It’s the Stupid Economy

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In the late 1800s, income inequality had reached an all time high in most of the western world. What followed was fifty years of war and revolution. Did the first cause the second? It’s not certain but the evidence certainly points in that direction. The accumulation of wealth and power in the hands of the few was so great that America’s first populist President championed legislation to break up the largest corporations, notably in the oil industry but also in the beef and railroad industries. Perhaps that’s one reason the USA avoided many of the internal disruptions faced by many other countries in the 20th Century. In any case, for many countries, violence became the great leveler.

Income inequality began to fall in western nations from World War I until the 1980s when it began to rise again, slowly in much of Europe, more rapidly in the English-speaking countries and the developing world. While the USA has returned to economic divisions similar to what existed in Teddy Roosevelt’s time, countries in Latin America and parts of Africa and southeast Asia have even greater income disparities.

While at the extremes, inequality is almost unimaginable. The hundred richest people in the world have more wealth than the poorest billion. An “eat the rich” ideology now runs rampant among certain segments of the population. Personally, I suspect they’re not that tasty.

But income inequality runs deeper than that. If you are in the top 20% of the population, you have seen your wealth and income increase steadily if modestly over the last 40 years. You may not feel like Rockefeller and you may be worried about your kids’ future, but for the most part you feel secure and happy. As it turns out, money does buy happiness up to a point and beyond that point it mostly seems to buy you detachment from the real world.

For the rest of the population, things are not so rosy. Incomes have stagnated or even fell in real terms and the perceived gap between you and those ahead of you in the economic race has become magnified. And, once, we get to the bottom 20%, poverty levels have risen as incomes fall.

None of this should be surprising. The market system is specifically designed to produce winners and losers and its primary goal is the accumulation of wealth. While apologists for capitalism claim that a rising tide lifts all boats, most of them don’t seem to understand that a lot of people don’t own boats and many who do, have leaky dinghies always on the verge of capsizing and sinking.

And what does all this income inequality mean for us? Bad news for the most part. A definitive study of 23 countries suggested that increased income inequality leads to higher incarceration rates. That may seem unsurprising but it may also lead to higher rates of family breakdown, worse medical outcomes, shorter life spans, higher child mortality rates, greater social disruption and breakdown of governance systems. I suspect, since it apparently leads to more consumption, it also leads to greater environmental degradation including climate change. Just anecdotally, a single large yacht of the type owned by the super rich produces more greenhouse gases than 400 average-sized African villages. And the drive to accumulate wealth and then keep it almost certainly takes you directly through oil fields and rain forests.

It also explains the growing dislocation of most voters in western democracies. Faced with abundant evidence that the economy is failing them in both real and relative terms, they begin to distrust the politicians who lead their state—even when such distrust is clearly misplaced. The rise of populism on the left and right as well as the constant churn of single term governments comes from that distrust. Eventually, when no party seems able to solve their problems RIGHT NOW, they turn their back on democracy altogether. Which suits authoritarians (who ultimately prove to be supportive of the rich) just fine. Are there alternatives? I think so but that will have to wait because…

That’s ten minutes from Hayden Trenholm.

Photo by Raden Prasetya on Unsplash

Klaatu, where are you?

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In the 1951 film, The Day the Earth Stood Still, an alien named Klaatu comes to earth and almost immediately is gunned down. Luckily for him, death is not an impediment, at least, not initially. He delivers a message to the world – stop fighting among yourselves and join a peaceful galactic civilization. It’s not a particularly original idea (except for the galactic part) but it falls on deaf ears. They shoot him again but rather than destroying the planet he saves it from destruction be all powerful robots by famously uttering: Klaatu barada nikto!

Say what? While no one really knows what those words meant (even the screenwriter) they did the trick and the earth was spared. The theme of bringing the world together to fight alien invaders has subsequently been a well-worn trope of science fiction movies, though generally in subsequent iterations, it actually worked.

Klatuu failed in his mission of world unity but that wasn’t the point. What the director and writer might have been getting at is that the world was doomed if it kept on its current road of nuclear proliferation. It would take more than the intervention of one man (or alien) to change that. It was a collective exercise requiring international collaboration. We signed a couple of treaties and the world didn’t burn (though a couple of guys seem determined to change that).

Sort of like what we are currently facing with climate change. Much like the arms race, the world has been in a competitive frenzy to have more, to make more, to control more. Economies have expanded—not a bad thing in itself—at the cost of the environment and, as well, as the end game plays out, at the price of greater social and economic inequality. It is not sustainable but, for most of us, present pleasure always out weighs inevitable pain. Anyone who has had more than one hangover can attest to that.

But nothing is inevitable. In 1980, most of the countries of Africa were in the hands of dictators who had clung to power—using violence, propaganda, patronage and corruption—for more than 20 years. Most had the support of one of the Great Powers at the time—the US and its allies on one side and the Soviet Union on the other.

