World in Serious Trouble on Food Front

Lester R. Brown

In the early spring of 2012, U.S. farmers were on their way to planting some 96 million acres in corn, the most in 75 years. A warm early spring got the crop off to a great start. Analysts were predicting the largest corn harvest on record.

The United States is the leading producer and exporter of corn, the world's feedgrain. At home, corn accounts for four-fifths of the U.S. grain harvest. Internationally, the U.S. corn crop exceeds China's rice and wheat harvests combined. Among the big three grains – corn, wheat, and rice – corn is now the leader, with production well above that of wheat and nearly double that of rice.

The corn plant is as sensitive as it is productive. Thirsty and fast-growing, it is vulnerable to both extreme heat and drought. At elevated temperatures, the corn plant, which is normally so productive, goes into thermal shock.

As spring turned into summer, the thermometer began to rise across the Corn Belt. In St. Louis, Missouri, in the southern Corn Belt, the temperature in late June and early July climbed to 100 degrees Fahrenheit or higher 10 days in a row. For the past several weeks, the Corn Belt has been blanketed with dehydrating heat.

Weekly drought maps published by the University of Nebraska show the drought-stricken area spreading across more and more of the country until, by mid-July, it engulfed virtually the entire Corn Belt. Soil moisture readings in the Corn Belt are now among the lowest ever recorded.

While temperature, rainfall, and drought serve as indirect indicators of crop growing conditions, each week the U.S. Department of Agriculture releases a report on the actual state of the corn crop. This year the early reports were promising. On May 21st, 77 percent of the U.S. corn crop was rated as good to excellent. The following week the share of the crop in this category dropped to 72 percent. Over the next eight weeks, it dropped to 26 percent, one of the lowest ratings on record. The other 74 percent is rated very poor to fair. And the crop is still deteriorating.

Over a span of weeks, we have seen how the more extreme weather events that come with climate change can affect food security. Since the beginning of June, corn prices have increased by nearly one half, reaching an all-time high on July 19th.

Although the world was hoping for a good U.S. harvest to replenish dangerously low grain stocks, this is no longer in the cards. World carryover stocks of grain will fall further at the end of this crop year, making the food situation even more precarious. Food prices, already elevated, will follow the price of corn upward, quite possibly to record highs.

Not only is the current food situation deteriorating, but so is the global food system itself. We saw early signs of the unraveling in 2008 following an abrupt doubling of world grain prices. As world food prices climbed, exporting countries began restricting grain exports to keep their domestic food prices down. In response, governments of importing countries panicked. Some of them turned to buying or leasing land in other countries on which to produce food for themselves.

Welcome to the new geopolitics of food scarcity. As food supplies tighten, we are moving into a new food era, one in which it is every country for itself.

The world is in serious trouble on the food front. But there is little evidence that political leaders have yet grasped the magnitude of what is happening. The progress in reducing hunger in recent decades has been reversed. Unless we move quickly to adopt new population, energy, and water policies, the goal of eradicating hunger will remain just that.

Time is running out. The world may be much closer to an unmanageable food shortage – replete with soaring food prices, spreading food unrest, and ultimately political instability– than most people realize.


Lester R. Brown is President of Earth Policy Institute and author of Full Planet, Empty Plates: The New Geopolitics of Food Scarcity, due to be published in October 2012.

