Wednesday, 16 March 2016

Iranian FM talk

Yesterday the Iranian Foreign Minister, Dr. Mohammad Zarif spoke at my university to a packed auditorium consisting of Canberra diplomats, public servants and scruffy university students. My IR friends had got me to book a ticket with them well in advance so I got to hear him. He was a very eloquent speaker and handled all the provocations attempted at him by pro-westerners very tactfully.

Two things that interested me were: 1) when asked about IS, he strongly alluded to US support for them. I think most of the audience missed it because of their censoring bias, but I picked that up several times during his talk.

The second was his worldview in general. Sergey Lavrov, the Russian FM wrote an excellent article recently that gave me some insight into his thought as well. The difference in their evaluation ability in comparison to that of our western leaders, is that they have an erudite view of history.

The fact that our crop of politicians not only ignore but actively dismiss any lessons from history explains why mistakes get repeated again and again. Lavrov and Zarif both have an innate understanding on their countries' place in time and space, and are able to learn from previous history and extrapolate patterns into the future. Such analytical thinking is abjectly missing on our part.

Needless to say, he was a politician worth his salt and puts Hague/Kerry/Bishop and all of them to shame. I can't think of a single western diplomat who could impress a crowd as much as him (even a crowd in a western university), which says a lot about our choice in leaders.

Monday, 25 January 2016

The Great Depression II: Bigger and better than the last one!

If you have been watching the news right now, you might be scared. Or even confused. You might be hearing about the constant losses in the Chinese sharemarket and wondering why people are freaking out, and more importantly: what it means for you. This might be further muddled with a bunch of talking bobble-heads who are trotted out to repeat “don’t panic, everything is fine. Keep your money in the bank. Go out and buy that new iPhone. Consume!”

So here’s what it means. It involves a little history lesson. We go back to the end of the roaring twenties, specifically 1929. Throughout the decade thousands of ‘investors’, through a series of fraudulent methods, been inflating bubble after bubble of speculative enterprises that sucked the savings of Americans and through their demand, people across the world into a financial black hole (literally, because no information escaped about what was actually going on). The exact details are excellently laid out by the famous John K. Galbraith in his book “Great Crash 1929.” In fact while you’re waiting to see what happens, you might want to search that book in your local library and give it a read. It doesn’t take that long. If you want a dry synopsis, the Wikipedia page does a relatively decent job of it as well.

By 1929 this fa├žade of economic stability reached gargantuan proportions. From 24th October to 29th October 1929, now the infamous ‘Black Thursday’ and ‘Black Tuesday’, the stock market plunged repeatedly, beginning at a drop of 11% of its value at the opening bell. That amounted to $30 billion dollars of perceived wealth, wiped out in 5 days. Repeated attempts to close and re-open the market and confidence measures such as the Rockefellers and other notable businessmen buying millions of shares failed, leading to the Great Depression.

Does this sound familiar? Yes if you have been following the news. On 12th June the first shocks puncturing our most recent bubble appeared on the Shanghai Stock exchange – one of the major financial centres of the entire world, when it lost 5%. On the 7th and 9th January of this year, the market fell 18%. The Chinese government repeatedly closed the markets and most of the time, it has ended trading the day lower than it started. World markets, including Dow Jones, are also sucked into this quagmire, since most of the speculative finance heading into China is from western investors. Add to that, the extreme deflation in oil prices (which aren’t a good thing at all) and its mounting losses in the fracking industry means that a major depression is now on the horizon.

There are many people who will insist that everything is alright and that this is all normal. A good read of J.K. Galbraith’s book that I mentioned earlier will remedy any thought of that. For the last 7 years, ever since the recession of 2008, vast amounts of imaginary wealth (they call it quantitative easing) has been pumped into the world economy, where again it mostly got invested in speculative enterprises that inflated the value of investments to over a thousand times their actual worth.

People will send Bloomberg articles saying ‘look, so-and-so bobble head economist says everything is fine. You must be wrong!’ I answer: Nonsense. Economists have the liberty of being constantly wrong and yet taken legitimately to criminal levels. The so called fraudulent investors and supporting government cronies have been lying to leech their profits and cover their asses for decades – they lied about the massive delusion of America’s housing market in 2008, they lied about the actual productivity of all the oil bubbles since, and they’re still lying. If you want to take a person’s word seriously, check the accuracy of their previous statements. Most of the ‘respected’ financial authorities will turn out to be complete charlatans.

I travelled arounds parts of China mid-last year, and saw the effects of the bubble coming first-hand. Bridges half built and left derelict. Flyovers where the foundations were the only things built. Bullet rail lines that were only marked out. And to top it off, massive ghost cities where not a single person lives, the houses of which were priced in hundreds of thousands of Yuan.

