Obama and the Poisioned Chalice

I like Obama. He seems to be intelligent and honourable, and he is perhaps the only candidate that can ease the obvious tensions of a multicultural America. I find Hillary too ambitious and McCain too set in his old military ways. But because I like Obama, I hope he doesn't win this election and I hope he doesn't become President of the United States.

Bush will hand the new President an economy in a crisis so deep there will be no recovery for a generation, a war in Iraq which will cost lives and wealth for years to come and a legacy of thousands of crippled vets, the potential of world hunger and famine, catastrophic climate change, and a deep-seated anger from the rest of the world at what America has done to their economies.

I hope that someone else becomes the next President because, however good they are, they are likely to be remembered as the President that couldn't save America from the pain which is coming now. And Obama is still young enough to get a second chance, perhaps when the pain is easing, when the American people have adjusted to the new realities. Then he may stand a chance of success, and of being remembered as a great President. I like Obama.

Buying a Piece of The Great Satan.

As events have unfolded over the last few days I have not been surprised by the collapse of Bear Stearns. I won't be surprised at yet another cut in U.S. interest rates later today, and I won't be surprised at the collapse of Lehman Bros in the next week or so. There is an inevitability in this downward spiral as banks lose confidence in each other. We are days away from seeing a run on retail banks as savers finally read the writing on the wall and grab what they can from the wreckage.

But what does surprise me is the resilience of the stock markets. Resilience? Markets have plunged in recent days and are consistently down for the last 3 months, so what am I talking about? What I don't understand is, who is buying selected stocks in the U.S. and the U.K. and delaying the downward slide? Perhaps its the governments, trying to prop up the system, perhaps its private buyers with more balls than sense. But I'd guess its sovereign wealth funds, buying up chunks of America's international companies while their shares are on their knees. You can see the sense in it; arab oil money needs somewhere to go, Chinese trillions need a future investment vehicle, Russian oil money spent for future political leverage, ...... It makes a lot of sense, the world's coffers are full of dollars which are devaluing daily! And who's going to look too closely at who's buying what, r complain about the credentials of the new owners, when all eyes are elsewhere. Its not so much waiting for the other shoe to fall, as watching a financial tap-dance, with boots on!

Its strange to think that when Bush Junior took power just 8 short years ago, America had balanced finances, a budget surplus, sound money and a reasonably good standing in world affairs. There were the occasional calls for the overthrow of 'The Great Satan' but the USA commanded popular support, and most people could respect its ideals of freedom and liberty, even if it didn't always get it right.

But I don't think future history will be kind to America. The Iraq War was about greed for oil, and that War was paid for by sucking in an estimated $3 TRILLION of the world's savings. More was pulled in to finance a consumer spending boom, and any thoughts of financial or climate responsibility were somehow seen as an assault on 'freedom'. It seems like that wealth has now been destroyed, and this financial slow-motion train wreck is in real danger of destroying the world's banking system.

Make no mistake - we all blame America; the Government for its corrupting links to big oil and big business, the U.S. Army for Abu Graib and Guantanamo, U.S. corporate practices which promote greed as success, and its voters for their political illiteracy. The next few years will see lots of writers and commentators picking over what is happening right now, about ordinary people around the world losing their jobs, homes, saving and pensions, about homelessness and destitution, about hunger, about climate change. And especially about the greed and selfishness that led to this point.

It used to be just Iran that called the USA 'The Great Satan'; but as America deconstructs itself and the pieces are sold off at bargain basement prices, and as the fall-out from this coming world recession destroys so many lives, I suspect we'll all be cursing a once great nation who fell from grace.

The Power of Voodoo.

I haven't blogged for over a week. This isn't because there's nothing to say, its because I've had so many things going around in my head that I couldn't decide which to pick out for comment. The news is coming thick and fast now:

Financial; Northern Rock nationalised, monoline insurers, oil at $110 a barrel, gold sails past $1,000 an ounce, and Bear Sterns rescued by the Fed (the first of many?). Inflated house prices have barely started to fall and already the news has featured 'tent camps' of dispossessed home-owners growing on the outskirts of Los Angeles, and charity food queues in New York. More and more articles about whether this is really Peak Oil. Desperate actions by governments and central banks to give away money, reduce interest rates and devalue their currencies. Confidence is the true bedrock of currency and the fractional banking system, but it is evaporating and the financial avalanche has started.

Climate change; records for warmest, wettest, stormiest, snowiest and driest all being broken almost weekly. Droughts in Australia (7 years!), China, Africa and the USA. This is not just of academic interest as people's lives and livelihoods are being destroyed and families displaced in a desperate effort to save themselves and find a better life in a more benign environment. European intergovernment meetings this week about preventing mass migration (from Africa) and the 'security' issues.