Copyright © 2012 Earth Policy Institute

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Reposted from Planet Thoughts The future of nuclear power now hangs on a single decision by President Obama---and us. His Office of Management and Budget could cave to the unsustainable demands of reactor builders who cannot handle the standard terms of a loan agreement. Or he could defend basic financial procedures and stand up for the future of the American economy. You can help make this decision, which will come soon. It's about a proposed $8.33 billion nuke power loan guarantee package for two reactors being built at Georgia's Vogtle. Obama anointed it last year for the Southern Company, parent to Georgia Power. Two other reactors sporadically operate there. Southern just ravaged the new construction side of the site, stripping virtually all vegetation. It's also stripped Georgia ratepayers of ever-more millions of dollars, soon to become billions. This project is in the Peach State for its law forcing the public to pay for reactor construction in advance. When the project fails, or the reactors melt, the public still must pay. A taste of what's coming has emerged in shocking defects in poured concrete at the site which will cost millions to correct and months of delay on a project whose construction has barely begun ( http://nukefree.org/nc-warn-vogtle-already-hit-major-design-flaw-delay ) . Nonetheless, Southern runs virtually no financial risk. It actually has an interest in never finishing. Florida is now in turmoil, trying to rid itself of a similar Construction Work in Progress law ( http://nukefree.org/florida-legislators-sue-stop-nuke-bailouts-advance ). Worldwide estimated reactor costs have jumped from $3-5 billion each a few short years ago to $10 billion or more, and rising. Uranium prices are set to soar as the supply of Russian weapons-based fuel is about done. And renewables have long since outstripped atomic energy as being cheaper, faster to build, cleaner, safer, more reliable and open to community ownership. There are virtually no private investors willing to back new reactor construction. There are no private insurers willing to take the risk on operating reactors. There is no place to store the radioactive wastes they generate. Operating reactors in Vermont ( http://nukefree.org/vermonters-tell-vermont-yankee-get-out ), New York, California ( http://nukefree.org/nrc-chair-jazcko-says-san-onofre-be-shut-indefinitely ) and elsewhere now face ferocious public uprisings to get them shut. They are being joined by Governors, US Senators and entire legislatures. Peter Shumlin, Governor of Vermont, has appeared at a major public rally to shut Yankee. The legislature long ago voted (26-4) the same way. Shumlin was joined by US Senator Bernie Sanders, who has issued a stunning denunciation of the loan guarantees ( http://nukefree.org/sen-bernie-sanders-ryan-alexander-stop-nuclear-subsidies ) . US Senator Ron Wyden of Orgeon has published a serious warning about the on-going dangers of Fukushima, which he recently visited ( http://nukefree.org/sen-wyden-warns-situation-fukushima-worse-believed ). Once the public kills one of these elderly reactors, a tsunami of shutdowns among the 104 currently licensed in the US will follow. Germany and much of the rest of Europe have abandoned the technology ( http://nukefree.org/europes-war-over-nuclear-financing ). Bulgaria has just scrapped plans for two proposed generators. Major banking institutions have warned potential investors in Britain's planned reactors that if they proceed, they will lose their financial standing. Mexico has also said it won't build new nukes. In Asia, only one of Japan's 54 licensed reactors now operates, and it may soon shut. Huge demonstrations and hunger strikes are raging against a proposed project at Koodankulam, India. The Philippines says it won't build any reactors at all ( http://nukefree.org/philippines-says-no-new-nukes ). China, the last bastion of any apparent large-scale interest in multiple nukes, seems to be wavering, in part because of the rise of a No Nukes movement there. Here, two reactors barely beginning construction in South Carolina are also in deep trouble. Their builders need massive rate hikes in North Carolina to proceed, and the opposition there is fierce ( http://nukefree.org/ncwarn-north-carolina-can-kill-south-carolina-nuke-project ). But the lynchpin is Vogtle. The construction loan guarantee program got $18.5 billion from George W. Bush in 2005. With the industry in deepening chaos, it took until last year for a president to designate less than half that money. For the first time in years, there is no Executive or Congressional request to put more money into the fund. The French National Utility EDF did step forward to get funding for Maryland's proposed Calvert Cliffs project. But haggling over terms contributed to its demise. Now Southern faces the same abyss. It refuses what the mortgage community would consider a normal 20% downpayment on its taxpayer-funded loan. Southern wants to put virtually none of its own money into the project, leaving the radioactive gamble totally to the public. But the Office of Management and Budget is apparently demanding something more reasonable ( http://nukefree.org/vogtle-loan-guarantee-not-yet-done-deal ). Because the OMB is a White House agency, Obama holds the key. It's our job to make him turn it in a green direction. A short while ago, this package was considered a done deal. But the GOP uproar over the failed $535 million loan to the solar company Solyndra changed to context. Initiated by Bush, Republicans have made Solyndra the poster child for bad federal loans. Vogtle involves some 15 times Solyndra's liability. And it's all Obama's. At least three petitions are circulating against the package.( http://nukefree.org/please-do-sign-petition-stop-new-nuke-loan-guarantees ). There are many ways to finally shut down what has been the most expensive technological failure in human history. Fukushima and the killing power of radiation, the unsolved problem of radioactive waste, the campaigns against failing reactors such as Vermont Yankee, Indian Point, San Onofre and Davis-Besse---all are key. This weekend, a conference convened by the Sierra Club in Washington, DC ( http://action.sierraclub.org/site/DocServer/no_Nukes_Flyer2.pdf?docID=9701 ), will weigh the various strategies. But killing this loan guarantee package could finally kill the prospect of new reactors in the US. The astonishing rise of Solartopian green technologies has far outstripped atomic energy in the marketplace. Every delay deeply diminishes the possibility of building more of these profoundly uneconomic anachronisms. In the long run, Vogtle, Summer and any other new nukes that seem to slip through in the short term will almost certainly be stopped by what has become one of the most powerful non-violent social movements in human history. But right now, it's up to Obama---and us. Does he really want an atomic Solyndra on his hands? Will we really let this happen? Let's relieve the President of this radioactive burden. Let's kill these reactors before they kill us, and take the most significant leap of all toward a green-powered Earth.

A very versitile and useful crop, banned by the US government

Learning From China: Why The Existing Economic Model Will Fail By Lester Brown

For almost as long as I can remember we have been saying that the United States, with 5 percent of the world's people, consumes a third or more of the earth's resources. That was true. It is no longer true. Today China consumes more basic resources than the United States does.

Among the key commodities such as grain, meat, oil, coal, and steel, China consumes more of each than the United States except for oil, where the United States still has a wide (though narrowing) lead. China uses a quarter more grain than the United States. Its meat consumption is double that of the United States. It uses three times as much coal and four times as much steel.

These numbers reflect national consumption, but what would happen if consumption per person in China were to catch up to that of the United States? If we assume conservatively that China's economy slows from the 11 percent annual growth of recent years to 8 percent, then in 2035 income per person in China will reach the current U.S. level.

