Economic Warming

The mariner has been posting www.iowa-mariner for a couple of years. If you are a regular reader, you know he sees impending chaos on all sides. The mariner will follow in the footsteps of his favorite prophet Amos (a country fellow who raised sheep and had fleas) and the prophet’s fictional counterpart, Chicken Little.

The storm clouds are visible on the horizon and bad economic weather is predicted by conservatives and liberals alike. When the solution from each side is redundant, that in itself suggests chaos.

The mariner has read books by two expert authors each of whom starts from a different premise and arrives at similar conclusions.

The first book, The Colder War by Marin Katusa, (John Wiley and Sons, 2015) follows along the line of economic prophets who fear the Brazil-Russia-India-China (BRIC) alliance and the use of non-US dollars in world trade. Katusa predicts a slow demise for the US because of its seventeen trillion dollars in bond debt and, more importantly, because BRIC production of fossil fuels easily will dominate the US Petrodollar market. What will happen slowly (Katusa uses the decline of the British pound over thirty short years, finally yielding to the American dollar at the end of the Second World War) is that holders of US treasury notes will cash them and buy rubles, reals, yuán or some worldwide derivative based on BRIC dominance. In simple terms, this means the US is headed for at least 15% inflation of the dollar and will lose the float advantage of using US dollars around the world.

Katusa spends a lot of his book on Vladimir Putin’s plans to encompass the entire Euro-Asian land mass in a “Common Economic Space.” In other words, replace the US dollar-supported euro, the oil-rich something-stan countries, the Middle East, Asia and most of Africa into a giant free trade zone – all without using US dollars.

Katusa suggests the following remedies – which he doesn’t guarantee will be successful:

  • “Stop runaway government spending. If the growth in government debt is held below the growth rate of the economy, the dollar’s ability to withstand attack will strengthen mightily.
  • Stop accepting everyone’s invitation to participate in everyone’s conflict.
  • Stop everything – especially tax rules and handouts.

For each of us, Matusa suggests:

  • “Trade some of your dollars for gold and silver and don’t store it in a bank.
  • Open an account with a non-US bank to make it easier to obtain cash in foreign currencies.”

Obviously, Marin Katusa is a fiscal conservative. His underlying strategy does not include economic transition away from fossil fuels but rather suggests ways to put sandbags around the US economy. His perspective can’t be totally faulted; he is one of the world’s top fossil fuel negotiators.

 Now on to the second book, This Changes Everything by Naomi Klein (Simon and Shuster, 2014). As prolific a writer and advocate as Katusa, Klein challenges the fossil fuel profit model. She suggests the greedy pursuit of oil-based economies will collapse under the hidden costs of global warming, costs related to health, fragility of depending on one economic resource, and the profound shift of weather patterns that will impact most temperate zone nations dependent on crops – the northerly ones like Canada and Russia will have improved crop opportunity while those in lower latitudes like the US and Southern Europe will have more extreme weather conditions, frequent droughts and flooding.

Similar to Matusa’s book, Klein spends the first third of her book identifying the antagonist: not Putin but the conservatives who deny global warming. The following quotes set the tone for the entire book, which is heavily footnoted:

“And for many conservatives, particularly religious ones, the challenge goes deeper still, threatening not just faith in [capital] markets but core cultural narratives about what humans are doing here on Earth. Are we masters, here to subdue and dominate, or are we one species among many, at the mercy of [geophysical] powers more complex and unpredictable than even our most powerful computers can model?”

The author cited a statement from Yale’s Cultural Cognition Project:

“The Yale researchers explain that people with strong egalitarian and communitarian worldviews (marked by an inclination toward collective action and social justice, concern about inequality and suspicion of corporate power) overwhelmingly accept scientific consensus on climate change. Conversely, those with strong hierarchical and individualistic worldviews (marked by opposition to government assistance for the poor, strong support for industry, and a belief that we all get pretty much what we deserve) overwhelmingly reject the scientific consensus.”

Klein then moves her focus to the disastrous liaisons between “environmental” organizations and corporate partnerships. Many examples are cited not only in the United States but in virtually every country including the United Nations Environment Program. One example involved the Nature Conservancy (NC), the largest and richest environmental organization in the world and 2,303 acres along Galveston Bay in Texas. The acreage was donated to the NC by ExxonMobil in 1995.

This acreage was important to environmentalists because it was the last habitat for the Attwater Prairie Chicken. The bird population, estimated at over one million before the twentieth century, due to oil exploration had dropped to threatened extinction by 1965. The Nature Conservancy proclaimed recovery of the Attwater Prairie Chicken as its highest priority. Four years later the NC drilled its own oil well in an area that would have direct consequences on critical habitat. When this oil well was discovered by NC members, it attracted national press coverage. NC said they could drill without hurting the bird population.

By 2003 only sixteen birds remained. Still, when the first well ran dry, the NC drilled a second well. In 2012, the Attwater Prairie Chicken was extinct.

The Nature Conservancy had succumbed to the desire to make millions of dollars to be used in behalf of worldwide conservancy. Klein’s point is that the NC had good motives but capitalist solutions do not solve a global problem. In fact, capitalism accelerates climate change.

Klein makes this point across several similar examples. In every case, capitalist solutions failed. Cultures are so bound to profit as a solution for everything that global issues like carbon emission are a distant second and have no chance to transition to non-fossil fuel. Global warming is caused by fossil fuel profit. Any progress must be collective in nature and further must reduce the petro economy to a scant size of what it is today. In the US, petrodollars keep the wealthy growing wealthier and allow the US government to borrow 46% against its gross domestic product.

Benevolent billionaires offer little hope for a genuine shift in economic culture. Among others mentioned by Klein are Bill Gates, Warren Buffet, Michael Bloomberg, Richard Branson and T. Boone Pickens. In every case, these billionaires advocate solutions that will benefit their corporate investment in alternative solutions. Again, these endorsements use a capitalist model as a solution – first, there must be profit.

Global issues like carbon emissions and warming oceans are not part of any profit model. The expense must be covered but not by opportunistic means. This is a new phenomenon in economics: profit is not part of the financial model. Global warming is neither a national issue nor a GDP issue nor a profit versus loss corporate issue. It is pure overhead that must be dealt with collectively by 7 billion humans in 196 countries.

It is this very kind of solution, fraught with corporate restraint, government regulation and spending, and suppression of the largest profit sector in the world that frightens capitalists and advocates of individual freedom.

In the mariner’s opinion, Klein’s book roars like a lion until the part where solutions are offered. Klein cites a growing number of blockades where the local people literally stood in the way of fossil fuel operations. The author feels that growing civil interference will continue to have more influence with those who must deal with the overhead of fossil fuel extraction. An example to watch is the Keystone XL pipeline intending to move sand tar oil from Alberta to Texas. There have been several protests along the path of that pipeline; Obama does not support it. We will see how much influence blockading will affect a republican congress.

Naomi Klein is not an economist. Unlike Matusa, she does not provide financial detail about the impending crisis. Still, one can image what will happen to corporate profit and national GDP if the petrodollar is greatly diminished. On this point – the tremendous shift in priorities as well as economic models – Matusa and Klein agree: financial instability is something everyone will face in this century.

Finally, Klein cites a truism:

“It is often said that Mother Nature bats last, and this has been poignantly the case for some men who were most possessed by the ambition of conquering her.”

 Did someone mention that the sky is falling?

Ancient Mariner

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