Food crisis; the combination of climate change and drought has decimated crops. Increased population, biofuels, and the spending power of wealthier countries has increased demand (especially from Asia). Grain stocks are at the lowest in living memory. Add the high oil price and we are reversing the Agricultural Revolution of the 1970's and bringing the spectre of world famine to centre stage, not in some future scenario but THIS YEAR!

All of the above is already news and is happening NOW, but let's look at what hasn't happened just yet:
The 1 billion people in India who rely on the annual monsoon rains to feed them. Climate change may switch off the monsoon at any time - it is predicted by most of the climate models, and most of the triggers are now in place.
The collapse of the Chinese food production system because of current drought and desertification - already the subject of emergency meetings of the Chinese government. Another 1 billion people at risk.
The 1 billion people who now live in slums and favelas around major cities, reliant upon a growing economy for the possibility of future survival. They have no 'fallback' position in recession because they have given up their subsistence land, have no savings, social care or health care.

Starvation is about a lack of money to buy food as much as a shortage of food. You and I can afford to pay double the price for a loaf of bread, but a family living on 1 or 2$ a day cannot, and will literally die of malnutrition. It is the wealth of oil that has enabled to world population to double in my lifetime (3billion to 6.5 billion); I don't want to watch if it 'adjusts' itself back down again.

I consider myself to have been incredibly fortunate to have grown up and worked through the wealthiest period of human history, in one of the wealthiest countries in the world. For my children and grand-children the world is about to become very different. This isn't another recession, or cycle, or adjustment, or correction. This is not going to be fixed by lower interest rates, or a new government policy, or an international treaty.

Realpolitik is that Britain has just announced moves towards building the first new coal-fired power station in 20 years, has just opened the new 5th terminal for Heathrow Airport, and is discussing building a new runway. Realpolitik is that all the northern countries that can make a case, have started arguing over who can claim possession of the newly unfrozen Artic, ready for oil and gas exploration. Realpolitik is subsidised production of ethanol so Americans can drive 4X4's (and drive up food prices) while Africans starve. Yes, it IS that simple! The talk about CO2 reductions is just hot air, climate conferences are just talking shops and nothing real is happening. 'Sustainable development' is bullshit, just another excuse for business as usual.

One feature of human society has always been this idea that we can influence events, even when we didn't understand them. Rain dances, magic charms, praying to the gods, it's all just voodoo. That's what is happening right now. World events are now running faster and faster, we are pretending we have some control but we don't. We are in for the ride of our lives.

For some of us, forward looking and self sufficient by nature, perhaps living in a more protected country or environment and with the wealth to prepare, we can improve our chances. Many assume that things will be alright, it's the government's responsibility, or it's all too depressing and they'd really rather not think about it all. Many more simply don't have the opportunity.

They, like their governments, will just have to have faith in the voodoo.

Getting Ready for the Next Economy.

Over the years I have met quite a few people with Trust Fund income. This is where their parents have put aside a lump of money in investments, and the interest is paid monthly as an additional income. If the fund is large enough, the fortunate recipient need never work again.

Whilst its not always easy to spot these people, they do seem to share certain features; a confidence and security from being separated from the grubby aspects of 'making ends meet', the freedom to make choices about what they really want to do with their time, and sometimes a sense of superiority, perhaps bordering on arrogance.

Western economies have benefitted from their own Trust Funds. In the USA and Britain this came mainly from the oil wealth found under the ground, and where there is no domestic oil by the benefit of paying peanuts for a concentrated energy source which can do all the hard work for you (Japan and Germany, for example). Where this wealth is further invested around the World, the returns continue the income stream.

That has now changed forever. The US now imports over 60% of its oil, the UK is barely oil self-sufficient, the price has risen reducing the oil import/production bonus, and the competitors in India and China can combine oil with cheap and plentiful labour to undercut production costs anywhere else.

What's worse, our governments have used the national Trust Fund to underwrite international debt to support a consumer spending spree. Now, the final step, those countries still with oil are so wealthy they don't need to produce anything, and can buy ownership of all those investments assembled by the Western companies and banks. The Trust Fund is disappearing fast!

The consequences are massive. Like most Trust Fund recipients we have been a little arrogant about our perceived superiority. Like most Trust Fund recipients we have been able to largely choose what we do for 'work'; perhaps design fashion clothes or computer games, or make music and videos, or perhaps market useless things to each other. We have had the income to spend years in university studying increasingly esoteric subjects with little practical outcome. We have had the income to pander to our egos with more toys, bigger houses, and world travel (oooh, look at the poor people!).

I met a guy once who'd lost all the income from his Trust Fund (not by his own actions). He had the accent from a fine education, he had the rich friends (who didn't invite him to parties anymore), and he had some great stories. He was trying to find a job and found that almost everything he's learned counted for nothing, he became very depressed and couldn't handle his 'new' reality. Eventually after a desperate period, he swallowed his ego, became a saleman and re-invented his life.