If we also assume that the Chinese will spend their income more or less as Americans do today, then we can translate their income into consumption. If, for example, each person in China consumes paper at the current American rate, then in 2035 China's 1.38 billion people will use four fifths as much paper as is produced worldwide today. There go the world's forests.

If Chinese grain consumption per person in 2035 were to equal the current U.S. level, China would need 1.5 billion tons of grain, nearly 70 percent of the 2.2 billion tons the world's farmers now harvest each year.

If we assume that in 2035 there are three cars for every four people in China, as there now are in the United States, China will have 1.1 billion cars. The entire world currently has just over one billion. To provide the needed roads, highways, and parking lots, China would have to pave an area equivalent to more than two thirds the land it currently has in rice.

By 2035 China would need 85 million barrels of oil a day. The world is currently producing 86 million barrels a day and may never produce much more than that. There go the world's oil reserves.

What China is teaching us is that the western economic model—the fossil-fuel-based, automobile-centered, throwaway economy—will not work for the world. If it does not work for China, it will not work for India, which by 2035 is projected to have an even larger population than China. Nor will it work for the other 3 billion people in developing countries who are also dreaming the "American dream." And in an increasingly integrated global economy, where we all depend on the same grain, oil, and steel, the western economic model will no longer work for the industrial countries either.

The overriding challenge for our generation is to build a new economy—one that is powered largely by renewable sources of energy, that has a much more diversified transport system, and that reuses and recycles everything. We have the technology to build this new economy, an economy that will allow us to sustain economic progress. But can we muster the political will to translate this potential into reality?

Original article

Why Iceland Should Be in the News, But Is Not

An Italian radio program's story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.

As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here's why:

Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors. But as investments grew, so did the banks’ foreign debt. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.

Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)

In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.

But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)

To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.

Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.

They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.

That’s why it is not in the news anymore.

US 4.5% of the world pop, 20% of worlds co2

Turning Algae into Energy

Just three years ago, Colorado-based inventor Jim Sears shuttered himself in his garage and began tinkering with a design to mass-produce biofuel. His reactor (plastic bags) and his feedstock (algae) may have struck soybean farmers as a laughable gamble. But the experiment worked, and today, Sears' company, Solix Biofuels in Fort Collins, is among several startups betting their futures on the photosynthetic powers of unicellular green goo.

The science is simple: Algae need water, sunlight and carbon dioxide to grow. The oil they produce can then be harvested and converted into biodiesel; the algae's carbohydrate content can be fermented into ethanol. Both are much cleaner-burning fuels than petroleum-based diesel or gas.

The reality is more complex. Trying to grow concentrations of the finicky organism is a bit like trying to balance the water in a fish tank. It's also expensive. The water needs to be just the right temperature for algae to proliferate, and even then open ponds can become choked with invasive species. Atmospheric levels of CO2 also aren't high enough to spur exponential growth.

Solix addresses these problems by containing the algae in closed "photobioreactors"—triangular chambers made from sheets of polyethylene plastic (similar to a painter's dropcloth)—and bubbling supplemental carbon dioxide through the system. Eventually, the source of the CO2 will be exhaust from power plants and other industrial processes, providing the added benefit of capturing a potent greenhouse gas before it reaches the atmosphere.

Given the right conditions, algae can double its volume overnight. Unlike other biofuel feedstocks, such as soy or corn, it can be harvested day after day. Up to 50 percent of an alga's body weight is comprised of oil, whereas oil-palm trees—currently the largest producer of oil to make biofuels—yield just about 20 percent of their weight in oil. Across the board, yields are already impressive: Soy produces some 50 gallons of oil per acre per year; canola, 150 gallons; and palm, 650 gallons. But algae is expected to produce 10,000 gallons per acre per year, and eventually even more.

"If we were to replace all of the diesel that we use in the United States" with an algae derivative, says Solix CEO Douglas Henston, "we could do it on an area of land that's about one-half of 1 percent of the current farm land that we use now."

Solix plans to complete its second prototype by the end of April and to begin building a pilot plant this fall. That plant will take advantage of CO2 generated from the fermentation and boiler processes of New Belgium Brewery, also in Fort Collins. The company's initial target is to be competitive with biodiesel, which historically sells for about $2 per gallon, wholesale. They believe they can reach this goal within a few years, and are ultimately aiming to compete with petroleum.

John Sheehan, an energy analyst with the National Renewable Energy Laboratory (NREL) in Golden, Colo., believes these goals are within reach. "There is no other resource that comes even close in magnitude to the potential for making oil," says Sheehan, who worked in the lab's algae program before it was shut down by the Department of Energy. One of algae's great strengths, Sheehan adds, is its ability to grow well in brackish water. In the desert southwest, where much of the groundwater is saline and unsuitable for other forms of agriculture, algae can proliferate.

GreenFuel Technologies Corp., based in Cambridge, Mass., is focused on cultivating algae that can produce high yields of both biodiesel and ethanol. There are more than 100,000 strains of algae, with differing ratios of three main types of molecule: oils, carbohydrates and protein. Strains of algae high in carbohydrates as well as oils produce starches that can be separated and fermented into ethanol; the remaining proteins can be turned into animal grains. GreenFuel hopes its pilot plant will see initial yields of 8000 gallons of biodiesel and 5000 gallons of ethanol per acre of algae.