Then Michel Gorbachev arrived on the scene with the idea of glasnost, which lead to the fall of communism and the tearing down of the Berlin Wall, caused mostly by internal transformations rather than the exhortations of Ronald Reagan. The effect in Africa was dramatic. The iron grip of Marxist dictators was loosened and, in many countries, multi-party states began their shaky existence. Western powers, too, no longer saw the benefit of supporting “useful dictators” like Mobutu in Zaire. Without continuing CIA support many lost their positions (though not the billions they had stolen over the years). It was not the end of Africa’s problems but it set the stage so that, in some countries at least, real progress could be made, while in others, things became less bad.

So maybe we don’t need an alien invasion after all (though I’d love to hear Donald Trump say he was going to build a wall around the earth and make the Martians pay for it). What we need are a few brave leaders to transform the earth… No, that’s not it, we need the whole population to wake up and kick a few of our so-called leaders in the butt and then, get on with the job at hand.

Because we really can’t be saved by the actions of one person (look at Russia today) but only by the collective action of the many, even if we have to drag the rest kicking and screaming into the future. While we still have one.

And that’s ten minutes from Hayden Trenholm

With a Whimper

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The UN report on the state of biodiversity offers a bleak assessment of nature. Species are going extinct at a rate never before recorded in human history. And almost all of it is caused by human activity. Climate change is taking its toll, of course, but the destruction of forests, growing urban sprawl and poor land use practices are all adding significantly to the devastation.

Many scientists now call the current era the Anthropocene (when man dominates the environment) and predict it may end with an extinction event equivalent to the five major events that wiped out more than 75% of species at various times in the past. The last came when an asteroid came down in the Yucatan and tipped the scales against the dinosaurs but there were similar catastrophes in the past.

The difference, of course, were those were caused by random accidents – this one seems deliberate.

One might think that it is a silly animal that fouls its own nest but humans have been doing it for, well, forever. Tribes of humans were generally nomadic because they had wiped out the local wildlife or depleted the soil in slash and burn farming. But it didn’t matter. Until 10,000 years ago, there weren’t enough humans on the planet to do real damage (though ask the giant sloths about that). Then came large-scale agriculture and it’s all been downhill since then. Though those early cities were pikers compared to what we’ve accomplished in the last two hundred years.

You would think we might be prepared to learn from history and some of us have. There is certainly plenty of evidence about what happens when humans think only in the present tense, ignoring history while pretending the future will take care of itself.

But do we listen? Sometimes. Do we change? Less often. When even the slightest effort to encourage better behavior (a modest carbon tax for example) is met with howls of rage from both left and right, you know there is not much hope for the human race.

It doesn’t help that a significant portion of the population are eagerly awaiting the end of the world and their (but not your) resurrection into the kingdom of heaven—no matter what version of the heaven they happen to hold dear. If you believe the end days are coming—as fundamentalists of various sects seem to hold true—what difference if the world burns and the birds fall from the sky? God’s plan and all that self congratulatory nonsense.

Then there is the “I’m alright, Jack” crowd who seem to believe that if they accumulate enough wealth, they and their descendants will somehow thrive in a devastated world. These are the same jackasses that believed that if they dug their bunkers deep enough, they would survive an all-out nuclear war. Sometimes I’d like to flash forward a couple hundred years and ask the dregs of the superrich how that worked out for them—if they haven’t already been eaten by their poorer cousins.

The worst are those who read these pronouncements of doom and acknowledge their truth, then throw up their hands and admit defeat. Nothing I can do personally so eat, drink and be merry… I’ve got nothing against any of those activities but I’m quite capable of multi-tasking. I can personally reduce my carbon (and equally important plastic and toxic waste) footprint while paying others to do more and voting in governments with the will to make all of us do better.

In any case it’s not the end of the world. Life has been almost wiped out on 5 previous occasions but here we are, in a world (still) filled with life. A million years from now there will still be life—different perhaps, but here nonetheless—while all the works of man from our cathedrals to our SUVs, from our arts to our imaginary friends in heaven will be reduced to a thin layer of plastic infused sediment for future intelligent beings, if new ones should arise, to ponder over.

On that hopeful note, this has been slightly more than ten minutes by Hayden Trenholm.

Photo by Dominik Vanyi on Unsplash

Future Thinking

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The past is irrelevant.

Well, like most categorical statements, it’s not entirely true. The past can serve – if you approach it with a critical mind – as a guide to success. And failure. It can at least tell us how we got to the here and now.

Still, it is surprising how many people, on both the right and left, spend most of their time staring behind them, either with fond, if misguided, nostalgia or with bitter resentment. The past is a rich lode that can be mined to fuel present day prescriptions to restore a glorious era or overcome ancient wrongs.

