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Corporate Profits and Aggregate Demand

by Metatone Sun Apr 28th, 2013 at 04:16:31 AM EST

Some random reading on the internet got me thinking today:

Apple's new pitch to investors | Felix Salmon

Apple is trading at an astonishingly low valuation, with a p/e ratio in single digits, because it has now become that animal investors like least: a slow-growing tech stock. Either one is fine on its own, and both slow-growing stocks and fast-growing tech stocks can support much higher multiples than Apple is seeing right now. But conservative investors, who like slow-growing stocks with high dividends, are constitutionally uncomfortable with the volatility inherent in the tech world. And technology investors, who are happy taking that kind of risk, want to see substantial growth. Apple, notwithstanding the fact that it's one of the most valuable companies in the world, is falling through the capital-markets cracks.

front-paged by afew


It got me wondering about profits and Aggregate Demand.

We know empirically that wages do more for AD than profits - but I wonder if profits have also reduced in their AD potential over the years.

First, as with Apple, we've constructed a sector of companies where dividends don't really exist. As a result corporate profits tend to go into the bank. Which leads us back to the banking-AD transmission problems we already know about.

As the same time in terms of the particular problem of immediate AD, it strikes me that even dividends are problematic. If, as is often asserted, many shares are owned by retirement funds then we have an extra problems.

(As an aside I'm not sure that the "retirement funds own the corporations" narrative is correct, but I haven't worked out how to prove/disprove it.)

Anyway, the extra problem - profits go into dividends, which go into retirement funds - some of which go to paying out pensions right now, but the majority of which still go (due to demographics) to further investing in assets. So with the expansion of private retirement funds it seems we've largely created an asset-profit-asset cycle, which actually sucks money out of the rest of the economy.

Of course, the first defence of the free-market economist is that profits being used to buy assets enables investment. However, since the asset classes in question rarely involve new cash into businesses, we need to view this with scepticism...

Display:
Tech press reports Apple is sitting on $145 billion in cash.  Google has about $50 billion.  MicroSoft somewhere around $60 billion.  US Hedge Funds have about $418 billion to play with. Even these numbers pale to the ~$25 trillion being held by US corporations in off-shore accounts.  

The world is awash in cash.  What the world needs is some way to fruitfully use the cash.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Apr 25th, 2013 at 12:58:07 PM EST
That is exactly what Yanis Varoufakis is saying in Global Minotaur. See this. The whole article is worth a read as a concise statement of his work as applied to the current situation.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 26th, 2013 at 01:31:47 PM EST
[ Parent ]
This:

We know that finance under capitalism is not epiphenomenal on the real economy, as our general equilibrium models assume.

needs to stapled to the head of every Policy Decision Maker.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Apr 26th, 2013 at 01:52:42 PM EST
[ Parent ]
Apple has recently decided on a massive dividend/buyback (can't recall which one). Ironically, they've also just performed a huge bond offering to finance this. But don't they have a huge amount of cash already, why do they need to finance it? Tax reasons. Repatriating the profits to the US would result in a massive tax charge. Better to borrow the money, and wait and hope for another tax amnesty and bring the profits back then.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu May 9th, 2013 at 07:24:40 AM EST
[ Parent ]
For some reason this has long been my intuitive impression, but I've never had any strong support.

The drive for efficiency, downsizing, and corporate consolidation has resulted in a system where the big corporations take more from the general economy than they ever pump back via wages, and this money sits around idly reproducing itself in the bank accounts and investment firms of the richest few.  Corporate profits exist at the expense of the larger system, as they and their rich owners already have more money than they could ever spend in the real economy.

by Zwackus on Thu Apr 25th, 2013 at 09:36:07 PM EST
The name of the game is 'differential accumulation' and, at the higher levels, it is a matter of survival as a player. Big fish eat small fish so be a big fish. You are not even a fish until your wealth exceeds about $40 million. Below that level you are just krill for the filter feeders, looking for some safe place to hide. Doctors? Yum.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 26th, 2013 at 01:41:07 PM EST
[ Parent ]
Doctors: The grist every investment scam runs on.
by rifek on Fri May 10th, 2013 at 12:16:19 PM EST
[ Parent ]
Over the last couple of decades preceding 2008, it has been hugely more profitable to speculate in various ways (buy growth stocks, buy real estate, buy sovereign debt, buy commodities) than to invest in factories or whatever.

