Bubbles, dangerous beauty!

Everyone is captivated by them, children and adults alike!

They are used also to describe and be analogous to, complex features of our lives. Bubble formation or nucleation is used to describe the formation of our universe and the period of expansion in the short time after the Big Bang. For most of us, I guess it is comforting to think that we live in a bubble universe......but bubbles burst!

Much as I love the debate on astro-physics and quantum theory, I'm really more than happy to leave that to the experts! Instead I want to focus this blog on another use of bubble theory, that which deals with economic models relating to inflation and the formation of bubbles that can harm our economies.

With the globalisation of trade and the advent of World wide corporations, so the management of trade and individual economies has become larger and more complex.Governments are competing in a race to the bottom in attempts to keep the value of their currencies down, to keep export prices competitive. Normalisation of interest rates could unleash strong inflationary pressure.

Currently the most dangerous bubbles forming, and lurking almost unseen by the vast majority of us,  are asset bubbles. These bubbles form when there is over inflation of an asset price (demand pull), as an investment vehicle. The bubble is thus formed by rapid price rises over a short period, but this is not supported by demand (over a longer period) or by an underlying inherent lower value.

Inflation of the bubble (see this as an aggravation of the situation) serves to make it less stable. In the aftermath of the recent global recession and in major asset classes there have been some serious contributory factors to bubble inflation, that have been deployed to stimulate economic growth.

These have been prolonged low interest rates and over inflation of the money supply (quantitative easing). Because of these actions there are potentially inflated bubbles in Carbon (oil and fossil fuel industry), property, Gold (rare metals generally), agricultural land and property. The scale of the bubble may vary in priority from country to country, but in effect they are all linked due to the globalisation of the banking system. Most of these economic instruments, as politicians like to call them have been deployed in all of the major economies, I might wonder how capable they are at playing these instruments as opposed to their voters?!!

Let's take property as a case study, partly because we have already seen a fairly major collapse of just such a bubble in the US, which has led to many of the current problems! A derivative is a loan or financial product that is secured against an asset, in this case a mortgage, which provides the underlying security. Because of a housing shortage in the US (not exclusive to US,  UK and Japan are vulnerable too), leading to a spike in property prices. Hedge fund managers saw this as an opportunity with minimal risk and created a huge demand. This had to be underpinned by the creation of more mortgages, which in turn led to riskier lending and created a demand for more housing (over inflation of the price, underlying loss of asset value and increased risk). As house builders caught up with demand, so house prices began to level off and even fall. This created negative equity and exposed the risk of the over inflated asset price. The sub-prime lending (as it came to be known) had started and had too much momentum to be restrained, the bubble collapsed.

Unfortunately these tell tale signs can be seen in other assets/commodities, it might even be reasonable to expect that hedge funds would look for an alternative support mechanism for the derivatives market (although you might hope with the benefit of property hindsight!). There is great concern that oil, coal and gas investment has formed a bubble whereby the value is over inflated in relation to the amount that can be extracted and used, if we are to meet emission targets for Carbon Dioxide. Given that this bubble is large in comparison to the property bubble and that fossil investments underpin so many pension funds, it is difficult to see how the current economic system could recover were (or should that be when!), the bubble to collapse.

Other bubbles are also worth consideration: agricultural land values and food commodities have seen huge increases in investment over the last few years. Although the US first saw these increases at such a scale, in the last couple of years, there has been a global land grab going on. Such investments are now threatened by climate change induced (or exacerbated) water scarcity, crop pests and disease. Forecasts have put potential losses on investment as high as 5 trillion pounds (£5trn).

Thinking of things at a more human level, some recent research has suggested the formation of a productivity bubble! Companies have looked solely at the bottom line, with employees seen merely as another asset to be sweated! The hours worked have got longer and the holidays taken have been less as workers have been made redundant, or not replaced, leaving the rest to pick up the additional workload.

Productivity increased globally, however this is now starting to flatten off as chronic stress and illness in the workplace manifest themselves. In fact it is likely that productivity could start to fall again, if global temperatures continue to rise and more virulent disease affect the population. It is not sustainable to continue to inflate executive pay and the asset register on the grounds of infinite improvements in productivity!

The only real way to avoid several catastrophic collapses, is to live within our means and not to print money against future productivity that can't be met because it makes a false assumption of infinite resources and continuous improvements in productivity.

Addendum.