I think we are now training many of our young people for careers which will barely exist in ten or twenty years' time. Research, financial services, marketing, fashion, music and cinema will still exist, but will be a much smaller part of a smaller economy. Farming, manufacturing, natural resources, environment and energy will be a much bigger part of the new economy. The personal skills I'd like to see for my children and grandchildren would include more practical lessons like balancing a personal budget (more useful than statistics, I think), making and fixing things, gardening, farming and animal husbandry. Perhaps also parenting and succesful relationships. I'd also like to see more about co-operation and working with society, instead of this rampant cult of fake individuality.

The future is there, in front of us, but our egos are clouding our eyes. We can force ourselves to see what is coming and make positive steps to deal with what comes next, or we can wait until it smacks us in the face. The time to do something is now, before the last of our inheritance is gone forever.

Bird Flu and Pandemics

Here's a quote from the World Health Organisation website:

'An influenza pandemic is a rare but recurrent event. Three pandemics occurred in the previous century: “Spanish influenza” in 1918, “Asian influenza” in 1957, and “Hong Kong influenza” in 1968. The 1918 pandemic killed an estimated 40–50 million people worldwide. That pandemic, which was exceptional, is considered one of the deadliest disease events in human history. Subsequent pandemics were much milder, with an estimated 2 million deaths in 1957 and 1 million deaths in 1968.'

And,
'Health experts have been monitoring a new and extremely severe influenza virus – the H5N1 strain – for almost eight years. The H5N1 strain first infected humans in Hong Kong in 1997, causing 18 cases, including six deaths. Since mid-2003, this virus has caused the largest and most severe outbreaks in poultry on record. In December 2003, infections in people exposed to sick birds were identified.
Since then, over 100 human cases have been laboratory confirmed in four Asian countries (Cambodia, Indonesia, Thailand, and Viet Nam), and more than half of these people have died.'

Read the rest for more information; http://www.who.int/csr/disease/influenza/pandemic10things/en/

Note that in 1918 the world population was around 1.6 billion, so 50 million dead was just over 3% of the population. But Bird Flu is actually more lethal, currently 60% of infected people die. So far, of course, Bird Flu is just that; an infection which passes between birds and occasionally to humans in close contact with birds. The possible way it may transform itself into a human-to-human disease would be for a population in contact with poultry, perhaps weakened by malnutrition and with poor medical care, to catch human flu and act as a human petri dish for a new, virulent strain to develop. HIV might be an additional factor, especially if the sufferer isn't on HIV medication (which tends to block other viruses).

Another worrying feature is the demographic; H5N1 infects young people, kids and teenagers, not the old people that most flu epidemics infect. With 50% of the World's 6.5 billion population now living in cities, and 1 billion of them living in shanty-towns with poor sanitation and healthcare, the dangers of rapid spread are horrifying. Typically developing-world cities are predominantly young people because of the high birth rates and the typically short lifespan. And lest you consider yourself seperated from the risk, consider that every one of those cities has airports, with flights connecting to somewhere near you every day.

The WHO say it's a matter of 'when' not 'if'. There are great efforts underway to develop a generic flu vaccination, but the probability of producing sufficient in time, or indeed having the political will or resources to vaccinate everyone, are slim. I'm not sure what happens to a 'fortunate' population who has access to the vaccine, but who is able to watch 24 hour World news of countries without such protection.

But perhaps we are now sufficiently inured to watching poverty and starvation that we will watch it as just another reality TV show.

Cities, Megacities, and the Price of Oil.

One-third of the World's 6.5 billion population live on less than $2 a day. One billion live on less than $1 a day. That's just $365 a year, the price of 2 or 3 tankfuls of fuel for your car.

Behind these numbers is a more complex picture. An urban poor person needs that one or two dollars, to buy everything he or she needs; shelter, food, fuel, medicines, clothes, transport, even taxes. But a rural poor person with a piece of land may be much better off (relatively!) in that their land may provide food, perhaps fuel, and shelter. Their monetary income may be additional to their basic needs. This is why land reform is more important than aid to poor countries, why a standpipe or irrigation system is better than encouraging a move to the city.

But governments like cities. People vote in cities, pay taxes, are easier to monitor and control. Its cheaper and easier to provide healthcare and education, businesses have the critical mass to survive. In fact one of the aims of taxation is to force workers into a society which produces surplus, rather than just self-sufficiency which cannot support a hierarchy or ruling class.

However poor city-societies are very vulnerable. They require imports of energy and food to survive, which must be paid for with the profit from commerce. In poorer countries that commerce usually means commodity trading of the country's natural wealth, perhaps some small scale manufacturing and export, and aid. That is the 'profit' that pays for everything else. But it is not, of course, the main activity of the city which may be government administration, tax collecting and redistribution, perhaps aid agencies, education, hospitals, insurance offices, banks, and all the paraphernalia we are familiar with on every city street anywhere in the world.

As energy prices rise 4-fold and food prices double, poorer cities suffer most, because energy and food are their unavoidable imports. But poor self-sufficient people with their own land are largely unaffected - they have the same food supply and use little imported energy. In fact if they have any surplus to sell at market, the increased food prices make them better off.