So, the actual productive economy is sort of a withering atrophied appendage, from the point of view of capital demanding 10% or more in annual return.

Now it's not so easy to make your 10%+. All this private money could be invested to bring back economic growth. In the aggregate, that would be moderately profitable for the investors. I have the impression that, again in the aggregate, the greedy money is holding out for the next quick buck, rather than investing in new productive capacity for a return of, say, 3 to 5%.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Fri Apr 26th, 2013 at 03:37:02 AM EST
And since

1 quick buck speculative investment tends to be much more destructive than productive, and the

2 existence of huge sums of private wealth far in excess of the total value of all real assets has a necessarily distorting if not destructive effect on any planned or proposed ventures in the real economy,

I might propose that wiping out such idle wealth entirely, and reinflating the economy via governmental creation and dispersal of money would result in a far healthier economy over all.  

by Zwackus on Fri Apr 26th, 2013 at 04:54:28 AM EST
[ Parent ]
Now it's not so easy to make your 10%+.

That is why borderline and not so borderline criminal activity is so popular with the risk taking set.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 26th, 2013 at 01:54:29 PM EST
[ Parent ]
Economic criminality in those circles appears to be seen as criminal only if you get caught and sentenced. Otherwise it was legal and fine and dandy.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Apr 26th, 2013 at 02:43:16 PM EST
[ Parent ]
I wouldn't agree with this. I mean, looking at the fat ROCE margins of some companies, I mean, wow. It would be positively criminal for those companies to hand out generous dividends instead of plowing the profits back into the business, at least if they are operating in markets that show some growth.

The problem is the companies that neither reinvest, buy back stocks or have big dividends. The super-solid ones like Apple and Microsoft that put the money in the bank (lowering ROCE, ROE, ROI, argh...), and to make things worse, that money isn't even lent out by banks but end up as excess reserves at the central bank.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu May 9th, 2013 at 07:30:13 AM EST
[ Parent ]
Do private pensions create voters who fear inflation and nationalisation of failed banks more than continuation of recession?
by Jute on Fri Apr 26th, 2013 at 05:49:02 AM EST
The EU is destroying the economic prospects of its under-60s in order to protect the  purchasing power of the private pensions of the over-60s... Too bad that, with the economy in ruins, there won't be anything to buy with that purchasing power anyway...

The Euro will outlivebury us all --- Jean-Claude Juncker
by Migeru (migeru at eurotrib dot com) on Fri Apr 26th, 2013 at 06:09:28 AM EST
[ Parent ]
And we'll see what sort of care facilities their broke children and grandchildren will be willing to provide them.
by rifek on Fri May 10th, 2013 at 12:20:37 PM EST
[ Parent ]
That's a darn good question.

In the US that is the sort of thing Pew Research and Public Policy Polling seek to answer¹.  I don't know if there are equivalents in the EU.

----------------------------------------------------------------------------------------------

¹ not that the SeriousPeople© bother to listen, mind you

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Apr 26th, 2013 at 01:47:52 PM EST
[ Parent ]
Of course, the first defence of the free-market economist is that profits being used to buy assets enables investment. However, since the asset classes in question rarely involve new cash into businesses, we need to view this with scepticism...
Primary market purchases (rights issues, bond issues) are investment. Secondary market purchases (paper pushing) are speculation.

However, firms can and do use financial assets (often their own shares) as collateral for credit. So rising asset prices improve collateral availability. What is destroyed when the asset markets plunge is not "wealth", it is "collateral".

The Euro will outlivebury us all --- Jean-Claude Juncker

by Migeru (migeru at eurotrib dot com) on Fri Apr 26th, 2013 at 06:13:28 AM EST
Of course, the first defence of the free-market economist Lysenkoist hack is that profits being used to buy assets enables investment. However, since the asset classes in question rarely involve new cash into businesses this assertion rests on the loanable funds fallacy, which was debunked a century ago, we need to view this with scepticism...