I have added the link below to an article in the International Debt Observatory, looking into the potential problems surrounding unconventional fossil fuels. It was recently published (post my blog), but serves to underline the problems emerging.

http://www.oid-ido.org/article.php3?id_article=1396

Future perfect with good waste planning.

Having returned to work after a couple of weeks off, I have been piling through the backlog of e-mails, trying to pick up the threads where I left off and see what is new!

Amongst the rubble that is my inbox, were a couple of requests for input to consultation responses, always with short turn around periods. I did however, don my thinking cap and provide some words containing the sum of my nuggets of wisdom.

I found this to be a useful exercise, it got me thinking and helped me to tie together some issues that had been floating around in the backwaters of my consciousness. In writing out my thoughts, it helped to distil some ideas about what the problems facing us are and how we might begin to respond.

The consultations in question are on waste planning guidance and waste prevention, both closely linked and essential parts of planning and developing our service infrastructure.  The problems are many; lack of accurate data, a need to change behaviours and mixed messages to name but a few.

Amongst these problems, one that I feel hasn't been properly explored, is how planning links to historic data and fails to meet needs for future proofing. In terms of infrastructure and investment in the right technologies, this might in part be due to the lack of investment that is currently available or that the policy incentives that are in place don't offer the correct balance.

If you plan your infrastructure needs based upon data collected during an economic downturn, can it be a reliable benchmark for future provision. Can it also be sufficient to drive the changes needed to meet targets, social and economic aspirations?

What I think needs to be addressed, is how will we deal with a rapidly growing population and and an economic recovery (even a weak one). In my estimation, waste prevention and resource efficiency measures will struggle to off-set these drivers for growth in waste generation. If that is the case, then planning for nil growth in waste generation over the next 20 years could leave us with a significant capacity shortfall.

I hope to deliberate on some of these issues more in future blogs, but at least for now, the seed has been sown!

Happiness is it all it's hyped to be?

I have reposted below an extract from the Huff Post Green.

Arianna Huffington: Why I'm Unhappy With Happiness Surveys

"UK population's happiness is on the up," trumpeted a headline in The Guardian. What the headline was referring to are the results of a survey conducted by the Office for National Statistics meant to measure Britain's national well-being. The program was announced in 2010 by David Cameron, with the first report coming in 2012 and the second this past week. While the idea of measuring a country's well-being by something other than just its GDP is certainly important and can lead to a really worthwhile conversation, the question is how the alternative index is compiled and how it correlates with other data on health and well-being. I'm solidly behind any effort to show that we're more than just our marginal contribution to our bank account, the bottom line of our employer or the gross national product of our country. But it's important to look at the whole picture.

It would be really good if instead of just creating a a set of statistical indicators, that these indicators were used actively and progressively, to decouple our well being from GDP, accretion of wealth (at least the material bit) and reliance on fossil fuels. If these indicators provided the basis for measuring progress against these objectives as part of a cyclical programme for improvement, then this could have real and practical benefits.

Terminology, is it a waste?

A question has been asked recently, about the relationship between language and activity. The question centres around whether or not the the word describing what we discard (in this case waste) supports the activity (recovery of resource) and does it justice in the modern context.

This has turned out, not just to be an academic exercise in linguistic evolution and the history of waste, it has opened up the wider issue of how we define a more complex system and draw defining lines that can be clearly understood by all.

The debate has been stimulated by a need to move waste up the hierarchy, taking it full circle from cradle back to cradle. There are however, a number subtexts too, with the language around co-mingled collections for sorting and waste collected at source having evolved their own terminologies, which is not helpful.

 I see it thus:
If paper be paper, wherever it sits in it's life cycle, then just maybe, it needs to be recovered separately at source. The same would apply to any other rejected material that seeks rehabilitation back into the language of use.

This is what the revised Waste Framework Directive appears to require, so in regulatory terms, the regulation is on the right track! The only minor fly in the ointment being, that everything that is discarded, is legally classified as waste for the purposes of implementing regulation.

So for me, I can see that people will still regard their recycling collection (especially mixed dry recyclable material in a wheelie bin), as something more akin to waste, than to its constituent materials.. This is most likely because it is collected co-mingled and sorted away from the eyes of the producer. This loss of connection could be a critical factor in reconciling both the value and responsibility represented by the waste, to the holder (producer) in relation the valuation and effort that is put into pre-cleaning and sorting of that waste.

Kerbside sorting can offer a better connection, especially if residents can observe their waste being placed into separate compartments as paper,metals, plastics etc.