Therefore we have two results:
Firstly, if we want to aid the people of a poor country, then land reform (dividing land into self-sufficient plots for local private ownership), education about self sufficiency, provision of basic tools, water supply, non-hybrid seeds and harvest storage are best for the people, at least as a first step towards stable and sustainable future development. They are better off kept out of the cities.

Secondly, cities are increasingly vulnerable as food and energy prices rise. Their needs are immediate, there is no slack in the system, no built-in storage to mitigate disaster. If that fuel tanker or food shipment doesn't arrive or can't be paid for, the city is immediately in trouble.

Cheap oil has allowed for cities to grow rapidly, both by subsidising food production, and by subsidising transport of food into the city. Bombay now has a population of 33 million, Karachi (Pakistan) 27 million, Dhakar(Bangladesh) 25 million, Jakarta (Indonesia) 25 million, in total 18 'megacities' with populations exceeding 10 million and a further 450 cities with populations over 1 million. Lagos (Nigeria) has gone from 300,000 in 1950 to 15 million today, and is estimated to reach 25 million by 2025. One billion people, one-sixth of the world's population, now live in shanty towns around big cities.

Here's a quick calculation; supposing each person ate a modest kilo of raw food produce a day, then a city of 20 million would need 20,000 tonnes of food, that's 4,000 trucks of food per day to supply its needs. Assuming a 50 mile (80km) round trip, that's about 20,000 gallons (90,000 litres) of fuel per day. You can see how vulnerable a large city is to fuel or food shortage, and we haven't even touched on fuel for food production, or heating, or cooking, or lights, or public & private transport.

There is a good reason why in 1950, before the era of cheap and abundant oil, there were only 83 cities which exceeded 1 million people (most in relatively wealthy countries), and most of those were surrounded by productive farmland.

As food and fuel prices rise, the World's poor cities are a disaster waiting to happen, and no-one seems to be noticing.

The End of Globalisation?

The concept of globalisation has been touted by the West as a 'Very Good Thing', and what sane man could possibly argue with it. 'Free markets' were up there with other good things like 'Freedom' and 'Democracy', and governments ignored those so-called Luddite arguments from anti-globalisation protesters at G7 meetings around the world. Hippies, dropouts and New-Agers!

Of course it was always a somewhat one-sided version of free markets; we can sell our subsidised agricultural surplus to you, but your food doesn't meet our standards. Or we can buy your basic commodities at the price WE set, and sell our expensive manufactured goods, burgers and cola back to you so you are forever in our debt. Or we'll sell you our high productivity hybrid seed but you must use our pesticides.

That was all going so well until those pesky Chinese and upstart Indians started taking over the world. Suddenly outsourcing and offshoring hit the headlines, as cheap foreign labour (often with technology degrees) could do what we've always done, but for peanuts. It's OK when its cheap plastic toys, not so good when its computers, cars, ships, steel, furniture, clothes, boats, TV's, prescription drugs, software, and pretty much anything else you can think of.

But there's another side to open markets; labour. If you believe in the principle of an open border for goods, shouldn't you also believe in an open market in people and skills? That is a step too far for almost every developed country, unless it is to fulfil an urgent need for doctors or graduate engineers.

Unfortunately, the people in poorer countries don't agree with border controls and are on the move for a better life, much as most Americans' ancestors did two or three short generations ago. There are an estimated 20 million illegal immigrants in the US and an unknown number in Europe; the EU estimates about half a million new ones per year, but its little more than a guess and its been happening for decades. About 10,000 have died in the last 5 years attempting the various sea crossings from north and west Africa.

But the Western electorates are now rebelling. Protectionism is back on the agenda in the US, and border controls are being tightened all the time. Racist attacks are on the increase everywhere, and right wing parties that support protectionism or racist policies have found their star in the ascendant in France, Denmark, Germany, Greece and even Russia. Even the British Prime Minister (of the left-of-centre Labour Party) is talking of 'Britsh jobs for British people'!

There is a third area of free markets; energy. Experts may argue about if and when Peak Oil has or will happen, but the current reality is flat production, greater demand from China and India, and more oil producers holding on to a greater portion of their production for their own use. The same is starting to happen with coal and natural gas. Few would now try to defend the US government version that the Iraq invasion wasn't about capturing the second-largest oil reserve in the world, especially when Alan Greenspan said as much in his memoirs. Venezuela has seized control of its oil fields in a populist move, much against the wishes (and possibly the actions) of the CIA, Exxon and the Bush administration. Russian state companies have taken over foreign-owned contracts and commentators have indicated a hardening political attitude to energy exports. Exporter countries are increasingly holding onto their remaining energy reserves.

