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Nurturing vital diversity & resilience: Scaling out, rather than scaling-up!

Photo: NASA

Nurturing vital diversity & resilience: Scaling out, rather than scaling-up!

There is an unfortunate knee-jerk response programmed into many people in leadership positions to want to ask: “How do we scale it up?” every time they hear a seemingly good idea. To a larger or lesser extent, many of the people who have this response have contracted the virus of neoliberal economic indoctrination. Once infected you do not question the economic growth imperative, its hidden subsidies and externalities, the inadequacy of GDP as a measure of positive progress, nor the implied assumption that bigger is better or more efficient and effective. Very often it is not!

Of course we need to find a way that regenerative practice and careful restoration of healthy ecosystems functions spreads from community to community and bioregion to bioregion to reach global impact as quickly as possible. We need to reach scale, but not by scaling-up!

Many regenerative solutions will no longer be regenerative if they are simply scaled up into a mega-project or replicated in a cut & paste (cookie cutter) fashion. Such expansionist approaches tends to loose touch with the necessity for solutions to be born out of the cultural and ecological uniqueness of a place — its people and its bioregion. We can learn from the patterns of natural system how to design as nature, create place-sourced solutions and create conditions conducive to life.

In general natural systems do not keep growing exponentially in quantity and size. They tend to follow a logistic curve of growing to a certain point and then changing and maturing in qualities, relationships and interconnections without continuing to grow quantitatively in size or numbers. Just reflect on your own development from childhood to adulthood, if you want an example for that pattern. Our species has long passed the point where we should have switched from quantitative growth to qualitative growth, from more and bigger, to better and more appropriate.

 …click on the above link to read the rest of the article…

Don’t Call Me a Pessimist on Climate Change. I Am a Realist

Don’t Call Me a Pessimist on Climate Change. I Am a Realist

To see our fate clearly, we must face these hard facts about energy, growth and governance. Part one of two.

DrWilliamRees.jpg
A smile in the face of reality. UBC ecological economist William E. Rees, co-creator of the ecological footprint concept, has some bad news for techno-optimists. Photo by Martin Dee.

Why is this important? Well, if Greta Thunberg and followers are to inspire more than emotional release about climate change, the world needs to face some hard facts that suggest we are headed toward catastrophe. At the same time, skepticism is the hallmark of good science; realists too must be open to the challenge posed by new facts.

So, today, and in a piece to follow, I present an unpopular but fact-based argument in the form of two “Am I wrong?” queries. If you accept my facts, you will see the massive challenge we face in transforming human assumptions and ways of living on Earth.

I welcome being told what crucial facts I might be missing. Even a realist — perhaps especially a realist in present circumstances — occasionally wants to be proved incorrect.

Question 1: The modern world is deeply addicted to fossil fuels and green energy is no substitute. Am I wrong?

We can probably agree that techno-industrial societies are utterly dependent on abundant cheap energy just to maintain themselves — and even more energy to grow. The simple fact is that 84 per cent of the world’s primary energy today is derived from fossil fuels. 

It should be no surprise, then, that carbon dioxide from burning fossil fuels is the greatest metabolic waste by weight produced by industrial economies. Climate change is a waste management problem!

 …click on the above link to read the rest of the article…

Platforms for a Green New Deal

Platforms for a Green New Deal

Two new books in review

Does the Green New Deal assume a faith in “green growth”? Does the Green New Deal make promises that go far beyond what our societies can afford? Will the Green New Deal saddle ordinary taxpayers with huge tax bills? Can the Green New Deal provide quick solutions to both environmental overshoot and economic inequality?

These questions have been posed by people from across the spectrum – but of course proponents of a Green New Deal may not agree on all of the goals, let alone an implementation plan. So it’s good to see two concise manifestos – one British, one American – released by Verso in November.

The Case for the Green New Deal (by Ann Pettifor), and A Planet to Win: Why We Need a Green New Deal (by Kate Aronoff, Alyssa Battistoni, Daniel Aldana Cohen and Thea Riofrancos) each clock in at a little under 200 pages, and both books are written in accessible prose for a general audience.