There have recently been a spate of name changes, by companies, consultancies and collectives, where the term waste has just been supplanted by the term resource. This probably only serves to confuse people and does not do justice to the processes involved. If material is being collected for onward treatment, then we should at least try to describe that step, as it will help indicate that a process of transformation is being undertaken. If we are happy to to call thermal treatment (in its many guises) Energy from Waste (EfW), why can we not describe Materials Recovery Facilities (MRF's) and Mechanical Biological Treatment  plant (MBT), as Waste to Resource facilities (WtR)?

I'm sure that the public would understand these terms and relate them to a process akin to rehabilitation of their discarded resources. I do not believe that an over simplification of the language helps the cause, in fact it could even lead people to be suspicious that something is being hidden from them.

Is Rome already alight?

On a climate change theme today!

It seems quite incredible to me that governments appear happy to leave the issue of climate warming and sea level rise on the back burner, whilst continuing to exploit fossil fuels at an increasing rate.

I have highlighted a couple articles that sum up the predicament quite clearly, I can't believe that we have all voted to mandate procrastination on such an important issue!

 

First up from 350.org a US map showing 16 cities at serious risk from sea level rise and climate enhanced storm surges.

http://www.climatecentral.org/news/waiting-on-new-climate-deal-will-set-world-on-path-to-5c-warming-16100

Even the IEA have spoken out about the current impasse on reaching political agreement for a replacement to Kyoto.

They say that with current trends in energy production and emissions, this puts us on a path to a catastrophic 5^oC rise in global temperatures.

http://www.climatecentral.org/news/waiting-on-new-climate-deal-will-set-world-on-path-to-5c-warming-16100

And all this on a day when the Guardian reports that the UK is looking maximise UK North Sea oil production #greenestgovernmentever

There is absolutely no point in growth at all costs if the cost becomes catastrophic climate change!

So what if we left the EU?

This the second of my 'what if' blogs, where I examine topical events and ask a few what ifs?

I'll take an alternative view wherever possible to stimulate some debate and possibly actions to counter what might be perceived as injustices or just plain greed and stupidity!

Of course there are two sides to every story and there may well benefits to leaving the EU, however I do not believe that they would emerge in a short enough time frame to be of any practical benefit. In fact I believe that anti European sentiment is driven by anachronistic dogma and greed. The greed being on the part of the wealthy elite, who would stand to benefit from a reduction in legislative protection for workers and the environment (two of the pillars of sustainability).

On the other hand, the impacts of leaving the EU could be quite severe and impact with almost immediate effect. It's worth taking a little time to look at some of the potential impacts , as most UK citizens stand to be affected in some respect.

I have outlined some of the main arguments, in the hope that it should become evident that we would be much more vulnerable outside the EU.

Some politicians have said that if we leave we would not be paying into the EU pot, but that we would still have all the free trade agreements, which would allow us access to our biggest market. This might well be true, for a while at least |(until we are slowly written out of various agreements), however the Americans seemed to make it quite clear during Cameron's visit to the White House, that we would be foolish to leave and that it would direct impact investment into the UK.

It would also be true that in order to trade within the single market, we would still have to meet all the EU production standards (as do Norway and Switzerland) which would entail cost, but with no representation in the making of those standards. What's more, we would still pay tariffs, which would affect our competitiveness.

So what about jobs? It has been widely argued that EU regulations have been a brake on our SME's, which make up a large part of our economy and only a fraction of which, trade within the EU. There is an element of truth in this, but surely there is room for negotiation on such issues, the EU has already recognised this and is taking very similar measures to those that we have proposed.

So by coming out of Europe we could create nearly a million new jobs in the UK, however that is only one side to the story and the fact is that we are likely to lose millions of jobs, as large production sites move in to mainland Europe (Airbus/cars manufacturers, etc.). This would have a very detrimental impact as these are high end earners for the UK and many SME's depend upon them for their orders.

As well as these issues, we would have fewer rights in the EU than we do now, which would make it much harder to retire to other EU member states or buy property there.We would also lose much of power at the negotiating table by not being in Paris, Berlin  and Brussels, this could see us increasingly marginalised by the US, China and Russia for example. None of this would be good for either our trade or status which is an invisible benefit.

The cost of being in the EU, whilst it is a big number, doesn't look so big when put alongside the trade figures, as our exports are just over 50% into the EU, which is a much bigger figure!