All in all, with increasing calls to control offshoring of industry, tighten border controls, protect energy assets, and keep jobs for one's own workers, I think we can expect mainstream politicians to increasingly play the protectionist card. This will mean a quiet reversal of globalisation policies, perhaps even introducing import controls or taxation on cheap imports from Asia. One excuse may be environment; reducing the carbon footprint of goods travelling long distances. Another may be stimulating the economy by subsidising local manufacture with tax breaks or grants.

Protectionism brings out the worst in people and politicians, and policies can be especially cruel to those migrants already in the country (legal or not). The tolerance exhibited when times are good and labour in short supply can quickly disappear with high unemployment and recession. Government crackdowns can split families (one immigrant parent, for example), justify prejudice, racism and even violence.

In the long term it really doesn't matter because the changes will come about anyway. As energy rapidly increases in price, shipping goods around the world will make Asian products less viable. At the same time a devalued dollar, euro and pound will encourage local manufacture again. And a poorer Britain or America with high unemployment will be a lot less attractive as a destination, both for goods and migrants.

In the meantime though, as the song says, 'There may be trouble ahead...........'

Under the Sun.

It is easy to be depressed at the moment. Stock markets in turmoil, house prices falling, oil is said to be past its peak and will continue its rapid rise in price, climate change, war in Iraq..... This isn't esoteric stuff; negative equity, homelessness, unaffordable energy bills, cars we can't afford to run anymore, and increasingly violent weather, all directly impact our personal and family lives.

But now and again its worth taking a step back from the gloom, and to try to see where we might be going next, and how we might smooth our path into a more successful and sustainable future. Perhaps even learn something from our current predicaments.

I'd suggest one way to analyse the trends is to 'follow the money'. But money (both income and capital) comes from energy, so let's 'follow the energy'. The most successful countries will be those with abundant energy; Middle East with oil (for the moment) and all desert states with solar and access to seawater (for desalination), Iceland with geothermal and its nascent hydrogen economy (one of the few places it's viable) and windy places with wind power.

The other energy source is food, so food production (constrained by high fuel and transport costs) will renew interest in traditional farming areas and practices; Eastern Europe and the Russian steppes for example. Traditionally cities grew up adjacent to agricultural production (but we've now built on those areas as cities expanded), or next to ports for food imports (but we've now redeveloped many old ports for yuppy housing!).

The wealth generated by energy sources is already controlling access to investment, so we can also expect a spread of their ideologies, for example Islamic banking, and also culture in fashion and arts. Hopefully not Russian politics!

For the capital already out there in the world, looking for a return, the 'hot' long-term investments will be agricultural land (for both food and energy crops), and solar and wind power. In the longer term, infrastructure projects such as railways and local ports will replace trucking as fuel prices make road transport increasingly unaffordable.

It doesn't take a genius to work out that productive agricultural land, solar and wind energy sites aren't in the places where political power or population resides at the moment. For countries with a shortfall in these energy and food production capabilities there are two options; go to war to gain control of resources, or enter into agreements with energy-rich states. The U.S. is already doing both; war in Iraq and close ties with Saudi. Already many of the USA's long held 'morals' have been compromised in both encounters.

Most of the proposed technological 'fixes' for future energy shortages are a waste of time, they are simply political sops to a scared public. Biofuels and the hydrogen economies DON'T mean 'business as usual'! But Egypt is already building a mega solar power station (which concentrates solar power to generate steam to drive a turbine for electricity) and plans 50 more, sufficient to power all of Europes needs through 3 undersea cables.

That such a scheme is feasible is reassuring, and points to a new energy paradigm. But it is a small step to realise that energy-hungry manufacturing would be better based next to such a power plant, so we can expect solar-powered manufacturing cities and ports growing up in the old cradle of civilisation, Egypt, and Morrocco for example. Already Iceland's biggest business is aluminium smelting, powered by zero-carbon hydro and geothermal power.

Lastly, internet technology. It's important to remember that this is a tool for a job, not production itself. (After all, 'techno' just means 'tool'). The internet smooths the way for distribution of information, but it doesn't 'produce' anything; not food, not energy, not machinery. In many cases it actually diverts effort and labour from real production, such as turning genuine business investment exchanges into gambling markets (with the current crisis as an excellent example of the results).

Personally I'd like to see our remaining fossil fuels invested in future infrastructure; small local ports, energy-efficient manufacturing near energy sources, freight railways, low energy housing, local solar power plants, peer-to-peer power grids. NOT bigger cars, more roads, media superstars, Second Life, stock market gambling, or any other of the madnesses that far too many people use today to replace reality! I believe that if people can see a realistic and positive path to a successful future, perhaps the present won't look quite so bleak.

The Best of the Best.

The advantage humans are said to have over other species is our intelligence, and if we are to solve our problems and survive and thrive in the future, then I suppose it'll be the superiority of our intelligence that'll help us get there.

But let's look at how we use it now. Let's assume that our education systems choose and nurture our most intelligent kids, and they succeed in the system, go on to university and lead intelligent lives which will contribute to the common good. Where do they go and what do they do?