The only difference is that instead of private market personalities such as the Rockefellers, the desperate market-saving attempts are being made by the Chinese government, itself heavily involved in the speculative frenzy. Billions of dollars of investment money were gambled on China’s growth. There were nowhere that imaginary money could have gone apart from into dead-end malinvestments. The much-repeated fatal mistake of confusing money for actual wealth and GDP as actual growth resulted in the massive ghost-cities and hundreds of botched infrastructure projects that have marked Chinese growth over the last decade.

So what does this mean? It could mean Great Depression II. Great-er, I should say. In the previous great depression, massive infrastructure project as part of Keynesian economic philosophy were a viable option. In a world where we still had growing access to energy supplies and ample oil, putting people to work through extracting energy and investing in capital was an option. That won’t work this time, despite the almost religious chants of many of today’s leftists that Keynesian economics is still the answer. We live in a world with dwindling energy supplies, where shrinking economies is a matter of course, and any large investment in capital runs up hard against the increasing costs of extracting oil.

This depression is going to be a lot worse than the last one. I’m sure that almost every half-baked conventional economic strategy, ranging from insane Friedmanite fantasies to extreme Keynesian money printing (I mean, screen money typing) and massive state-planning will be tried, and every single idea will crash and burn, taking large chunks of the world economy with it. They will fail because every single ideology is unequipped for the realities of ecological overshoot and is blind to the reality that we have used up over half of all the oil reserves in the world and production from here on is only going down. You can bet that it will take decades for humanity to finally blunder into a level of abstract wealth and allocation of resources (particularly energy) that actually make a little more sense based on our actual balance.

In the meanwhile, there is plenty of pain for almost everyone who is alive right now. The previous depression was marked with widespread unemployment, starvation, destituteness, poverty and loss of hope. The following decade is likely to bring the same bag of things, probably a lot worse since today’s people aren’t as recently jaded from a world war like last time, are far less equipped to live on a shoestring budget, and more importantly, can’t cope with reality without cheap access to technology to sedate them.

Being a student looking at graduating soon, the coming years are set to take a hard toll on me and my peers. A realistic dialogue is needed now, before things start biting, to convince people to start making the tough decisions needed to survive the coming years.

Friday, 8 January 2016

Back to the 2050s

This being the first week of the New Year, all the notable writers on any topic at all are posting predictions for this year. The more prudent ones are saying what they’ve been saying all along – expect 2016 to be a continuation of 2015, but with a few more bumps and steeper gradient. For those who are hoping now is the time for some miraculous piece of technology or sudden revolutionary awakening of human consciousness to save the impending doom of our civilisation, this year is once again going to disappoint. I can’t add much of value to the predictions already made by Greer or Kunstler, so I think I’ll probe further into the future.

This slightly-further future is going to be very different to the one that has constantly been predicted by tech-fetishizing cheerleaders. Let’s take the year 2050, when I will be 55 years old. I expect that world to be very different from the one we find familiar. The ravages of war, depletion and climate change is going to result in a world, if parts of it are functioning at all, more resembling that of my grandfather’s time and earlier – perhaps like the year 1950, a century earlier. I'm going to (very roughly) outline how the forces of engineering and economics will shape the trajectory of the future ahead of us in terms of some features central to the lifestyles of people inhabiting developed societies right now.

Personal Computers and the internet: Expect these to disappear from the home, from your backpacks and pockets. To produce these devices, we need a strongly globalised economy with ample inputs of fossil fuels to extract, process, and manufacture raw materials into the highly precise pieces of circuitry required for digital computing. This massive embodied energy cost will be economically inefficient for functions that can be fulfilled with printing presses and radios. On top of that, the continuing pursuance of planned obsolescence production by most of the major tech companies means that plenty of valuable material is simply being wasted instead of being reused. As our current culture is obsessed with constantly producing and consuming ever more high-powered and resource consuming devices, regression to more sensible, low powered earlier computers will also no longer possible as our entire computer systems infrastructure is constantly ‘upgrading’ to better produce the sort of needlessly overpowered devices we use today.

By 2050 vast cost of manufacturing personal computers will make them inaccessible to average households once again. Emails will once again be a luxury, probably costing several times regular ‘snail’ mail. Computers will only be affordable to rich companies, government departments and academic institutions who will use them for what they were originally meant for – processing large amounts of data and complex calculations, instead of watching cat videos. As explained by John Michael Greer, the internet will morph into something more resembling the older DARPA-net, used only for essential tasks.

Cars: People living in many western societies can’t fathom life without their personal oil burning machine – I mean, car. Our cities are all structured around this gargantuan form of wastage and pollution. The advent of the car was a sign of a huge surplus of energy that our society had in the 20th century, and similarly future shortages of such energy will do the opposite. When filling up your car is going to cost a quarter of your weekly income, and you have to juggle rent and soaring utility costs, you’re likely to ditch that gas-guzzler and live closer instead. No matter how much people try and cover up, facts are that personal transport is simply infeasible in a society where people have to pay the full costs of energy usage.