FIFY

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 28th, 2013 at 05:11:54 AM EST
I'm afraid that we're so far from winning the loanable funds debate that I look for smaller wins.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Apr 28th, 2013 at 06:55:11 AM EST
[ Parent ]
that goes into "assets" fuels asset price inflation (money does not translate into more stuff - stuff (but only capital) translates into more money). What we need if for central banks to fight that kind of inflation too.

I think it is not at all irrelevant that there was no real estate bubble in Germany - Germans don't think they need to worry about asset price inflation (and the corresponding distorsions in the debt and collateral markets)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Apr 28th, 2013 at 07:23:28 AM EST
Not to worry: some are hard at work trying to inflate a real estate bubble in Germany too...
by Bernard on Sun Apr 28th, 2013 at 09:20:41 AM EST
[ Parent ]
People here seem to be very keen on separating nominal versus real growth. An idea that makes sense to me.

But, when I read this post (and some of the comments) I start to see the two getting mixed in strange ways.

If all this cash standing idle would suddenly be put in the hands of consumerscitizens, what would be the advantage?

A little bit would probably be putting the economy at full potential, I can see that.

But all this cash, if "liberated", what would it bring? I would like to remind that there seems to be a consensus around here on the topic of "physical limits to growth", so:

  1. If this money was mostly liberated on the Western world, this would mostly allocate resources to westerners further impoverishing "3rd world" citizens (through e.g. inflation of commodities).

  2. If this money was allocated "Southern hemisphere" we would suffer a bit in the "North" (again due to inflation).

2 Would be better than 1, in my book. But still...

I simply do not see much space for REAL increase in physical aggregate demand: simply because that many resources in the planet are at its limits.

I am not saying that this is an "all or nothing issue". Obviously we see a massive build-up in inequality and that should be reversed. Furthermore, if money was made available for the people there would probably be a decrease in unemployment, etc...

BUT, wage increase could not increase aggregate demand for physical goods if there is no supply (which in not constrained only by demand, but - more and more - by physical availability in the planet).

It seems to me that part of the reasoning here is still (unconsciously) based on the idea that supply is only constrained by demand... Forgetting physical limits.

And that real and nominal sometimes get mixed a bit too much...

by cagatacos on Sun Apr 28th, 2013 at 10:15:17 AM EST
The point is that skewed distribution of wealth and income impose a constraint on top of the physical constraints.

Liberating all the voluntarily idle money to be productively employed will not allow us outperform our physical constraints - we don't get to renegotiate the laws of nature. But not liberating it will reliably cause us to underperform our physical constraints.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 28th, 2013 at 03:06:38 PM EST
[ Parent ]
I understand the point. But should not (in the "Western world") aggregate demand go DOWN?

The point is: resource allocation is highly skewed between "West" and "Rest". It is impossible for our standard of life to be shared with all the world simply because the planet would not "deliver" it.

Therefore the rational and fair (not that humans are either...) thing to do would be for demand in the West to go down?

BTW, this is another argument for less inequality: in a resource constrained world if the wealth of some is unbound, others will surely starve...

Note that (obviously) I an not saying that the current way this is happening is the Good Way(tm), on the contrary...

by cagatacos on Sun Apr 28th, 2013 at 04:26:09 PM EST
[ Parent ]
Demand for resources should go down and demand for services should go up.

Which often translates to down with private sector production and up with public sector services. And we can't have that.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Apr 28th, 2013 at 04:37:02 PM EST
[ Parent ]
Yes.  It does not really cost much more in the way of physical resources for a person to be sitting around unemployed, or for that same person to be employed as a social worker, teacher, or massage therapist.

Physical constraints may or may not force a contraction of living standards in the future, with living standards here meaning the ability to eat meat on demand and buy lots of disposable stuff.  However, physical constraints alone should never lead to mass involuntary unemployment.

by Zwackus on Sun Apr 28th, 2013 at 06:39:57 PM EST
[ Parent ]
physical constraints alone should never lead to mass involuntary unemployment
My work here is done.