The main focus now, says Cary Bullock, GreenFuel's president and CEO, is figuring out "how to grow algae fast enough and cheap enough that it makes sense economically. That's not easy to do."

With the science well in hand, the degree to which algae-based biofuels can replace petroleum—or the limited acreage of traditional feedstocks—rests upon that bottom line. Once the technology hits the ground, will a commercial-scale facility be on par with petroleum? Says Bullock: "You don't know until you've actually built the thing."

Analysis: U.S. Will Default on Debt

The Coming Great Government Debt Default

By: Lew Rockwell

Congress always responds to immediate threats regarding future sanctions. Whenever Congress thinks the voters will remember a vote at the next election, and will probably impose negative sanctions on incumbents, Congress always sees the light. "When we feel the heat, we see the light" said Senator Everett Dirksen a generation ago. His observation still holds true.

Our children are not going to pay off the suckers – us – who naïvely thought they could pass on the Old Maid of government debt to them.

Here is economic reality. Taxpayers and Treasury debt buyers are paying for all of the benefits that voters enjoy as recipients of government-funded programs. Voters are not transferring these costs to future generations. Costs are inescapably the same as benefits. If we receive present benefits, someone pays for these benefits in the present. The only questions are these: Who Wins? Who loses? How soon?

Economists despair about their inability to get across this simple idea: we consume only present goods.

Economics students nod their heads in agreement with the professor. "Yes, yes; we know that." But they don't know it. As soon as they start to vote, they forget.

THE ECONOMICS OF THE COOKIE JAR

When you catch your child with his hand in the cookie jar, you can be certain of one thing: he is after a present cookie. You can also be sure of something else: he does not intend to replace that cookie. He is driven by the desire for present gratification.

When you think of "child with its hand in the cookie jar" think "Congress." The difference is, a child will not respond to being caught with these words:

"This is in the best interests of the nation."
"We are acting as an agent of the People."
"Everyone deserves a fair share."
"We owe it to ourselves."
"We promise to replace this cookie with two cookies of equal or greater value in ten years."
Think of national economic production as a cookie factory.

People are employed to produce cookies. They eat cookies, but they also make cookies.

If they made no cookies, could they eat cookies? Only those cookies already in the cookie jar.

If, because of a war, the government tells the public that from now on, "we must support the troops," this means that those at work in the cookie factory must send cookies to the troops. The troops will be consuming cookies. They will not be producing cookies.

THE COSTS OF WAR

In his radio address to the nation on December 9, 1941, President Roosevelt did his best to substitute the inspirational word "privilege" for the economically correct word, "sacrifice." This was a way to describe costs as benefits.

On the road ahead there lies hard work – grueling work – day and night, every hour and every minute.
I was about to add that ahead there lies sacrifice for all of us.

But it is not correct to use that word. The United States does not consider it a sacrifice to do all one can, to give one's best to our nation, when the nation is fighting for its existence and its future life.

It is not a sacrifice for any man, old or young, to be in the Army or the Navy of the United States. Rather it is a privilege.

It is not a sacrifice for the industrialist or the wage earner, the farmer or the shopkeeper, the trainmen or the doctor, to pay more taxes, to buy more bonds, to forego extra profits, to work longer or harder at the task for which he is best fitted. Rather it is a privilege.

It is not a sacrifice to do without many things to which we are accustomed if the national defense calls for doing without it.

A review this morning leads me to the conclusion that at present we shall not have to curtail the normal use of articles of food. There is enough food today for all of us and enough left over to send to those who are fighting on the same side with us.

But there will be a clear and definite shortage of metals for many kinds of civilian use, for the very good reason that in our increased program we shall need for war purposes more than half of that portion of the principal metals which during the past year have gone into articles for civilian use. Yes, we shall have to give up many things entirely.

And I am sure that the people in every part of the nation are prepared in their individual living to win this war. I am sure that they will cheerfully help to pay a large part of its financial cost while it goes on. I am sure they will cheerfully give up those material things that they are asked to give up.

In other words, the cookie jar would soon suffer a substantial increase in demand from people who were no longer engaged in the production and distribution of cookies.

He predicted that those Americans who were still involved in the production of cookies would cheerfully eat fewer cookies, for the sake of the troops. But, just in case this cheerfulness waned, the President oversaw the creation of the War Production Board, which came into existence on January 16, 1942. It set up a rationing system.

THE COSTS OF DESTRUCTION

When a member of the military dies in action, he pays the ultimate price. There is no deferral of payment. He is gone. He has to be replaced. Someone else must now put his life on the line.

There is no bond market for human lives. During World War II, there is no illusion among Gold Star Mothers that this cost of the war could be passed on to a future generation. A grave marked the end of that particular generation wherever the occupant had not fathered a child.

In Europe, tens of millions of civilian graves marked the reduction of the size of future generations. There was no bond market for these productive assets, either.

What voters understand clearly with respect to the most productive assets – human beings – they do not understand with respect to all other productive assets.

A crashed airplane, a burned-out tank, a demolished jeep: they are all junk. They are all finished as assets. They were paid for, but they are worthless now except as scrap metal on a battlefield. They must be replaced.