Surprisingly, there is remarkably little overlap in coverage and it’s well worth reading both volumes.

The Case for a Green New Deal takes a much deeper dive into monetary policy. A Planet To Win devotes many pages to explaining how a socially just and environmentally wise society can provide a healthy, prosperous, even luxurious lifestyle for all citizens, once we understand that luxury does not consist of ever-more-conspicuous consumption.

The two books wind to their destinations along different paths but they share some very important principles.

Covers of The Case For The Green New Deal and A Planet To Win

First, both books make clear that a Green New Deal must not shirk a head-on confrontation with the power of corporate finance.

 …click on the above link to read the rest of the article…

The Third Wave Of Globalization Has Ended

The Third Wave Of Globalization Has Ended

The global economy is certainly at crossroads. Protectionism and nationalism, a well-matched marriage of global chaos at the moment, has threatened to end the third wave of globalization that began in the late 1980s. 

Capital Economics has published a compelling research note, titled “The end of globalization,” specifying how 150 years of globalization could’ve put in a significant peak in the last several years, all thanks to President Trump’s trade war with China. 

The third wave of globalization began in the late 1980s, mostly driven by technological advancements and shifting labor and capital around the world to the most cost-effective regions. 

While the Western hemisphere consumed for three decades, the Eastern hemisphere manufactured the goods (which produced rising inequality in the West and thus how protectionism and nationalism were sparked), but the status quo of how supply chains are organized around the world could be changing as world trade volumes have hit a significant wall. 

U.S. Economy Grew at 1.9% Pace in Third-Quarter

In terms of the Elliott wave principle, a third wave eventually gives out to a corrective fourth wave. Capital Economics believes the world is headed towards a period of de-globalization, or as history will call it a fourth corrective wave.  

“It is possible that this is just a temporary hiatus and that an unforeseen technological breakthrough will trigger a new wave of globalisation. But such waves are rare. In fact, there are several reasons – even before we consider the trade war – why globalisation has peaked. First, all the major steps to integrate the global system have been taken. Second, advanced manufacturing techniques mean that the location of manufacturing no longer hinges on where labour costs are cheapest. Third, complex supply chains have reached their limit. Fourth, China is unlikely to open up its capital markets significantly.

 …click on the above link to read the rest of the article…

September Class 8 Heavy Duty Truck Orders Collapse 71%

September Class 8 Heavy Duty Truck Orders Collapse 71%

Preliminary Class 8 order data for September is starting to trickle in and, like the data preceding it so far this year – it’s ugly. 

Class 8 orders were crushed 71% in September, reaching 12,600 units, according to Baird and Morgan Stanley. 

This follows a 79% plunge in August. 

This makes September the 11th consecutive month of YOY order declines and the 9th consecutive month of orders below 20,000.

Class 8 orders are often seen as a pulse on the U.S. economy. Morgan Stanley analyst Courtney Yakavonis wrote in a note that she expects YOY order declines to continue into the year’s end. But Baird analyst David Leiker said he was gaining “increased confidence” that a bottom in declines was likely near – but that’s a story we have heard from ACT Research analysts all year and orders just continue to collapse.  

The blame continues to fall on the trade war.

“Little has changed since August with respect to the freight market and freight rates, while uncertainties surrounding trade and tariffs continue to weigh on truck buyers’ psyches,” said Steve Tam, ACT vice president, according to FreightWaves

Don Ake, FTR vice president of commercial vehicles simply said: “Class 8 orders are stuck at the bottom of the cycle.”

As of September, the rolling 12-month average for orders is about 214,000.

“All the orders needed for 2019 were placed months ago and fleets are now adjusting delivery dates and finalizing requirements,” Ake continued.

If there’s one silver lining, it is that the slowdown continues to wear away at the backlog of trucks that are awaiting assembly. ACT predicts that the number of unbuilt trucks has fallen to 135,000, down from 151,000 in August.