But here’s the thing. While you may make tremendous efforts to re-write the past (so much easier than living in the present), you can’t actually change it. It’s over and done with. Despite aphorisms to the contrary, it’s dead, Dave.

More importantly, the past will always be that home to which you cannot return. As for those people who say ‘we should have done it differently…’ Well, you didn’t. In fact, for the most part, the speaker wasn’t even part of that mythical we; in some cases they weren’t even born.

So, while the past is not exactly irrelevant, it is largely unimportant to our current existence. You can’t change it and you can’t return to it. So grow up.

So what does that leave us? The eternal present and the envisioned future.

Which is plenty. By some metrics, there is now more ‘present’ than there has ever been. More people, more nations, more problems and more possibilities.

Everything we do occurs, by facile definition, in the present. But, at the same time everything we do extends into the future.

Ah, the future. Unlike the decaying body of the past, the future is pregnant with possibility and change. Indeed, every time we act in the present we create a different future. Science fiction fans will be familiar with the idea of ever-branching futures – each one shaped by the billions of actions taken by billions of humans every second. Most of those futures are indiscernible from each other, but no matter.

In truth, there is only one future – the one we all wind up living in. Almost nothing we do makes a bit of difference to that future. Even powerful people like Presidents and CEOs and public intellectuals and revolutionary leaders spend most of their days doing meaningless things. It is only in hindsight that we can ever say that this action or decision mattered.

Which might make life seem rather pointless and powerless. But it doesn’t.

We can have whatever future we collectively want. But that’s the thing – it is a collective decision. It’s not like some leader can take us to the future (any more than they can return us to the past) because they don’t know the way anymore than the rest of us. A book called Superforecasters recently pointed out that it is possible to make really good guesses about what the world will look like three months or even six months from now – but three years or six years. Not so much.

Maybe that seems pretty limited but still it does suggest a way forward. Conversation, dialogue, shared visioning – it’s not much but it may be the only way to get the future we want.

And that’s ten minutes.

Twitchy

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You’ve seen them. People with their faces buried in their devices as they drift down the street or grabbing their phone when if ‘bings’ – even if they are in the middle of a conversation. Their fingers drum impatiently on their desk if their computer takes a few seconds to boot up or connect. They growl when their texts or tweets or Facebook posts or Tumblr messages aren’t instantly answered. They hate waiting for anything; they don’t seem to know how to relax, even for a moment. Instant gratification gratified instantly.

You know who I’m talking about. The Twitchy generation.

Oh, not millennials or whatever generation comes next. A lot of them seem pretty laid back about everything – their love lives, their careers, the end of the world. They even read physical books. But that’s another story.

I’m talking about the forty-somethings (spreading into the fifty-somethings). They seem to think that history happened six months ago and the future had better get here pretty damn quick. And why can’t I get that show on Netflix!?

I think people under thirty actually understand that none of the programs which are supposed to connect our world really operate in quite the way they promised. At least their eye-rolls and shrugs when I ask them about it seem to suggest that.

No it’s the people who didn’t grow up with the highly connected and immediate (unmediated) world, that seem to have lost all sense of time, all sense of the slow changing nature of the world.

Take the current political world we live in. Nothing has really changed in the last fifty years. Governments have a life and elections – unless you are living in an unstable democracy or none at all – occur to a schedule. Presidents are almost never impeached; majority governments never fall before their allotted time.

Yet, to listen to the pundits, six months is an eternity. I saw a headline the other day asking if Justin Trudeau was the Teflon PM. For crying out loud, he’s been in office for less than four months – how much dirt do you think the world has generated in that time for any of it to stick? And as for delivering on his promises – why aren’t they all done right now? Why do we have to wait for consultation or debate or legislation or doing it right? If it isn’t here now it’s never coming, I tell you. Twitch.

Meanwhile in the USA people are moaning that Trump will be president and think how great/awful that will be. There won’t even be a vote for eight months. It’s not long but it’s not tomorrow. And when he gets there – if at all – all those things that he promised won’t arrive on February 1st. Twitch. Twitch.

I see this all the time. My boss – who is in his seventies – will leave a restaurant if there is a line of more than six to get in. My wife swears at her ancient computer every time it takes fifteen seconds to connect. People my age grumble whenever their favorite movie is rescheduled for a month – and heaven help George R.R. Martin if he delays his next book again.

We won’t stand for it. What do we want?  Everything and when do we want it? Now, goddamn it! Or yesterday.

Screw history. I want the future. And I want it before tomorrow.

Twitch. Twitch. Twitch.

And that’s ten minutes. Too late as usual.

The Future of Oil

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Kevin O’Leary should hold off on investing in the Alberta oil industry, not because Premier Notley isn’t going anywhere but because it just makes sense. Based on the precept of investing that you should buy low and sell high, he should wait until the properties become real bargains.