What is the difference between the productivity of a burned-out tank and the men who died in that tank? Scrap metal value. The burned-out tank may be worth more than the remains of those who died inside it. We do not like to think this way, but from the point of view of economics, it is true.

THE BOND MARKET

In a popular war, there is a war bond market. The mark of an unpopular war is the absence of any war bond market. The last American war bond market was in World War II.

The U.S. government sold war bonds in World War II. The total by the end of the program in 1946 was $186 billion – in early 1940's dollars – a gigantic amount. The War Finance Committee and the War Advertising Council spent more money on this ad campaign than any other in the history of American advertising.

But why did the government sell them? If the cost of the war in men and material was paid for by those on the battlefield who suffered and died, as well as by the folks back home who had to reduce their consumption, what did the war bond produce of economic value? A war bond could not reduce the loss of human life. It could not reduce the number of burned-out tanks. In short, a war bond could not reduce the cost of the war.

Then why sell them?

The reason was motivation. The cookie jar was being depleted, day by day. This meant that replacements were necessary. Folks back home who were engaged in war production would have to reduce their consumption. This output had to replace whatever had been lost.

Let us return to the three crucial questions. Which folks would have to cut back? Which folks wouldn't? For how long?

The war bond drives persuaded half of the folks back home to forego present income for the sake of future income. Income in what form? Pieces of paper with dead politicians' pictures on them? No. The promised future income would be America's survival as an independent nation. The appeal made by the government to buy war bonds was not the promise of personal economic gain in the future. It was to win the war by supporting the troops.

Then who were the winners? Those Americans who refused to buy war bonds and who saved their extra money to make down payments on unimproved land, especially in the Los Angeles area or in Westchester County, north of New York City.

The bond sellers never explained how buying a war bond supported the war effort. They did not say the following:

"Buy a war bond so that you will not be tempted to use your money to compete in the consumer goods market. That would drive up consumer goods prices. The government has imposed price controls on these goods. But if you will not buy war bonds, you will be tempted to spend the money in the black market. We're onto you. We know that privilege has long since turned into sacrifice, and you are tired of so much sacrificing. We are selling war bonds to re-kindle the sacrifice motivation. This will keep you out of the black market. This will in turn lower the costs of whatever the government buys."
Today, no one in government is so naïve as to try to sell war bonds. There are costs, but these costs are funded by Congress through taxes and the sale of conventional Treasury debt. Instead of war bond drives, the Treasury sells bonds to Asian central banks and American investors.

Buyers of long-term bonds are concentrated in the life insurance industry. Life insurance companies buy long-term bonds to cover long-term legal liabilities. What are these liabilities? To pay dollars. This is not a legal liability to pay dollars of constant purchasing power. Just dollars.

"TRUST US"

The government promises to pay off holders of Treasury debt. The government's debt has a AAA rating. Note: So did lots of subprime mortgages.

The government sells its debt as a way to keep from having to raise taxes to pay for government programs.

Who pays for these programs? Taxpayers and buyers of Treasury debt.

When are these costs imposed? Today.

What has been transferred to Treasury debt investors? A promise to pay dollars in the future. Not dollars of constant purchasing power. Just dollars.

Question: "What is the difference between a cashed Social Security check and crashed warplane?" Answer: "The plane does not vote."

Do present costs get transferred to future taxpayers? No; they are paid for by present taxpayers and investors.

Then what do present investors receive? IOU's. Lots and lots of IOU's. Issued by whom? Congress. As the Mogambo Guru would say, "hahahahaha."

Let's get this straight. We are not transferring present costs to future generations. We are pressuring Congress to write present IOU's for future repayment. We are transferring present costs to present investors in IOU's issued by Congress.

As to whether any future generation decides to pay off these IOU's is up to them. But if you look at a chart of the IOU's in relation to present tax revenues, it seems a bit far-fetched to imagine the future taxpayers will pay off these debts. After all, we aren't. Congress runs an official $1.8 trillion on-budget annual deficit, this sends a message: "We prefer that investors pay today's costs." Why should this change?

It will not change.

What will change is the willingness of investors to pay for today's costs in exchange for low-interest IOU's.

IOU'S OF OUR FATHERS

In Clint Eastwood's movie, Flags of Our Fathers, there is a scene that stands out as one of the most illuminating scenes in the history of America's movies on World War II.

The three surviving military personnel who were in the second Iwo Jima flag-rasing photo – the rigged one – are stateside. They are skeptical about their role as heroes. They don't see that they did anything special.

The Marines' press secretary informs them that they are there to sell war bonds. This seventh war bond drive was expected to fail before the flag photo captured Americans' hearts. He did not say, "If we can't sell bonds to the public, the Federal Reserve System will be the only buyer, and it will have to create the money out of nothing, which will produce shortages, because of higher prices in the black market," but that was the implication. The patriotism aspect of buying bonds is long gone. Today, the sales pitch is safety.

"Investors will get their money back. The market is liquid. Investors can get their money back at any time. Yes, rates are low. Yes, the Federal Reserve System doubled the monetary base in 2008 to keep alive the bond market. But this market is trustworthy. Price inflation is not a threat."
Implied message: it will never be a threat. But if it ever becomes a threat, you can sell your bonds and get your money back.