The Euro will outlivebury us all --- Jean-Claude Juncker
by Migeru (migeru at eurotrib dot com) on Sun Apr 28th, 2013 at 07:41:39 PM EST
[ Parent ]
Business-as-usual overstrains the world's carrying capacity. Demand therefore has to go down. It does not, however, follow that any demand reduction one can dream up will reduce the strain on the world's carrying capacity.

It is not obvious that reducing demand for, say, wind turbines will increase the carrying capacity available to the rest of the world.

And at the political level, any story that involves the sentence "and then all US and EU citizens reduce their consumption by 20 % across the board" will get you not elected. The tricks here are "all" and "across the board" - not all consumption is created equal when it comes to sustainability, and not all consumers have equal room to cut consumption. Which means that total demand is too heavy-handed an aggregation when discussing sustainability.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 28th, 2013 at 04:45:36 PM EST
[ Parent ]
I can see the issue in abstract, but it is the concrete becomes much more clouded.

For instance, if one increases the share of wages and "aggregate demand" goes up, there is an immense caveat there. You actually have to explain people that their new-found money will not buy what they seem to want to buy (a new car, a plane trip to Barbados for vacation, or, by the way, gas to warm up in the winter), but something else. They will be (in terms of consumption of PHYSICAL goods) worse off, they will be, in absolute physical terms, poorer.

Because, when I see "aggregate demand" I see an interpretation of physical growth. You might say that is not the same thing and I understand that, but then we are diverging from the common interpretation of "increase in the demand".

by cagatacos on Mon Apr 29th, 2013 at 05:34:48 AM EST
[ Parent ]
Right now I'm more concerned not with improving people's purchasing power, but with ensuring they don't fall into debt servitude. Which is the crippling outcome of a deep recession with massive long-term unemployment in the wake of a massive private credit bubble.

The Euro will outlivebury us all --- Jean-Claude Juncker
by Migeru (migeru at eurotrib dot com) on Mon Apr 29th, 2013 at 06:22:31 AM EST
[ Parent ]
The answer to that, surely, is the changes in relative pricing that occur in response to scarcity and abundance.

If physical resource limitations push up the price of a new car and the fuel to run it, and the price of that flight to Barbados, then labour abundance should lower the prices of massage, guitar lessons, home help, etc. There are plenty of low-resource-use things to spend your money on.

Most people, in the long run, would feel better off with such an evolution. On condition that they can escape the cultural hegemony of the high-consumption advertising regime.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Apr 29th, 2013 at 09:04:21 AM EST
[ Parent ]
Well - the values of 'the system' explicitly reward and praise conspicuous and wasteful consumption. If you have one big house, you need at least two more. If you have an expensive car, you need a private jet. If you have a small private jet you need a much bigger one.

And so on.

There aren't proper accounting measures for nebulous fluffy liberal nonsense like 'community benefit' or 'happiness' or 'feelgood factor.'

It's going to be difficult to change things until competitive acquisition stops being considered the ultimate - and only - social good.

And we're still a long way from a culture where everyone gets enough to live a reliable basic existence, but inventiveness, intelligence, creativity, and the ability to promote same, are valued far more than evidence of acquisitive ability.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 29th, 2013 at 09:30:43 AM EST
[ Parent ]
ThatBritGuy:
And we're still a long way from a culture where everyone gets enough to live a reliable basic existence, but inventiveness, intelligence, creativity, and the ability to promote same, are valued far more than evidence of acquisitive ability.

this is the reflection of the tight little ball of fear people are taught to internalise while young.

it is a mental illness, with symptoms of cruelty objectivisation of people disadvantaged in comparison.

as long as there is one man richer than you, your sleep is tormented by fear that you can't outwit the outwitters, who are all just waiting for the moment you drop your guard. no peace indeed for the wicked.

fun life...

christopher columbus whipped and raped native women, and wrote blithely about it, all the while commenting on how these natives were so naive because they didn't worship possessions. "what willing slaves they'll make", quoth he, marvelling how easy it was to take advantage of them.