Well the graduate employment system gives some indication. The best of the best may be headhunted by the big accountancy firms, the financial markets, or go into medicine or law (with a fast track into politics). If they're scientists they will find that the big budgets are in defence, and if they want computing then there are software firms to tempt them. Some will go back into the university back door as research and education staff, perpetuating the system. So how does all this valuable and expensively trained talent help the world?

The software firms have been a great way to make personal fortunes in the last 20 years, but if you take out games, social networking and pornography, I'm not sure even the little that's left has been such a major benefit to the wellbeing of the World. Yes, computers are a great and useful tool to do jobs like accounting, modelling climate and collating research, but that's not where the brains and money are directed.

The big science money goes into defence. Defence? We're really talking offensive weapon development to sell to our own governments and around the world, a total of over $2 TRILLION worldwide, that's $307 a year for every man, woman and child on the planet (and one-third of those people earn less than a dollar a day!). Half of that budget, $1 trillion is spent by the USA (that's $3,300 per year per US citizen). New, more sophisticated ways of killing people - is this what we want our best brains doing?

Then there's accountancy and financial services, including economists. In the last few years almost 50% of the UK GDP has come from the City of London financial sector, and London has become the financial capital of the World. These were the geniuses who devised, bought and sold sub-prime debt, CDO's, secondary insurance, hedge funds and private equity funds, and funders of commercial and consumer mortgages creating the housing bubble. These are the people we entrusted our pensions to. Who invested our savings for us. And these 'best brains' didn't see the crash coming; not this one, or the Dot.Com, or in 1989, or .......

Then there's the politicians (many of them lawyers) who run our countries and provide the framework for our lives. Does their leadership inspire confidence? Are we in awe of their intelligence, wisdom and foresight? Are they visionaries who we can trust to lead us into a better future? Or do we recognise them as pandering to the lowest common denominator with populist policies while they get quietly rich (because none of them seem to end up poor. Unless they get caught!). As we watch politicians talk about climate change, probably the biggest threat the human race has ever faced, but do nothing much, can we really expect them to solve our problems? Wasn't it them that led us into this mess?

Medicine and research. I'd have (naively?) thought that, for $3 per child in the developing World, we could afford to innoculate every child by now, ending unecessary deaths and crippled lives from smallpox, tuberculosis, measles, diptheria, polio, rubella and hepatitis B. Or perhaps find cures for diseases like malaria which infects over 500 million people and kills between 1 and 3 million people each year (mostly children, just like yours). But instead the money goes into keeping old richer people alive for a few extra years (that's nearly 50% of the American healthcare spending), or research into genetically modified animals and plants for profit. Today an anouncement of artificial life being created in a laboratory; a great achievement, but what about the lives that are already out there?

I could go on but you get my point. Little of the intelligence in the World is used as an act of creation, of genuine, succesful contribution to the common good. It is our common laziness that makes it easier for us to trust our lives, money, and futures to the hands of 'more intelligent' people; politicians, bankers, lawmakers, scientists, etc.

But if we look at what they really do with our trust, we may be more inclined to take back that respect, overcome our laziness, find out the facts, do more for ourselves and make our own decisions. Why not start today?

At last! Good News!

As stock markets continue their daily plummet, and the blogs are full of 47 flavours of doom, I thought I'd try to cheer you up with some financial news:
1. There is no 'Global Credit Crunch'
2. The World is not about to run out of oil.
3. The real World economy is just fine.

Now at this point you'll probably have snorted in disbelief and chucked this post into the bin, but hear me out.

1. There is no global credit crunch; there is a Western economies credit crunch. There's plenty of money in the world, OPEC countries have seen an increase in oil prices from $20 to $90 in the last couple of years (and they were doing OK at $20 a barrel!) The rest is pure profit (it costs just $5 a barrel to mine Saudi oil!). China and India is swimming in cash because their populations save, and those savings are underpinning their economic expansion. Its true that their stock markets will crash with everyone else's, but that's mostly Western investment money, which has driven Chinese stocks to over 50 times price/earnings ratios. But China holds $1.5 TRILLION of Western cash now, and if the dollar halves in 'value', it's still worth $750 BILLION!

What's happening is a massive transfer of wealth and a shift in belief. No-one wants to support Western wages, prices, debt and ego anymore. This is the first step to the New World Order, a stumble towards a more real world. Bad news for Western economies, but probably good news for the world because emerging economies will spend most of the money on real things, like infrastructure, manufacturing, basic health care, and education. Unlike the West which will simply waste it on newer consumer crap and big cars.

2. There's no oil shortage. Even though we are at Peak Oil, we are still pulling as much oil out of the ground as last year and the year before. All that is happening is that now we'll have to share it with the rest of the world, whereas before we could mine that wealth and hold onto the massive profits, and kid ourselves of Western superiority. This will involve a massive transfer of wealth and that won't be voluntary; stock market crashes and currency devaluations are just the start, asset and property prices will follow, then unemployment will drive down real wages to a more international level (i.e. competitive with the rest of the world). Which leads me on to...