This means that the IOU's of our fathers, which were never paid off, but were merely rolled over by selling more IOU's, have set the pattern. The patriotism is gone; the market for rolled-over Treasury debt is with us still. When it comes to government debt, the World War II song that most closely matches the market is "Roll Me Over."

CONCLUSION

All costs are present costs. It is only a question of who pays them and why.

Anyone who says that we are passing on present costs to future generations does not understand economic cause and effect.

We are told that we are using politics to leave a massive debt to our children. Really? Which children? The typical taxpayer? He or she can vote. As soon as this tax burden grows too heavy, the voters will demand that it be reduced. Congress will then sell more debt, just as it always does.

At some point, that debt will not find a market. The great default will then take place. At that point, Congress's IOU's will become IOU Nothings.

The Great Default is coming. Count on it.

Interesting

Don't Believe Me? Ask Lloyd's of London

A newly released report from Lloyds Insurance and Chatham House does an amazing job of putting the case for Transition to a business audience (you can download it here).

We can expect dramatic changes in the energy sector in the coming decades. This report encourages businesses, both in the energy sector and beyond, to look at how this will impact on their firms. The transition towards a lowcarbon economy and the interim volatility in traditional fossil fuel markets presents businesses with numerous risks but also opportunities. In order to reduce potential vulnerability and seize opportunities, business should be aware that:

1. Energy security is now inseparable from the transition to a low-carbon economy and businesses plans should prepare for this new reality. Security of supply and emissions reduction objectives should be addressed equally, as prioritising one over the other will increase the risk of stranded investments or requirements for expensive retro-fitting.

2. Traditional fossil fuel resources face serious supply constraints and an oil supply crunch is likely in the short-to-medium term with profound consequences for the way in which business functions today. Businesses would benefit from taking note of the impacts of the oil price spikes and shocks in 2008 and implementing the appropriate mitigation actions. A scenario planning approach may also help assess potential future outcomes and help inform strategic business decisions.

3. A ‘third industrial revolution’ in the energy sector presents huge opportunities but also brings new risks. Of particular importance for new technologies is the risk of constraints on raw materials such as rare earth metals, as scarcity may drive up costs. The rapid and widespread diffusion of some new technologies may also incur negative environmental implications.

4. Energy infrastructure will be increasingly vulnerable to unanticipated severe weather events caused by changing climate patterns leading to a greater frequency of brownouts and supply disruptions for business. This throws out a critical challenge to energy providers, investors and planners in terms of choosing the location of new infrastructure and fortifying existing plants and networks. Those businesses for which uninterrupted access to energy is of fundamental importance should actively consider investing in alternative energy supply systems.

5. Increasing energy costs as a result of reduced availability, higher global demand and carbon pricing are best tackled in the short term by changes in practices or via the use of technology to reduce energy consumption. The wider use of renewable energy and even self generation, bring added price and supply security benefits.

6. The sooner that businesses reassess global supply chains and just-in-time models, and increase the resilience of their logistics against energy supply disruptions, the better. The current system is increasingly vulnerable to disruption, given the trends outlined in this report.

7. While the vast majority of investment in the energy transition will come from the private sector, governments have an important role in delivering policies and measures that create the necessary investment conditions and incentives. If the global carbon market is to become a reality then government action must be taken to bring additional price stability and transparency. Investing in a secure, low-carbon energy future may have higher upfront costs, but will deliver lower cost energy in the future. Sound renewable energy and demand side measures are crucial elements in delivering the necessary energy services for businesses and the expected return on investments.

The Imminent Crash of the Oil Supply: What Is Going to Happen and How It Came to Pass That We Weren't Forewarned

Look at this graph and be afraid. It does not come from Earth First. It does not come from the Sierra Club. It was not drawn by Socialists or Nazis or Osama Bin Laden or anyone from Goldman-Sachs. If you are a Republican Tea-Partier, rest assured it does not come from a progressive Democrat. And vice versa. It was drawn by the United States Department of Energy, and the United States military’s Joint Forces Command concurs with the overall picture.
What does it imply? The supply of the world’s most essential energy source is going off a cliff. Not in the distant future, but in a year and a half. Production of all liquid fuels, including oil, will drop within 20 years to half what it is today. And the difference needs to be made up with “unidentified projects,” which one of the world’s leading petroleum geologists says is just a “euphemism for rank shortage,” and the world’s foremost oil industry banker says is “faith based” http://www.eia.doe.gov/conference/2009/session3/Sweetnam.pdf.

This graph was prepared for a DOE meeting on May 9, 2009. Take a good look at what it says, assuming it to be correct:

1. Conventional oil will be almost all gone in 20 years, and there is nothing known to replace it.

2. Production of petroleum from existing conventional sources has been dropping at a rate slightly over 4% per year for at least a year and will continue to do so for the indefinite future.

3. The graph implies that we are past the peak of production and that there are750 billion barrels of conventional oil left (the areas under the “conventionals” portion of the graph, extrapolated to the right as an exponentional). Assuming that the remaining reserves were 900 billion or more at the halfway point, then we are at least 150 billion barrels, or 5 years, past the midpoint.

4. Total petroleum production from all presently known sources, conventional and unconventional, will remain “flat” at approximately 83 mbpd for the next two years and then will proceed to drop for the foreseeable future, at first slowly but by 4% per year after 2015.