The number of available used trucks continues to rise, leading to lower prices in that sector. Volvo trucks and Mack trucks are both taking two down weeks at their Virginia and Pennsylvania factories this quarter.

 …click on the above link to read the rest of the article…

The Fed’s “Insurance” Rate Cuts Didn’t Work. Now For The Emergency Cuts

The Fed’s “Insurance” Rate Cuts Didn’t Work. Now For The Emergency Cuts

Pity the guys now running the Fed. They’ve inherited an economy that requires ever-bigger infusions of new credit and ever-lower interest rates to avoid financial cardiac arrest. But with interest rates already perilously close to zero the usual leeway is no longer there.

Making the best of a bad hand, Fed chair Jerome Powell has been cutting the Fed Funds rate but managing expectations for future cuts by calling the current ones “recalibration” and “insurance.” In other words, “don’t expect a quick excursion into steeply-negative territory. In fact this latest cut might be all there is.”

But the economy, like any addict, is profoundly uncomfortable with not knowing where the next fix is coming from and is behaving accordingly. From just the past couple of days’ headlines:

US manufacturing survey contracts to worst level in a decade US gross national debt jumps by $1.2 trillion, to $22.7 trillion Growth hits the wall Student loan debt soars, totaling $1.6 trillion in 2019 There is good reason to fear the repo Midwest’s faltering economies will spread pain nationwide Treasury yields sink after U.S. manufacturing weakness raises recession fears 

VC veterans host emergency meeting of unicorns as IPO ‘bubble’ implodes 

Now equities are picking up the anxious vibe. See Global stocks plunge for a second day to start Q4.

What happens next? Almost certainly, a “coordinated” round of aggressive easing by the US Fed, the ECB and BoJ. With some unconventional coercion thrown in by the People’s Bank of China. 

As for the timing, it’s just a question of “the number.” That is, how far does the S&P 500 have to fall before the stampede begins. Since this question will be answered by a bunch of largely clueless men dripping fear sweat and trying to figure out why their models have stopped working (and more poignantly why their life’s work has turned out to be a fraud), the number is unknowable in advance. 

 …click on the above link to read the rest of the article…

More Money Pumping Won’t Make Us Richer

More Money Pumping Won’t Make Us Richer

Whenever a central bank introduces easy monetary policy, as a rule this leads to an economic boom — or economic prosperity. At least this is what most commentators hold. If this is however the case then it means that an easy monetary policy can grow an economy.

But loose monetary policies do not generate economic growth. These policies set in motion the diversion of real savings from wealth generators to the holders of the newly pumped money. Real savings, rather than supporting individuals that specialize in the enhancement and expansion of the infrastructure are consumed by various individuals that are employed in non-wealth generating activities.

Moreover, not all consumption is a good thing. The consumption of real savings by individuals engaged in the enhancements and the expansion of the infrastructure is productive consumption. Conversely, the consumption of real savings by individuals that are employed in non-wealth generating activities is non-productive consumption.

It is non-productive consumption that sets the foundation for the weakening of the existing infrastructure thereby weakening future economic growth. In contrast, productive consumption sets the foundation for a better infrastructure, which permits stronger future economic growth. Needless to say, productive consumption leads to the increase in individuals living standards while non-productive consumption results in the lowering of living standards.

Why then is loose monetary policy seen as a major contributor towards economic growth?

Given that economic growth is assessed by means of the gross domestic product (GDP) framework — which is nothing more than a monetary turnover — obviously then when the central bank embarks on monetary pumping (i.e., loose monetary policy) it strengthens the monetary turnover in the economy and thus GDP.

 …click on the above link to read the rest of the article…

GROWTH: From Microorganisms to Megacities

GROWTH: From Microorganisms to Megacities

Vaclav Smil’s latest book explores growth in nature and society. It examines the rules and patterns of growth in four key domains, those of the living world; human energy consumption; human artifacts; and human populations, societies and economies. The author is a passionate advocate of quantitative analysis, and thus Growth is filled with numbers, graphs and mathematical notation. Yet it’s written to be easily understood by non-mathematicians, making brilliant but accessible use of statistics to illustrate salient features of growth in all its terrestrial forms (the book’s scope is limited to Earth). In short, Growth is a compelling read for statisticians and non-statisticians alike.

