Wednesday, February 02, 2011

It's cool by the pool - right? [COLUMN]

"Happy New Year!"  2011 one month on... by Nick van der Leek

From a global perspective, things could hardly be more ominous. We have some huge storms at work in Australia, Eastern North America, and Britain is still suffering through temperatures between -2 and 2C in their coldest winter since records began.  I predict that 2011 will be the year that the media finally wakes up to Climate Change.  Journalists that have prided themselves on their calm, intellectual scepticism are going to slowly step out of their cloisters...I mean closets...assuming they are still employed a few months from now.

The big news, of course, is that oil prices are back above $100.  Put another way, oil prices are at a level that makes the airline industry obsolete [yes even with the new Dreamliners and what-not].  More important, oil prices are driving another process which affects, sorry to say, everyone.  Food prices.  Especially the poor are having to fork out more than 50% of their meagre incomes on basic foods...and of course for the unemployed, these higher prices just seem increasingly cruel and unkind.  Egypt's protests are no mistake - they are the world's largest importer of wheat, and guess what, right now there is a shortage of wheat on world markets.  Why?  Well, just weather problems is virtually every major breadbasket in the world: Russia, Ukraine, Europe and the Middle East, the US prairies, Australia and South Africa.  Only one country has had a good wheat harvest - Brazil.

A food crisis is very bad news for world peace.  It's very hard to pacify a hungry mob.  It's very hard to convince them to 'just be patient'.
Here's how direct food prices are to oil prices.
 You should notice the correlation is actually intensifying.  Look at how that blue line is breaking away right at the end there.  That's climate change for you.  And make no mistake, when you have floods, and freezing storms and sweltering heat, your energy demands increase even more, and your food supplies tend to come under increasing pressure.  This isn't a problem if it's a regional problem.  Unfortunately, it's not a regional problem.  Climate change is real, and with energy [and it is partly due to our voracious use of energy] will form a double edged sickle, slicing through economies and populations in the coming years.  I don't expect people to believe that climate change is real.  It's in our short term interests not to.

In fact, it's obvious the bankers and businesses live on another planet.  The Dow has shot through the 12000 mark today, it's highest level in roughly 30 months [2.5 years].  Appropriately enough, stocks were at very high levels immediately prior to the crash in 2008, with oil prices running up at the same time.  Remember?
We're visiting the same territory again in 2011.  Economies and egos and banks and bankers have 'recovered' and now seem to have the nerve to make money again.  Business as usual has finally returned.  Really?

The difference between 2008 and 2011? Well the climate has worsened quite quickly. 2010 has a slew of new climate records, including the warmest ever year for the Northern Hemisphere and tied for the warmest year on record [with 2005].  A Katrina size monster, Cyclone Yasi, is approaching Australia's northeast coast.  It's packing 280km/h winds along a 500 km front.  On the other side of the world, a 2000 mile storm front is about to hit North America and Canada.
Currencies are worth spit in 2011, hence the skyrocketing gold price.  And unemployment everywhere continues to shoot up, causing social disorder to start stewing.

This time, there's no bail out money.  GM and Chrysler are doing great, for now, but BP made a loss of around $5 billion [it's possible they will be bankrupt following the next collapse in oil prices]. How will these bailed out automakers do when the fuel for their machines is too expensive to justify using those machines? I know some are talking about growth and recovery, but the reality is, without surplus energy, and by that I mean cheap energy, your expenses are going to cut into your incomes.  Growth is gone.  It's part of an economic system called Capitalism that, like suburbia, and currencies, and airlines, has no future.  Globalization, is also gone.

The bad news is that there aren't really any policies in place to curb CO2 emissions.  The good news is there don;t have to be.  Overpopulation, overshoot, and collapse are inevitable.  In other words, economic convulsion will occur anyway, choking consumption and bringing economic activity to another abrupt halt at the economic freight train seizes in its tracks, and bounces along.  It might not be derailed in 2011 either, but it will come close.  The Euro and the Eurozone are toast.  The USA and the dollar are toast.  Even China, with its healthy 'growth' faces inflation and...ultimately...will not graduate into a middle class, developed nation.  Sorry.

If the current food crisis facing the world's poor countries cannot be averted, there's a real chance of regional conflicts in Northern Africa and the Middle East spilling over and infecting more and more countries.  India and Pakistan are suffering too, and another barb could ignite something in the shape of a mushroom.  North Korea is another unknown.  In fact, nowhere are the prospects safe.

I don't see 2011 shaping up to be a very happy year.  2008 started nicely and then took a nosedive.  I think we're much closer to the nosedive right now.  Maybe we'll get to March or April before the markets run off a cliff.  Question is, once the dust settles, what will remain of international finance?  If currencies become worthless, and we're fast heading towards that, it means markets will disappear and the middle class will be instantly introduced to the plight of hordes of poor, already starving people.  The bankers and economists were wrong before.  Will they lose what little is left?  Given our denial on just about every important issue, and our talent for lying to ourselves, it's tough to see a happy ending.  But life must go on and I'm sure, for some, it will, and perhaps eventually, for the better.

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