5. Demand will begin to outstrip supply in 2012, and will already be 10 million barrels per day above supply in only five years. The United States Joint Forces Command concurs with these specific findings. http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf, at 31. 10 million bpd is equivalent to half the United States’ entire consumption. To make up the difference, the world would have to find another Saudi Arabia and get it into full production in five years, an impossibility. See The Oil Drum, http://www.theoildrum.com/node/5154.

6. The production from presently existing conventional sources will plummet from its present 81 mbpd to 30 mbpd by 2030, a 63% drop in a 20-year period.

7. Meeting demand requires discovering, developing, and bringing to full production 60mbpd (105-45) of “unidentified projects” in the 18-year period of 2012-2030 and approximately 25 mbpd of such projects by 2020, on the basis of a very conservative estimate of only 1% annual growth in demand. The independent Oxford Institute of Energy Studies has estimated a possibe development of 6.5mbpd of such projects, including the Canadian tar sands, implying a deficit of 18-19 mbpd as compared to demand, and an approximate 14 mbpd drop in total liquid fuels production relative to 2012, a 16% drop in 8 years.

8. The curve is virtually identical to one produced by geologists Colin Campbell and Jean Laherrere and published in “The End of Cheap Oil,” in Scientific American, March, 1998, twelve years ago. They projected that production of petroleum from conventional sources would drop from 74 mbpd in 2003 (as compared to 84 mbpd in 2008 in the DOE graph) and drop to 39 mbpd by 2030 (as compared to 39 mbpd by 2030 in the DOE graph!) http://www.jala.com/energy1.php. Campbell and Laherrere predicted a 2003 “peak,” and the above graph implies a ‘peak” (not necessarily the actual peak, but the midpointr of production of 2005 or before.

So here we are, if the graph is right, on the edge of a precipice, with no prior warning from either the industry, which knows what it possesses, or the collective governments, which ostensibly protect the public interest. As Colin Campbell, a research geologist who has worked for many large oil companies and studied oil depletion extensively (http://www.peakoil.net/about-aspo/dr-colin-campbell) says, “The warning signals have been flying for a long time. They have been plain to see, but the world turned a blind eye, and failed to read the message” http://www.greatchange.org/ov-campbell,outlook.html. The world was completely transformed by oil for the duration of the twentieth century, but if the graph is right, within 20 years it will be virtually gone but our dependence upon it will not. Instead, we have:

zero time to plan how to replace cars in our lives;

zero time to plan how to manufacture and install milions of furnaces to replace home oil furnaces, and zero time toproduce the infrastructure necessary to carry out that task;

zero time to retool suburbia so it can function without gasoline;

zero time to plan for replacement of the largest military establishment in history, almost completely dependent upon oil;

zero time to plan to support nine billion peolple without the “green revolution,” a creation of the age of oil;

zero time to plan to replace oil as an essential fuel in electricity production;

zero time to plan for preserving millions of miles of roads without asphalt;

zero time to plan for the replacement of oil in its essential role in every industry;

zero time to plan for replacement of oil in its exclusive role of transporting people, agricultural produce, manufactured goods. In a world without oil that appears only twenty years away, there will be no oil-burning ships transporting US grain to other countries, there will be no oil-burning airlines linking the world’s major cities, there will be no oil-burning ships transporting Chinese manufactured goods to the billions now dependent on them;

zero time to plan for the survival of the billions of new people expected by 2050 in the aftermath of peak everything;

zero capital, because of failing banks ansd public and private debt, to address these issues.

For the rest of the article click here.

Spain invests in electric cars

MADRID — Spain says it will invest $790 million in promoting and developing production of electric cars over the next two years.

Prime Minister Jose Luis Rodriguez Zapatero said Tuesday that Spain hoped to have 20,000 electrical and hybrid vehicles by 2011, 50,000 by 2012 and 250,000 in circulation by 2014.

Automaker Renault agreed last year to make the Spain’s first electrical car in 2011 at its Valladolid plant.

Action Now or Reaction Later

US military warns oil output may dip causing massive shortages by 2015

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day," says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: "While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India."

The US military says its views cannot be taken as US government policy but admits they are meant to provide the Joint Forces with "an intellectual foundation upon which we will construct the concept to guide out future force developments."

The warning is the latest in a series from around the world that has turned peak oil – the moment when demand exceeds supply – from a distant threat to a more immediate risk.

The Wicks Review on UK energy policy published last summer effectively dismissed fears but Lord Hunt, the British energy minister, met concerned industrialists two weeks ago in a sign that it is rapidly changing its mind on the seriousness of the issue.

The Paris-based International Energy Agency remains confident that there is no short-term risk of oil shortages but privately some senior officials have admitted there is considerable disagreement internally about this upbeat stance.

Future fuel supplies are of acute importance to the US army because it is believed to be the biggest single user of petrol in the world. BP chief executive, Tony Hayward, said recently that there was little chance of crude from the carbon-heavy Canadian tar sands being banned in America because the US military like to have local supplies rather than rely on the politically unstable Middle East.