it really is a soul virus, and we euroangloamericans have taught the rest of the world well by now how to operate without the ballast of community or compassion.

they caught on fast...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Apr 29th, 2013 at 11:49:14 AM EST
[ Parent ]
On top of that fear, we've severed virtually everyone from the land, so they have no direct access to food.  Then the media give an endless stream of stories about what would happen if the food supply were cut off and bread riots broke out, thereby feeding the fear and encouraging people to support the "benevolent masters" who keep the food supply running.
by rifek on Fri May 10th, 2013 at 12:51:40 PM EST
[ Parent ]
The high-consumption culture is in direct contradiction with a resource constrained world.

If people (and societies) define their "success" as the ever-increase of acquisition of goods then physical reality is at odds with that.

And physical reality does not change people's perceptions and cultural values overnight (that would entail the ridiculous assumption of a rational, omniscient species). For me, the obvious conclusion is that we are in for a lot of pain. Pain that is partially caused by the dissonance between what is desired and what is possible.

This is what leads me to believe that standard societal strategies will not work (i.e. good governance). Changing policies will hit the brick wall of what people believe it is possible (there will not be support for policies appropriate in a resource constrained world). Progress/growth is the most powerful religion.

[There are, of course, other causes for the pain. Like increasing inequality, ...]

by cagatacos on Mon Apr 29th, 2013 at 02:06:36 PM EST
[ Parent ]
If people (and societies) define their "success" as the ever-increase of acquisition of goods then physical reality is at odds with that.

Yes, of course. But psychological reality is that - at least for now - that is how people define success.

And there are obvious psychological rewards, in terms of ego satisfaction, increased physical comfort, increased opportunities for enjoyment of all kinds (both legal and illegal), and, not least, increased opportunities for mating and reproduction.

So if you want to rewire that psychological reality, you have to prove - in mediaspeak, and not just empirically - that those rewards are unsatisfying and ultimately disappointing.

Which is a problem, because in some very basic ways they really aren't.

The basic conflict is between Maslow's hierarchy of needs for most of the population, rational foresight for a minority, and sociopathy for a dangerous but immensely influential smaller minority.

And foresight is always going to lose that contest.

So what do you do? I don't know. But I think it makes no sense to claim that the resource-constrained position is reality-based while simultaneously denying psychological reality.

If there is an answer - and there may not be, beyond allowing consequences to take their course, as in any other logistic population explosions - it has to be psychologically savvy and politically adept enough to appeal to the majority, as well as rationally planned.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 29th, 2013 at 04:01:35 PM EST
[ Parent ]
[Reordering your answer]

So what do you do? I don't know. But I think it makes no sense to claim that the resource-constrained position is reality-based while simultaneously denying psychological reality.

I do not know if I was clear, but I was not, in any way, denying psychological reality. On the contrary: save for hard-cut physical laws, psychosocial reality is the main reality.

If there is an answer - and there may not be, beyond allowing consequences to take their course, as in any other logistic population explosions - it has to be psychologically savvy and politically adept enough to appeal to the majority, as well as rationally planned.

My view is precisely that the only "answer" is allowing consequences to take their course. I find this "answer" to be morally unacceptable though: in the event of an hypothetical alternative answer be possible not pursuing it is almost criminal. At least I try not to be in the business of discouraging others to have more optimistic views (only suggesting that failure should not be very frustrating).

So if you want to rewire that psychological reality, you have to prove - in mediaspeak, and not just empirically - that those rewards are unsatisfying and ultimately disappointing.

Which is a problem, because in some very basic ways they really aren't.

The basic conflict is between Maslow's hierarchy of needs for most of the population, rational foresight for a minority, and sociopathy for a dangerous but immensely influential smaller minority.

I think I agree with this, I suppose it would be consensual to say that the current sociopathic arragement propagandises in favour of the lower level of hierarchy of needs. Or, to put it in a more practical  way: while in the Western World(TM) a large part of the population has its needs for food, shelter and safety mostly resolved they are actively encouraged to want more on those levels...

by cagatacos on Wed May 1st, 2013 at 06:12:22 AM EST
[ Parent ]
Bull. Crap. Energy is endless, and everything else is atoms waiting to be recycled.  

