Behind The Great Transition to Renewable Energy
Earth Policy Institute
The global transition to clean, renewable energy and away from nuclear and fossils is well under way, with remarkable developments happening every day. The Great Transition by Lester Brown, Janet Larsen, Matt Roney, and Emily Adams lays out a tremendous range of these developments – here are seven that may surprise you.

How Sustainable is PV Solar Power?
Low Tech Magazine
Its generally assumed that it only takes a few years before solar panels have generated as much energy as it took to make them, resulting in very low greenhouse gas emissions compared to conventional grid electricity. A more critical analysis shows that the cumulative energy and CO2 balance of the industry is negative, meaning that solar PV has actually increased energy use and greenhouse gas emissions instead of lowering them.

The Counterfeit Shale Revolution (pdf)
Arthur Berman
The shale revolution is counterfeit. Tight oil and shale gas are imitations of something valuable and shale promoters intentionally deceive the public about their true value. It is counterfeit because the cost of produc4on is more than the global economy can bear. Producers and analysts deceive the public with misleading and incorrect break-even prices that exclude important costs or are based on exaggerated reserves. There is no shale revolution: it is a final, desperate effort to squeeze the last remaining petroleum from the worst possible rock.

Are we approaching peak population growth?
Max Roser
Since the 18th century, the world population has seen a rapid increase; between 1900 and 2000 the increase in world population was three times as great as the increase during the entire previous history of humankind – in just 100 years the world population increased from 1.5 to 6.1 billion. But this development is now coming to an end, and we will not experience a similarly rapid increase in population growth over the course of this century.

Book Review of Overshoot by William R. Catton Jr.
Craig Straub, The Social Contract
Catton concludes that the human community is condemned to bet on an uncertain future. Misperception of the human situation will motivate efforts to pursue solutions which make matters worse. An ecological understanding of the human predicament will help avoid constructing the road to hell paved with good intentions.

Challenging Thomas Piketty: Growth is not the answer to inequality

 Tim Jackson, The Guardian, UK

Those like me who fear that the continued pursuit of economic growth on a finite planet might be neither possible nor desirable face a different kind of challenge, brought home to us by Thomas Piketty’s 700 page tome Capital in the 21st Century. The astonishing popularity of the “rock-star economist” is itself a resounding testament to our concern for inequality.

But his painstaking analysis reveals an uncomfortable story. Piketty places the responsibility for rising inequality firmly and squarely on declining growth rates. Like Benjamin Friedman in The Moral Consequences of Economic Growth, he implies that only growth can bring civility, in part because an expanding economy allows for a degree of ‘catching up’ by the poorest in society, without much sacrifice or compromise by the rich.

For those of us less than convinced by the mantra of growth at all costs, the idea that only growth can save us from disastrous inequality poses some pretty serious challenges to our endeavour. Serious enough, that two of us – my Canadian colleague professor Peter Victor and I – decided to spend a bit more time analysing Piketty’s arguments.

What we found was fascinating. Piketty’s hypothesis only holds when the growth rate, savings rate and return on capital remain unchanged over long periods of time. When they move about, as they usually do, the economy is always chasing equilibrium but never quite arrives. In some circumstances, Piketty is absolutely right: declining growth can lead to rising inequality. In others, the exact reverse can happen: de-growth can in fact be compatible with greater equality.

This was definitely good news of a kind. Even more striking were the circumstances that made the difference. It turns out that if we are serious about reducing inequality, we must pay attention to the quality – as well as the quantity – of work in our economy. The endless mining of working life in pursuit of productivity gains for the owners of capital is not just detrimental to prosperity, it is inimicable to social justice.

If the debate about inequality is really back on the political agenda, it seems important that we approach it sensibly, without resorting to comforting half-truths. It remains to be seen how that will play out in a political debate mired in trivialities. Read the original article

Read Tim Jacksons paper: Does slow growth increase inequality?
Read another article by Tim Jackson: The dilemma of growth: prosperity v economic expansion

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