But there are signs that the US Department of Energy might also be changing its stance on peak oil. In a recent interview with French newspaper, Le Monde, Glen Sweetnam, main oil adviser to the Obama administration, admitted that "a chance exists that we may experience a decline" of world liquid fuels production between 2011 and 2015 if the investment was not forthcoming.

Lionel Badal, a post-graduate student at Kings College, London, who has been researching peak oil theories, said the review by the American military moves the debate on.

"It's surprising to see that the US Army, unlike the US Department of Energy, publicly warns of major oil shortages in the near-term. Now it could be interesting to know on which study the information is based on," he said.

"The Energy Information Administration (of the department of energy) has been saying for years that Peak Oil was "decades away". In light of the report from the US Joint Forces Command, is the EIA still confident of its previous highly optimistic conclusions?"

The Joint Operating Environment report paints a bleak picture of what can happen on occasions when there is serious economic upheaval. "One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest," it points out.

5 New Ideas

Here are 5 alternative energy sources that you may hearing more of soon:
• Helioculture: The idea is to create hydrocarbons with a little help from the sun. Brackish water is combined with photosynthetic organisms, nutrients and carbon dioxide and left in the sun. This process results in hydrocarbons that are ready for use a fuel -- not refining necessary.
• Sewage: Our waste can...reduce waste. Using microbial fuel cells, sewage can be used in bio-electrochemical systems to create power. In fact, Norway has plans to begin using human waste to power the buses in Oslo.
• Evaporation: Apparently, scientists are working on ways to harness the difference in electrical properties that exist between air and water. In order to make this work, a special kind of "leaf" is micro-fabricated. Air bubbles are pumped in, and as the water evaporates, the power is captured. Although it does seem like a lot of work for what might not be too much power...
• Human movement: Could the expanding planetary population actually power itself through movement? There are thoughts that piezoelectricity could be generated with the use of special tiles placed in strategic places where people walk. These tiles would be made out of materials that generate energy in response to mechanical stress applied on them. As people walked to the bus, or jogged in the park, their pressure on these tiles could produce power.
• Moon: For some time, scientists have considered ways to produce Helium-3, which is a non-radioactive possibility for mostly clean energy. However, creating He-3 on earth is a real pain. However, our near neighbor, the moon, has this light isotope in abundance. Could we see mines on the moon, working to tap into this source of possible energy? Maybe. One Russian company, RKK Energiya, thinks that moon mining for Helium-3 could be a possibility by 2020.

Transition Town Movement (Some basics)

What does Copenhagen mean for you?

The "climate summit" was a real fizzle. I think we all knew that the realistic chances of meaningful change being made was almost nil as the United States (25% producer of carbon emissions) never spent any real time making the climate talks a priority. Obama's last minute trip was way to little and way, way to late.

But, realistically, what did we expect?

So what do you and I do now? Well the same thing I have been pushing since I started this blog. It comes down to a simple concept:

"THINK GLOBALLY, ACT LOCALLY".

So, let's commit ourselves to pursuing transition on a local level. Start a transition steering committee. Begin making the type of changes in your personal life that can be an example to neighbors.

Refuse to spend money in the Wal Marts and Targets of the world. Direct your spending toward local businesses, that sell local or fair trade products. Do not be seduced by cheap anything.

Shop in local food stores, farmers markets and as much as possible directly from the farmer.

Almost every developed nation is now seeing a locavore movement, plug in!

Folks, we know that the kind of change that is needed will not happen if we wait for government. The kind of change that will make a difference is beyond hope of being achieved, so at this point the call is to adapt and get out ahead of the curve.

Our Katuah bioregion is a great area to weather the coming storms (literally!).

Remember, make the start and begin the discussions because we do not know how long before the situation becomes critical!

Defining the Continuum from here to Post-Carbon Sustainability

Here is a really interesting piece on transition.

Excellant alternate view of current economic situation

The Oil Casino: SEC Heading for Monte Carlo

This is a long article on the subject of oil and gas reserves and due diligence.

My purpose is to alert you to the revision of SEC Regulation S-K and Regulation S-X effective January 1, 2010. Concealed in a handful of benign new regs is a financial truck bomb that's going to blow away "proved reserves" as a meaningful metric of oil company assets.

Old definition: Proved Reserves are those quantities which can be estimated with reasonable certainty to be commercially recoverable from known reservoirs under defined economic conditions. Proved quantities are limited by the lowest known hydrocarbon as seen in a well penetration unless otherwise indicated by definitive geoscience, engineering, or performance data. Seismic data alone is not sufficient to define fluid contacts. Undeveloped locations may be classified as Proved in undrilled areas of a reservoir that can be judged with reasonable certainty to be commercially productive.
New definition: Industry is no longer constrained by the criterion of certainty. An operator can book incremental proved reserves from planned enhanced recovery projects (gas injection, acid fracturing) based on a pilot project. Coal seam gas, bitumen, oil shale and other unconventional resources can be booked as Proved Reserves. Estimated reservoir properties in the aggregate is a departure from the old rules. The new SEC definition does not require that an analogous reservoir has to be in the immediate area or in pressure communication. Seismic analysis and reservoir models are sufficient to book Proved Reserves.
Hold on to your shorts, it gets worse.

For the rest of this excellant technical discussion click here.