3. The real world economy is just fine. We tend to forget that the real world doesn't work in financial services or software, live in a new apartment in the city, drive a one year old car and shop in Waitrose. The majority of people in the real world work in a small business making something useful, or farming a plot of land, or teaching kids, or working in a hospital; THAT'S the real economy. In the Western economies they've been sold the ego dreams and the credit cards and the debt, and they'll be paying the price in the next few years, but fundamentally their real skills are still needed.

The combined effects will be a massive devaluation of Western economies compared with the rest of the world. Of the various ways that this might happen; stock markets falling, asset prices collapsing, unemployment, and devaluation of currencies, the least painful will be the latter; currency devaluation. If Western currencies fall (principally the US Dollar, the Euro , the Pound and the Yen) then the whole edifice of each Western economy will slide down the hill together, like a town in a big landslip. A few cracks will appear in the streets and buildings, but life within that economy will go on. We won't be buying so much from outside, and we'll have to re-invent local manufacturing and production. But that's a good thing, isn't it?

So fasten your seatbelts and try to look on the bright side, as we are leaving behind the ego economy and moving back into the Real World!

Making Babies.

Here's an amazing thought; every one of your ancestors was successful. Each of them, male and female, survived childhood illnesses and accidents, wars, plagues and famines, at least until they were old enough to meet a partner and make babies which were, in their turn, healthy enough to survive. Let's go further; you can trace this fantastic line of your family's success all the way back to the first humans; 'Adam' and 'Eve' if you wish.

Religions have different versions of when Adam and Eve were around. But scientists have worked out that Adam (called Y-chromosome Adam because of the genetic tracer) is said to be one African man who lived about 60,000 years ago. That's your Great x 2,700 grandad! Sadly he never got to meet Eve (mitochondrial Eve) who came from East Africa, probably Kenya or Ethiopia, 140,000 years ago; say 'Hi' to Great x 7,000 grandma! Every human on this planet contains their DNA. Hello Cousin!

But why stop at humans? After all, humans didn't just 'happen' one day, sitting on a rock and drinking cappucino. In a hunt to find our collective chickens and eggs, we can all trace our succesful ancestors through monkeys and little shrewlike creatures dodging the dinosaurs (150 million years, give or take), all the way back to the first amphibious fish thingy that slid slimily out of the ooze and took a first breath! And before that there was..... OK, maybe we won't go there!

All this leads me to believe that if there IS a meaning to life, it is to have succesful children. Children that will survive childhood, be fit and healthy, find a mate and have succesful children of their own. Ask any parent and they'll tell you some version of the same, they want their child to have the best chance of success, and most benign social structures are geared to this end. But note that this isn't just 'have children', this is to have SUCCESSFUL children. What does this mean?

Well, first of all it means the parents being around long enough to keep them safe, to educate them in the ways of the world, to pass on our hard-won knowledge and experience, and hopefully guide them away from danger. Secondly it means giving them the skills to earn a living, develop as a well-rounded human being and member of a sociable human race. Lastly it means for them to find a suitable mate and for them tohave children of their own. Ideally it means us having the opportunity to help the future generations too; what's the point of living for 3 times longer than our ancestors if we don't do this?

But there's more; successful children live in a broader world. Whilst as individuals we can make more money to give our own children an advantage, pay for extra achievements in schooling or by wealth inheritence, their real opportunities come from the society they live in. Why else would people try so hard to get a passport to wealthier countries, or war-free countries, or just countries with water? Our real safety and opportunity comes from a stable social system, where there is a rule of law, human rights are respected, and people help each other. No man is an island.......

If you agree with the above, then it will be obvious to you, as it is obvious to me, that modern society is failing in these aims. Parenthood has to be a much broader concept than just having babies, 'education' is a much broader concept than 'schooling', marriage is more than a temporary sexual or financial contract between adults, and 'family' is more than just one or two adults earning the wages while their child is 'educated' at school and college.

A successful society cannot be about an unseemly scramble to get richer at the expense of your neighbours; therein lies envy and despair. 'Haves' with lots and 'have-nots' with nothing result in a fractured society of anger and violence. Don't you think our children must be safer in a world of co-operation than in a world of raw competition? Do you let your children out into the streets to play in your neighbourhood?

If you, like me, are guilty of living a modern life; broken relationships and homes, single parent children, disassociated families, and a non-contributory attitude to society, and if you still have time left to repair some of the damage, I'd urge you to do so. For all our futures.

As the saying goes, 'If you're not part of the solution, ............!'