Don't forget also, that many EU laws benefit the environment, social well being and human rights, we have come to rely on these and changing them would cause an imbalance and could lead to many UK citizens losing out, with fewer protections.

At the end of the day, the case for leaving the EU just seems to be a charter for large corporations and wealthy industrialist to prey on UK workers by pushing down wages, restricting recourse to the courts and generally lowering everyone's standard of living. It is somewhat ironic that some of these corporations are those that don't pay their share of UK tax, something the EU has been trying to sort out!

For me there would be no point in having a vote without all of this being discussed openly and with access to information on the expected impacts. In such circumstances, I would not expect the vote to be a foregone conclusion!

What if?

I wanted to put some ideas out there about various aspects of our everyday lives, aspects that maybe we take for granted, but which could disintegrate before our eyes, or render us helpless to determine our own destiny. I hope to make this a mini series of questions about currently topical subjects to provoke thought around alternatives and what the World might look like, when you are stood looking back at the box!

The first 'what if' that occurred to me, has been the eerily quite aftermath of the Cypriot bail out! There are many ways that you could look at this, but in a basic form, didn't the Cypriot Government steal money from savers to leverage more borrowing from the EU banking stability fund (i.e. Germany, Austria, Sweden Finland etc.). When you look at it in this way, it all seems a bit imperialist rather than a cosy democracy!

Is Cyprus now any better off? Well not really it's limping along with several holes below the waterline, no one really wants to invest, expenditure will continue to creep back up again. either as benefits increase or attempted growth measures. In the meantime, tax revenues continue to stagnate or fall and eventually this beautiful island will find the economic buffers again! I would suggest that when this happens, a second round of account dipping will not be an option!

The 'what if' comes in two parts, they take the form of; what if it happened to us and what if we weren't prepared to sit idly by and accept it?

In the case of Cyprus the statements were all well prepared and rehearsed, because the governments and the bankers have the figures in front of them a long time before we do. We were told that the Cypriot economy was small and vulnerable to the global recession, that they had a burgeoning bureaucracy and that they had failed to move with the economic drumbeat, which is all pretty well true, as it is of many established democracies! We were also told lots of those horrible rich Russians were hiding their money in accounts there and that it would serve them right (but not as nasty as Mubarak and some other despotic leaders to whom, we pander for their wedge!). So in essence, they were pretty poor excuses for stealing money from the vast majority of honest, hard working and law abiding citizens!

As I said, Cyprus in not alone in this particular basket, Ireland is still there, more or less flat lining, as is Spain, Portugal and probably Italy too. We can't be sure about Belgium, because no one seems to have been in charge for some time and Slovenia has just asked if it can try the basket for size as well! In each case, all of these countries have sworn that they will not do the same as happened in Cyprus, but now that it has happened and a precedent has been set, hands up all those who believe them!
If you've got your hand up, you may be excused, you probably don 't need the money or you are already a politician!

And so, the second part of the question, are you prepared to step outside of the comfort zone? Rather than wait for things to get worse and for politicians to mess up and greedy banks to start snatching money that isn't theirs (as opposed to just inventing it against a future that can't pay), why not be a little pre-emptive?

There's never been a better time, with interest rates that low that saving is relatively pointless and banks piling on spurious charges to keep up their income! What if everyone started to pull their money out of all the large banks and place it in safes or small local building societies.

Banks have made it so convenient to spend money, one of the ways they get us to rack up debt in the name of growth, however in doing so we are totally losing control of OUR money! You know, the stuff that you work 40 hours for every week. What happens if they turn off the terminals and the ATM's, it might be your money, but you can't have it!!

Once you have regained control of your money, you will probably say to yourself, Hmmm, I a bit open to fraud, robbery and this is less convenient (which at this moment is true, but doesn't stop a lot of our population from still dealing in cash). You are somehow made to feel like a Luddite if you use real money, almost as if it is socially unacceptable, I wonder why?

Once enough of us have control of our money, there's a deal to be done! With the Internet at our disposal, why not set up as your own personal bank and/or form co-operatives with your friends? This is already happening with the likes of Paypal and EBAY, but it could be so much more, if were open, legally founded and operated for the benefit of you, as opposed to greedy fat cat CEO's and shareholders.

What of the banks? Well would you care, if you didn't need one?!! They only support their rich friends and dodgy politicians, so it might even help clean up our democracy, double bubble, and its mine all mine (although I might put some of it to a socially just use)!