A favorite author of Microsoft cofounder Bill Gates and a Foreign Policy magazine Top 100 Global Thinker, Smil is known for his multidisciplinary approach, energy-related expertise and penchant for packing his many books with all manner of fascinating facts. Growth‘s chapter on the biological realm supplies as fine a sampling of this latter propensity as can be found. Did you know that average dinosaur body volumes declined at the beginning of the final period of the Mesozoic era but then made a near-comeback to their previous highs by the time of the dinosaurs’ extinction? You will after reading this book–and if you’re as much of a nerd as I am, you’ll relish this and innumerable other scientific tidbits. You’ll also be awed by the 100-page bibliography and the fact that scarcely a sentence goes by without some bit of quantitative analysis or scholarly citation.

A Novel

Prehistoric trivia aside, Smil’s chapter on the living world rightly focuses on those life forms most necessary to humanity’s survival and the functioning of the biosphere. These include, of course, modern-day trees and forests, microorganisms, agricultural crops and animals.

 …click on the above link to read the rest of the article…

The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)

The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)

The world has experienced a decade of growth fueled by record-low interest rates, a burgeoning money supply, and historic debt levels – but the good times only last so long. 

As the global economy slows and eventually begins to retract, can precious metals offer a useful store of value to investors?

Part 1: The Start of a New Cycle

Today’s infographic comes to us from Endeavour Silver, and it outlines some key indicators that precede a coming gold-silver cycle in which exposure to hard assets may help to protect wealth. 

The Start of a New Gold-Silver Cycle

Bankers Blowing Bubbles

Since 2008, central bankers around the world launched a historic market intervention by printing money and bailing out major banks. With cheap and abundant money, this strategy worked so well that it created a bull market in every sector — except for precious metals. 

Stock markets, consumer lending, and property values surged. Meanwhile, the U.S. Federal Reserve’s assets ballooned, and so did corporate, government, and household debt. By 2018, total debt reached almost $250 trillion worldwide. 

Currency vs. Precious Metals

The world awash in unprecedented amounts of currency, and these dollars chase a limited supply of goods. Historically speaking, it’s only a matter of time before the price of goods increases or inflates – eroding the purchasing power of every dollar. 

Gold and silver are some of the only assets unaffected by inflation, retaining their value.

Gold and silver are money… everything else is credit.

– J.P. Morgan

The Perfect Story for a Gold-Silver Cycle?

Investors can use several indicators to gauge the beginning of the gold-silver cycle:

  1. Gold/Silver Futures

    Most traders do not trade physical gold and silver, but paper contracts with the promise to buy at a future price. Every week, U.S. commodity exchanges publish the Commitment of Traders “COT” report. This report summarizes the positions (long/short) of traders for a particular commodity. 

 …click on the above link to read the rest of the article…

Why the ECB should raise, not cut rates

Why the ECB should raise, not cut rates

Negative rates are likely one of the reasons behind the lacklustre European growth. Negative rates have worked as a tool to transfer wealth from savers to the indebted governments that have abandoned all structural reforms, while these extremely low rates have also perpetuated overcapacity, incentivised the refinancing of zombie companies and effectively worked as a disguised subsidy on low productivity. Not only those measures have damaged banks, but they have also created very dangerous collateral impacts (read “Negative Rates Have Damaged Banks But This Is Not The Worst Effect”).