Sophistication and Complexity

When the dot.com boom was in full swing in the late 1990's, many people spoke of a 'new paradigm', a different way of doing business that would redefine economics and the marketplace. I recall a friend was trying to find a way to turn his company into an Internet business (and pick up some of the capital sloshing around looking for something to invest in), and asked my advice. I said I could see the point as a marketing tool, but that his business wasn't ideal - it relied on personal service which didn't translate. This isn't what he wanted to hear and we ended up having an argument about the 'New Economy'. But history later showed us that old-fashioned economics still worked.

Most people today will also argue that our economy today is much more sophisticated; that banking and financial services are inherently robust, that governments won't stand by and watch anything happen that jeopardises the stability of The System. Its a common assumption that complexity is the same as sophistication, but in reality they are opposite.

A pack of cards is stable until you start building a house of cards with it, and the taller and fancier your construction, the more complex and impressive it becomes, the nearer it gets to total collapse. If it looks shaky while you're building it, you can add a few cards to make it more stable, but once it starts to fall there's no way to save it. Complexity is inherently unstable.

Sophistication comes from the Greek word for 'wisdom', and it makes sense that wisdom has to be based on reality. Complexity which is designed to hide reality can't be sophisticated. An example is money itself. The concept of money; a medium of common exchange across place and time, is a sophisticated idea, but only as long as the money has an agreed and stable value. During the Second World War the Third Reich put great efforts into producing fake banknotes to undermine confidence in pounds and dollars. Similarly after the War the Deutchmark suffered hyperinflation as confidence collapsed. The same is happening in Zimbabwe today. Excess printing of money devalues it, until you reach a point where all confidence is gone.

By now we all know that the complexity of financial arrangements devised by banks and insurance companies in the US has hidden the true level of debt in the system, even if as yet we are still unable to assess the full extent of their shennanigans. This in itself has been enough to undermine confidence in currency and sparked a flight to gold and commodities. But we've barely started.

The governments of the US and Europe (and Japan, to a lesser extent) have decided to print money in massive quantities in the hope of re-inflating the bubble economy and delaying the inevitable for another year or two (surely a political rather than an economic imperative). In effect the governments are doing what the Third Reich tried to do, print money, and the result is devaluing the currencies. This is a very dangerous strategy for the US, which relies on foreign countries buying $2 billion a day of American securities - how long will they do so for securities denominated in fast-devaluing dollars?

But there's more. 70% of foreign-held reserves are held in US dollars. Already many governments are trying to divest themselves of this fast-sinking currency without panicking the markets. Sovereign Funds are in the news, buying companies, banks and investment funds at knock-down prices (and gutting the US economy of its ability to produce domestic wealth). But as these dollars are repatriated into the US system, they inflate the economy by their actual quantity and by increasing the speed of the flow of money though the system, both of which add further to the devaluation (i.e. its hugely inflationary). Whichever way you look at it, these combined effects are very serious because they undermine the whole structure of banking and currency based on fiat money.

So what happens next? Expect to see more Sovereign Fund investment in dollar denominated assets which have international value, as dollar deposits are exchanged for anything which may continue to hold real value into the future. International companies, especially those in mining or commodities, or those with expertise or patents (which can easily be transferred offshore). High quality trading names will also draw attention. This will support the dollar and the stock markets for a while, perhaps even a year or two. But as the real heart of these companies is transferred abroad to cheaper and less regulated environments, and the true vulnerability of the fractional banking system becomes more obvious, then the real impact will be felt.

That's when the pack of cards will come tumbling down.

Urban Life and the End of Suburbia

There's a lot of discussion going on at the moment about urban planning in the light of high oil prices, CO2 emmissions and climate change. I've been working recently on innovations in floating-home developments, either houses which can float during flood events, or (my preference) floating houses on permanently flooded low grade land and mudflats. The advantages are that housing development can take place on land which is of little use for either agriculture or development, reducing the pressure on both. In a country (UK) which has a housing shortage, and with the constant need to upgrade housing stock to higher sustainability standards, the Government plan to build 3 million houses here by 2020. In my view these must not be built on farmland; we need it for food and we need it for energy crops.

In most of Europe the public transport system is good; governments invest in it, people use it, and in urban areas the switch from cars will be less painful. For example in Nice (France) a new urban tram system now runs silently through the ancient streets, connecting the poorer social housing on the outskirts (where there is high unemployment) with the tourist centre, beaches and hotels where the work may be found. The cost is 1€ ($1.30) for any trip (with additional discount for bulk tickets), and the same low prices apply to the excellent modern bus service which connect the rest of the city and along the coast to Cannes and Monaco.

But transport cost (both public and private) are rising fast, and the cheap fuel and universal car ownership which created suburban living and 'The Commute' are ending. The increasing costs can be absorbed in a boom but, as we slide towards recession, many people will re-assess their budgets and the costs of their lifestyle choices. Cars are becoming unwelcome at the other end too; in the UK city-centre companies are taxed if they provide car parking spaces for workers, and the London Congestion Charge costs £8 ($16) per day to drive into London. All this is likely to be fatal to the concept of 'suburban' where dormitory towns empty during the daytime, and often l