Further, it is dangerous bullcrap. It annoys me that I keep having to point this out, but if the environmental movement is seen to stand for - to advocate- mass poverty, it will loose all popular support, and die a highly deserved death. This entire line of thinking is a dead end, because if it is mistaken - and I am quite confident it is -  it is Evil, in exactly the same way austerity is Evil, and if correct we are in any case doomed, because the course of action that would imply will never ever happen.

Do not talk yourself into thinking that austerity is good for the environment. It is not, because people who are scared insecure and feeling poor do not give two shits about the plight of the land, global warming, or much of anything other than getting a job..

The only way forward is a vision of green plenty. Recycling industries are industries! With good, bluecollar, well paid work to be done. Decarbonizing the economy means work carving floating mountains out of the bedrock (http://eduard-heindl.de/energy-storage/index-e.html), and more work at the reactors/windmills/whatever. Cleaning up travel means rail lines, and a heck of a lot of them - possibly even a continent sized network of tunnels at low pressure so that they can run at airplane speeds. - because why deny people vacations when you can send them to their destination faster using electrons instead of jetfuel?

Having the construction workers of europe sit idle on the dole does not get us any closer to this future. It is in fact, just stupid.

by Thomas on Mon Apr 29th, 2013 at 11:33:15 AM EST
[ Parent ]
Thomas:
It annoys me that I keep having to point this out, but if the environmental movement is seen to stand for - to advocate- mass poverty, it will loose all popular support, and die a highly deserved death.

(+citation needed)

what a straw man... just because people opt out of technologically complex existence, and opt in to a lighter, simpler life, and speak well of the experience, does not mean, as you imply often that ecologically aware people want us all to move back to caves and dress in otter skins!

ecologically aware people have not created any chernobyls yet, yet they're EVIL.

uh-huh... project much? if i admit that nuclear power is a bete noire to me, will you admit your greenpeace monsters seem equally OTT to a detached observer?

you ignore that we all want coal gone, instead you're  creating divisions of your own making.

either way we're doomed, right, coalfired GW or nuked to high hell, fukushima'd right up the yin yang.

shill for nukes all you want, but lay off good, brave people trying to save us a shitload more heartbreak, even if you don't agree with them.

you got safe, clean easy to build quick, cheap and safe nukes?

thought so, meanwhile we do have alternatives, and thank pastaman all the carping won't stop them gaining ground every minute while folks argue on message boards.

meanwhile more and more lies rack up from the nuke industry, these are the people you put your faith in?

it's not the technology as much per se, it's the technology in the hands of hapless humans that's the problem, and you don't see solar/wind having to lie like weasels or BP execs, do you?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Apr 29th, 2013 at 12:09:42 PM EST
[ Parent ]
Limit-to-growth reasoning sets me off in the worst way - firstly, because it seems to me to lend aid to the plutarcs currently trying to grind us down into serfdom. Which is. Uhm. Bad.
Secondly because there are about 7 billion people alive, and most of them are not posting on websites from apartments with reliable power, sanitation and a stocked fridge.
I believe in sustainability through urbanization and technology - reducing our footprint and increasing our standard of living at the same time by concentrating the human presence on this planet into well designed urban spaces. Those cities need to be attractive, and as closed cycle as we can get them. This necessarily implies a very significant increase in global energy production. The numbers do not look too good for anything other than desert solar or nukes, which is why I "shill" them. As for safety.. eh. Safety is relative.  living without electricity kills you before you are forty on average. Coal and gas kill far more than nukes ever have.
What I do not believe in is that returning people closer to the land is a good idea. There are too many of us. We would kill the land.  
by Thomas on Mon Apr 29th, 2013 at 01:09:24 PM EST
[ Parent ]
Limit-to-growth reasoning sets me off in the worst way - firstly, because it seems to me to lend aid to the plutarcs currently trying to grind us down into serfdom. Which is. Uhm. Bad.