In recent weeks we have heard of a likely new stimulus plan that would include a new repurchase program and further rate cuts. A new asset purchase program is completely unnecessary and unlikely to spur growth when all Eurozone countries already have sovereign debt with negative yields in 2-year maturities and the vast majority have negative real or nominal yields in the 10-year bonds.  Why would the ECB repurchase corporate and sovereign bonds when the issuers are already financing themselves at the lowest rates in history?  Furthermore, by reading some statements one would believe that the ECB has stopped supporting the economy. Far from it, when it repurchases all debt maturities in its balance sheet and has implemented another liquidity injection TLTRO in March 2019.

The main problem of those who defend further purchases and more negative rates is one of diagnosis. The central planners believe the Eurozone problems come from lack of demand, and that investment and credit growth are not what they would want them to be only because investors and corporates believe that rates will ultimately rise, leading to defensive positioning.

 …click on the above link to read the rest of the article…

It’s Happening Again: Maersk Halts Asia-Europe Loop Amid Global Slowdown

It’s Happening Again: Maersk Halts Asia-Europe Loop Amid Global Slowdown  

Growth in the world continues to collapse into late summer, so much so that Maersk and Mediterranean Shipping Company (MSC) had to “temporarily suspend” their AE2/Swan Asia to North Europe loop until mid-November, removing 20,000 twenty-foot equivalent unit (TEU) a week from trade, reported The Loadstar.

Collapsing demand and plunging shipping container rates have led to pain for carriers who sail their vessels along the route. This is the second time Maersk and MSC have suspended the circuit, and the last time this happened was last fall.

Maersk and MSC said it’s working hard to “balance its network to match reduced market demand for the upcoming [Chinese factory shutdown] Golden Week.”

Maersk and MSC said the AE2/Swan suspension would “help us to match capacity with the expected weaker demand for shipping services” from Asia to Europe.

Maersk and MSC said the service would resume “in line with demand pickup,” suggesting the suspension could be extended into 1H20 as global trade isn’t expected to pick up for the next six to eight months. 

Maersk and MSC adopted a similar strategy last year, suspending AE2/Swan Asia to North Europe loop from September to December, this was right around the time when stock markets across the world crashed from October to December, on fears the world economy was slowing. It just so happens that the global synchronized slowdown is much worse this year, likely the world has entered a manufacturing/trade recession in late summer 2019.

The suspension of AE2/Swan loop will see 12 17,800-20,500 TEU vessels idled for the next several months. 

The last time the AE2/Swan loop was halted, it was during the period when world stocks collapsed last fall.

Freightos freight data for China to Europe 40 ft shipping containers shows muted price recovery over the last several years.

 …click on the above link to read the rest of the article…

Lacalle: A Day Of Reckoning Looms For The Global Economy

Lacalle: A Day Of Reckoning Looms For The Global Economy

European and Asian economic data is deteriorating, says economist and author Daniel Lacalle.

“I’d call right now the day of reckoning,” Lacalle says, in this video excerpt of our soon-to-be released podcast In The Arena.

 “The entire message from mainstream consensus is ‘Yes there was a global slowdown,’ but using the trade war as an excuse.”

Lacalle argues that the global growth slowdown has absolutely nothing to do with the trade war and says the trend in economic data around the world suggests Wall Street estimates for global growth are still too high.

“We’re now in the reality check period,” Lacalle says.

“Now, the risk of recession is starting to build up.”

Keep it Simple

Keep it Simple

Markets blow up on Friday on a series of tweets, markets jam higher on the pronouncement of dubious phone calls on Monday. The rapid back and forth has many heads spinning and makes for dramatic headlines as people are searching for explanations. To which I say: Keep it simple, especially in the age of the great confusion.

Background: In 2019 market gains have been driven by pure multiple expansion resting on 2 pillars of support in the face of deteriorating fundamentals: 1. Hope for rate cuts and Fed efficacy 2. Trade optimism. But in process little to no gains are notable since the January 2018 highs, in fact most indexes are down sizably since then.

And when markets are purely reliant on multiple expansion the risk for accidents increases when confidence gets shaken. Friday’s escalation on the trade war front again highlights this point.

And in context of global growth slowing an escalation in the trade war is akin to playing with fire as it risks being a trigger to nudge the world economy into a global recession. After all 9 economies are either in recession or on the verge of going into recession.