Take the graphic below, for example. Apart from just noticing the congestion issues, notice that each vehicle expends most of its energy in making itself move, and that moving passengers is a much smaller marginal energy input. Obviously a mode of transport that can move the most people is going to be more efficient in variable cost (per person), than one that spends a majority of its fuel in just making the frame and associated parts move (the extremity of that being a car with one person in it).

Secondly, think about systems costs. Cars and buses both require several lanes of gravel and tar, which is really energy and cost intensive. Compared to that, one set of rails with loose gravel, and cobblestone roads (that can be made with human labour) is going to be far easier to build and maintain. Any sensible administration will make the cost-effective choice, that is, ditch conventional roads once the huge subsidies governments have set up for them are ditched.

Along with this, I also expect that the time of sprawling suburbia with associated highways and malls is going to end as well. More competent administrations will invest in better urban planning and public transport, such as light rail. Long commutes are going to be unaffordable and thus undesirable (thankfully). Already built large suburban areas are going to turn into desolate ruins, be stripped down to make way for agriculture if possible, or turn into smaller towns and hamlets.

Phones: More and more of our communication infrastructure is tied to the internet, so the demise of the internet will bring about the phasing out of mobile phones associated nick-knacks like video calling. Rolling out wires for a telephone line operated by humans with switchboards is considerable, but a lot less than building mobile towers every few kilometres and keeping satellites in the sky just so you can find the nearest restaurant. It’s far easier to just use your local telephone to keep your loved ones notified when increased mobile costs mean that texting or calling on the cellular network costs as much relatively as it did in 1990.

Expensive cellular network costs will increase the demand for substitutes such as regular mail, or maybe a cost based email system. Even amongst those who could potentially afford the luxuries of mobiles, such as the elite, I expect that the most functionality the average phone will have will be calling and messaging. Mobile data networks are likely to disappear altogether, especially when the internet of the near future won't be even near as large as it is today. You’ll have to look up city directories and magazines to find a nearby restaurant, or rely on word of mouth again. And perhaps learning to read a map will be of value as well.

Flying: I myself have been very guilty of this particular form of waste, having travelled across the world in the past few months. Of course, not only are jet aircraft very fuel consuming, the also require huge amounts of embodied energy to produce and maintain. In terms of domestic transport, a country that wants to remain connected will have to resort to a lower capital and higher labour input level form of mass transport, such as railway or boats. There might be a narrow window of opportunity where airships can be a competitive substitute to both rail and flight, however due to our cultural obsession with needle-shaped heaver than air devices, I highly doubt that airships will gather sufficient investment to be developed before things get worse. I could (and hope to be) wrong – several militaries have been working on airships as heavy-load transport, and will perhaps have some sway over civilian transport policymakers.

Entertainment: When things regress, it’s often not in the same way backwards as it was forwards. The shifting of mass-entertainment from TV to the internet affected a profound cultural shift where people are now used to being instantly gratified with whatever form of entertainment they want. 

Gone is the patience of pencilling down a show you want to see at 7:30pm on a certain channel. Furthermore, most inhabitants of currently ‘developed’ societies are going to be overburdened with work to just feed themselves and therefore are unlikely to find TV worthwhile in terms of time or money. I find the return of TV as a mass medium unlikely in such circumstances. Perhaps old-fashioned movies combined with news reels will be the most viable form of visual entertainment and become popular as they were during World War II and after, as it’s far cheaper to pay a few dollars to walk into a short news and TV show than to buy a TV set and subscription.

Books are still relatively popular and will have better demand as handheld devices become less common. Although this also means that personal music will also disappear, the demand gap will be picked up by a renaissance of radio media, which has been surviving somehow through all these years of increasing on-demand digital entertainment. Radio is a much cheaper alternative as all it requires is a few microphones, maybe a recording player or two and a transmitter, rather than huge servers and factories needed to keep tablets and iPods going. The same can be said of newspapers; the printing press has been around since the 13th century and isn’t going to be upstaged by internet news in terms of energy and cost input - ever.

Usually predictions of the future done by my fellow millennials are an assortment of their preferred techno-fantasies. However, most millennials are also completely oblivious of the unfolding crises that are going to wipe out industrial civilisation a few lifetime from theirs. Most see their current difficulties as a temporary set of circumstances that will improve once all boomers die and more ‘efficient’ or ‘equal’ policies are enacted as part of their utopian revolution. The fact that economic decline is going to be a permanent feature of their lives which they can adapt to or flounder in hasn’t struck home. Of course, the school of hard knocks is expected to make many students over the next few years. Being more realistic about the future ahead, can help preparation.