The price of oil has just dropped below $30 a barrel, a level unpredicted even six months ago. It may have a way to fall yet.

A number of factors are coming together to make a perfect storm for falling energy prices.

At the top of some people’s list are the faltering economies in China and some of the other BRIC countries. Falling demand for oil is certainly a factor in the price fall. While the American economy is picking up, its thirst for oil is not enough to prop up the price by itself.

But falling demand is only part of the picture. New technologies – notably fracking – have released a great deal of previously unrecoverable oil and, more importantly, natural gas, into the North American market. Energy reserves have seldom been higher. Meanwhile, solar and wind have become serious competitors as a source for electricity and are bound to become more so if the US keeps even half of its commitments to reduce greenhouse gases. While a Republican in the White House might change that – it will have little effect on other countries that aren’t in denial about the causes of global climate change.

Of course, the real culprit in the falling price of oil is Saudi Arabia which is determined to become, once again, the world’s dominant supplier of petroleum. They are willing to drastically cut their own revenues if only to irreparably damage the oil production capacity of other countries.

Things get a lot more complex now that the new deal with Iran will release billions of barrels of relatively cheap Iranian oil onto the already glutted market. Prices as low as $20, $15 or even $10 a barrel are possible. Think it can’t happen? During the late-90s, oil hovered in those ranges for over a year before the growing world economy and conflicts in oil producing regions drove the price up again.

Of course, what goes down is bound to go back up, right? But will the world economy ever rebound sufficiently to drive up demand for oil – especially in a world that finally seems determined to lower its carbon footprint?

Low oil prices are a terrible thing for some oil producing countries – Nigeria and Venezuela may see their economies and governments collapse in the wake of lost petro-dollars – and bad for some others, like Canada and England, who rely on oil to boost sometimes faltering manufacturing industries. Only Norway – which frugally set aside most of their past oil income – is likely to escape real problems.

For other countries – particularly those who have invested in their industrial infrastructure, low oil should be a good thing in the short term – and irrelevant in the long. Unfortunately, Canada has largely failed on that front and will pay the price for over-emphasizing oil and allowing corporations to hoard now devalued cash. It may be a tough row to hoe for any investor hoping to sell high somewhere down the road.

And that’s ten minutes.

The China Syndrome

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Stock markets in China (and as a result around the world) plummeted this week. Measures put in place by the Chinese government to calm such crashes seem to have had the opposite effect as traders couldn’t sell fast enough as markets fell. The government removed the measure and the market has grown calmer. They’ve also probably been fiddling around behind the scenes in order to try to control what is essentially a chaotic system.

Markets serve useful functions; over the long term they help shift capital from failing industries to emerging ones. Governments can influence markets – essentially use them – by changing tax laws and other arms-length measures to achieve certain public policy goods. Nothing new about that and nothing wrong either.

However, in the short term, markets are largely ruled by ‘irrational exuberance.’ This is what leads to massive overvaluing of some stocks and sudden crashes when the least little ripple hits the economic news. Perhaps this is not surprising. Eddie Murphy put it best in ‘Trading Places’ when he told a couple of crooked investment bankers (is that adjective redundant?) that they were ‘a couple of bookies.’ Which, on some days, is all the stock market is: an off-track betting shop.

It doesn’t help when clever fellows use high technology to game the system, gaining millions for themselves by using ‘flash trades’ to skim money from more legitimate stockholders and traders. And given the propensity for all markets to ‘phish for phools’ not as a reflection of intentional criminality but rather as a reflection of how unregulated or poorly regulated markets inevitably run, it is not surprising that useless investments may be promoted as rock solid.

So what is really going on in China? First and foremost we know that the Chinese economy is growing at a slower rate than it did over the last ten years. But it is still growing at rates that should make western nations green with envy. 6% is not a bad rate but it isn’t 10%. Simple math suggests that 10% was never sustainable but, hey, high finance is not for simpletons, right?

And that is part of the problem. Despite constant warning by investment houses (warning only there because the law requires it) that past results are not a prediction of future outcomes, most people – including bankers, business men and senior finance officials – don’t really seem to get it. Decisions made a few years ago to invest in sectors of the economy that were dependent on continued massive growth in China (and let’s not even get into the misreading of the economies of the other BRIC nations) are, at least in part, behind the current panic.

So, if you have a lot of money in the stock market, you are in for a rough ride. But as more than one person wiser than me has said – you shouldn’t invest in stocks if you aren’t prepared to lose all of your investment. So tough luck.

Unfortunately, a lot of us are dependent on pension funds that are also heavily invested in the stock market. Let’s hope those managers have their eye on the long term and not on the day to day exuberance of day-traders.

And that’s ten minutes.