This morning I was speaking with Brian Sullivan and he asked me what matters most here, the China trade war, the Fed, or technicals. The short answer is they all matter as it is a battle for control, but how to delineate a complex interplay of conflicting forces into some clarity?

Let me give you my take on all 3 fronts. Before I do, for background here’s the clip from this morning:

China:

Occam’s Razor: The simplest explanation is often the best one and that’s really what’s happening on the China trade war front as far as I’m concerned.

 …click on the above link to read the rest of the article…

Major Recession Alarm Sounds

Major Recession Alarm Sounds

Major Recession Alarm Sounds

Red, red, in every direction we turn today… red.

The Dow Jones shed 800 scarlet points on the day.

Percentage wise, both S&P and Nasdaq took similar whalings.

The S&P lost 86 points. And the Nasdaq… 242.

And so the market paid back all of yesterday’s trade-induced gains — with heaps of interest.

Worrying economic data drifting out of China and Germany were partly accountable.

Chinese industrial production growth has slackened to 4.8% year over year — its lowest rate since 2002.

And given China’s nearly infinite data-torturing capacities, we are confident the authentic number is lower yet.

Meantime, the economic engine of Europe has slipped into reverse. The latest German data revealed second-quarter GDP contracted 0.1%.

Combine the German and Chinese tales… and you partially explain today’s frights.

But today’s primary bugaboo is not China or Germany — or China and Germany.

Today’s primary bugaboo is rather our old friend the yield curve…

A telltale portion of the yield curve inverted this morning (details below).

An inverted yield curve is a nearly perfect fortune teller of recession.

An inverted yield curve has preceded recession on seven out of seven occasions 50 years running.

Only once did it yell wolf — in the mid-1960s.

An inverted yield curve has also foretold every major stock market calamity of the past 40 years.

Why is the inverted yield curve such a menace?

As we have reckoned prior:

The yield curve is simply the difference between short- and long-term interest rates.

Long-term rates normally run higher than short-term rates. It reflects the structure of time in a healthy market…

Longer-term bond yields should rise in anticipation of higher growth… higher inflation… higher animal spirits.

Inflation eats away at money tied up in bonds… as a moth eats away at a cardigan.

Bond investors therefore demand greater compensation to hold a [longer-term] Treasury over a [short-term] Treasury.

 …click on the above link to read the rest of the article…

BOOM! Fossil Fuel Combustion and the Mother of All Economic Busts

BOOM! Fossil Fuel Combustion and the Mother of All Economic Busts

Photograph Source: Eric Kounce TexasRaiser – Public Domain

William Catton focussed on what follows a boom in the human population. He spelled out the scenario in his 1980 book, Overshoot: The Ecological Basis of Revolutionary Change. As one reviewer put it, “Catton believed that industrial civilization had sown the seeds of its own demise and that humanity’s seeming dominance of the biosphere is only a prelude to decline.”

Catton hasn’t been alone. Many others have warned or at least implied an inevitable human population bust. But that inevitability is no longer likely to hit solely from overshoot alone, and not in some far-distant future. Instead, with the added pressure from our booming combustion of fossil fuels, a human population bust could plausibly be kicked into gear sometime “by” — a.k.a. before — 2050, or within the next 30 years.

This could be the mother of all economic busts.

The human population boom has been the bedrock of economic boom in sector after sector. It’s been the bedrock foundation of a profit boom for the fossil fuel combustion industries that now put it at risk. In the US alone, the booming human population has been the wellspring for surging numbers of visitors to the likes of Yellowstone National Park, city managers bent on promoting growth, the basis of soaring demand for logging to supply housing for a growing human herd.

Booms thus enjoy considerable public approval and political popularity. Over and over again, the long-ongoing human population boom has afforded the political elites and local boosters an opportunity to boast of a booming economy, sometimes raising local and even national concerns that they tout growth at any cost.

Bust, on the other hand, is a dirty four-letter word.

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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