Humanity's future on this planet - that is, the health of the planet itself - ultimately has nothing to with our little social status games and desire for equality. Nor is our population level something we can dictate to the planet.

I think if humanity ends up circling the drain this century by failing to exit from the industrial age into a post carbon economy it's going to be trivially easy to obfuscate declining energy stocks (and thus human prospects) in the idea that it's all just failed policy. That argument has long been made with food - and when 50% of food (last I read) is lost to spoilage and wastage, it's very easy to argue.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Apr 29th, 2013 at 05:46:54 PM EST
[ Parent ]
Overall Energy shortages can never be anything other than artificial. The solar infall on the equatorial deserts is immense, and harvesting even a small faction of it is quite sufficient to power a global industrial civilization.
If you do not believe this will work, then think of nuclear as proof of concept. People will tolerate reactors before they will tolerate going without sufficient energy. In extremis, There are no resource or energy constraints preventing everyone and their sister from copying/licensing Russian fast breeder designs and just building them. Which will power a global industrial civilization for dozens of millions of years using not a single scrap of new technology.
by Thomas on Tue Apr 30th, 2013 at 02:01:56 AM EST
[ Parent ]
you make sense on everything else you say, Thomas, and apart from the nuke issue, it's a pleasure to read your posts.

as for desert solar, it seems a very good use of technology, as long as distributed energy and battery research are accorded equal funds for research.

i think we should try and steer away from huge centralised plants whenever possible, for obvious reasons like line loss, grid sturdiness and vulnerability to terrorism.
but i would make a happy exception for desert solar, as if it failed, we could still break it up and use the panels in smaller configs.

unless you are talking about stirling rigs. you do mean PV, right?

even with boiling water, it makes more sense than coal or nukes.

biogas has a future i think, as by-product of processing human and other animal waste, especially, again, at a village or household level.

LPG terminals, pipelines, tankers, seem like shortsighted policy, certainly until we have tried to cover as much as possible of cooking needs with biogas.

i heartily support your acknowledgment of the energy abundance that's all around us unused however, and all that implies concerning mendacious artificial scarcity and faux-finite fuel sources.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Apr 30th, 2013 at 06:42:05 AM EST
[ Parent ]
also not sure about your emphasis on urbanism and concern if city dwellers all went back to farming at once.

if pollution were cleaned up out of the air, cities would be a different animal.

if more people permacultured the land, there would be better distribution of populations. most of the present citiy growth consists of the ultra-poor crammed into shanties and favelas, breeding grounds for every disease known.

the countryside has its dangers too, i am not pollyanna-ish about it.

suburbs, which have been correctly ridiculed for many reasons, could also be transformed into better use of the land, once we learn to create abundant clean, cheap/free-(ish!) energy.

that's why it's the most important issue bar none, even the economy, (which would regenerate under a green aegis anyway.)

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Apr 30th, 2013 at 06:49:58 AM EST
[ Parent ]
Part empiricism part logic.
Low-impact farming - defined as "minimal eco damage per calorie" is fairly capital and skill intensive. Computerized-dosage pesticides, zapping bugs with robot lasers, biological pest control, responsible and effective use of fertilizers or legume rotations, permaculture with mechanized picking, refrigerated storage of produce, seawater greenhouses (Google these. They are really nifty) carbon-enriched soils.. all the neat stuff pretty much needs farmers with substantial education, and fair amounts of capital. That only works out if each farmer is managing a fairly large area. So, to put it bluntly, we need to clear most people off the land so that the most suited parts of it can be managed better - for higher yields and less damage and the rest can be reverted to a wild state. Fortunately, there is no need for land clearances, because people - and this looks quite universal - just really would much rather move to the city. Even when it is a slum. So the goal should be to make the city cleaner, and nicer. Available tools: "nigh-Infinite labor, all the rocks and steel you care to dig up." So construction - done right - can save the planet.
by Thomas on Tue Apr 30th, 2013 at 12:35:07 PM EST
[ Parent ]
One way to combine low-impact farming and small "farms" is to combine living and farming spaces. Humans and plants have similar environmental requirements.
by Jute on Thu May 2nd, 2013 at 06:10:00 AM EST
[ Parent ]
Two things.

One, a lot of people want to move to the city because the economy in their rural area is stagnant and feudalistic.  When staying at home means living like a serf, then yeah, a lot of people want to move to the city.

Two, the high-tech investments you've described work.  I'm not challenging that.  However, labor-intensive small-plot farming also works.  Yeah, there are more people involved, so the end product is more expensive - but given that the vast majority of the end-point cost of foodstuffs takes the form of middleman profit, I'm not sure that reducing farm labor to nothing is the only way forward.

by Zwackus on Thu May 2nd, 2013 at 08:25:35 PM EST
[ Parent ]
For instance, if one increases the share of wages and "aggregate demand" goes up, there is an immense caveat there. You actually have to explain people that their new-found money will not buy what they seem to want to buy (a new car, a plane trip to Barbados for vacation, or, by the way, gas to warm up in the winter), but something else. They will be (in terms of consumption of PHYSICAL goods) worse off, they will be, in absolute physical terms, poorer.

Well, yes, they will have less stuff. But they'll be able to make their monthly mortgage payment.

Under Austerity, by contrast, they will also have less stuff, but they will not be able to make their monthly mortgage payment.

If we as a species collectively prefer the latter over the former, then the profession you need to consult for policy advice is psychiatry, not economics.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Apr 29th, 2013 at 05:29:46 PM EST
[ Parent ]
new-found money will not buy what they seem to want to buy (a new car, a plane trip to Barbados for vacation, or, by the way, gas to warm up in the winter)

They could use some of that 'new found money' to install solar heating in their homes. Then a one time consumption of physical resources would produce a long term benefit to their lives. Some solar thermal systems could also be used to provide daytime cooling in the summer

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 30th, 2013 at 09:55:24 AM EST
[ Parent ]
A second (completely separated) issue is the physical impact of less inequality.

I would argue that inequality (which I am not defending!) leads to less physical consumption: If you are rich, you are not going to convert all your wealth to physical consumption (there is so much food you can eat, travel you can make, etc...) whereas somebody in the low/middle class will very naturally increase it expenditure for physical stuff (eat decently, get more clothes, travel a bit, buy a book, get warm in the winter).

A more equal society would require a much more rational way of allocating scarce resources?

by cagatacos on Mon Apr 29th, 2013 at 05:40:09 AM EST
[ Parent ]
A much more rational way of allocating resources, scarce or otherwise, would in any case be required before a substantially more equal society can be achieved.

Because the currently dominant principle of resource allocation is "pillage, then burn."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Apr 29th, 2013 at 05:43:13 PM EST
[ Parent ]
FT.com: UBS move to curb investment banking risk bolsters Q1 profits (April 30, 2013)
Last October, Switzerland's largest bank by assets unveiled a radical plan to wind down risky parts of its investment bank and focus its activities around its wealth management business, which is among the largest in the world.

...

Sergio Ermotti, chief executive, said that the results - which also saw revenues increase from SFr6.5bn to SFr7.8bn - were an encouraging start to UBS's new strategy.

...

UBS's non-American wealth management operations saw its highest quarterly inflows since before the financial crisis, bringing in SFr15bn in net new money, while the Americas wealth management division attracted SFr9.2bn.

Hoarding trumps investment.

The Euro will outlivebury us all --- Jean-Claude Juncker
by Migeru (migeru at eurotrib dot com) on Tue Apr 30th, 2013 at 04:49:05 AM EST
Holding money beats regularly blowing it up in the quest for ever greater returns? Who knew? The guys who brought us ZIRP? Naah, more likely it is an unintended consequence. ZIPR is the price for continued 'extend and pretend'.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 30th, 2013 at 10:09:33 AM EST
[ Parent ]
Hoarding other people's money for a constant fee beats the riskier investments.
by Jute on Thu May 2nd, 2013 at 06:15:39 AM EST
[ Parent ]


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