The Editor’s Columns - 2008

 

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May 2008

As I write, the price for crude oil has soared to 120 dollars per barrel and continues rising. If we look back to the prices before the tanks crossed the border to the oilfields in Iraq, we read of about 34 dollars and this was already considered too high at the time. After the first shots were fired in anger the prices made a quantum leap to the 62 dollar-margin and continued climbing.

This is not a natural progression. It’s also not connected to the depletion of resources. This is not the market’s way of telling us that we run out of fuel. On the contrary, right now we have more access to more oil than ever before. Even if we consider the demands created by the increasing fuel consumption in China, the prices should never be that high - there is enough oil around for generations to come. So what does this mean? It means that the global market is facing a new monopoly. What is new, you may think, the OPEC has been around for quite some time now, right? Well, this here is different. Bush senior, in his address to Congress about the state of the nation, had spilled the beans: “We cannot allow Saddam Hussein to control 40% of the world’s oil reserves.” In the aftermath of “Desert Storm” Saddam was prevented from exporting oil but guess what, the oil prices stayed comparably low, less than thirty dollars. So the very moment the oilman in the Oval Office gave the go ahead to invade Iraq it should have been clear to everybody what is going to happen next.

There is a bright side: the steep increase in fuel prices will accelerate the move into alternative energy technologies, and the Europeans are leading the way; Americans better watch out, they could be in for a surprise. I expect in the foreseeable future Europe to be completely weaned off from fossil fuels, although for the foreseeable future, oil will keep its place as raw material for the chemical industry. China will continue to monopolize the demand and it will tighten the screw on American investors who turn to Asian lenders for cash injections. But in the long term this is not going to be of any good for the Chinese as well. Their technology is still developing and if kept dependent on oil will eventually fall behind. And should the Chinese investor feel the need to recall his investments, he may find it a tad difficult to reach into a naked man’s pocket. On the other hand, the Chinese space program is just gearing up, so, who knows. We look ahead to interesting times.

One side effect of all this is already hitting the poorer countries. At present there is no famine and no drought, but there is a serious food shortage.

The much vaunted climate change has nothing to do with it, the globalization of the economy does. In forty countries, 32 of them in Africa, the masses of low income earners are no longer able to afford the prices at the grocery store. Food is there, but out of reach. The biggest producer of wheat on the market is not Canada but Kazakhstan, and at present Kazakhstan has closed its borders for the export of food stocks completely, so has Indonesia for the export of rice. Other food exporters like Russia have hiked up the prices by 40% and rising, and in the rich countries who depend on imports like Singapore, the building contractors have a smile on their face. Singapore is increasing her storage facilities. It’s a good time for hoarding food stocks and increasing profit margins.

In this day and age, subsistence farmers have become a dying species; they migrate in masses to the slums of the big cities where a miniscule income in the sweatshops is beating hands down no income in the fields. But now $1.50 a day is not nearly enough to feed an average family of six. And why is that so? Because the poorer countries have trusted the promises of globalization and therefore boosted investments in industries for export instead of investing in their own agriculture. After all the world market would always be there to supply the food stocks, wouldn’t it? Well, not anymore. (And they dare telling us that Marx is passé.)

And what are the rich countries doing about it? They agonize over “saving the planet.”

Or so their governments say. It’s an opportunity to scare the taxpayer into hitherto unheard of tax-hikes and in the media the mill of daily misinformation is keeping busy coining new terminologies like “carbon footprint.” Newspeak is alive and kicking. But climate changes happen, in geological terms they happen all the time; our life span is just too short to notice. Climate changes have happened in the past and right now we are on a cycle towards the next one. Greenland has its name from a time when the Viking settlers really sunk their plows into a green land. That was less than 800 years ago. And right now it is going to happen again. Then, the climate changed and a thick glacial sheet buried all the arable land under ice. Viking settlers who failed to adopt the lifestyle of the Inuit died of scurvy.

500 years later the French poet Francoise Villon (1431-1463) grew up under a blood red sky. He never saw anything else in his entire life. It was a short life. The red menace in the skies lasted for 80 years, but it didn’t come out of the medieval chimneys of the stinking and polluted Paris where a drink of fresh water was a life threatening experience. The chemical signature of core samples from the glaciers in Greenland clearly indicate that it was the fallout of a volcanic eruption elsewhere on the planet, an eruption at least five times bigger than Krakatoa. So, it happened before, and it is going to happen again. And nothing we do will prevent it. Volcanic activities (Yellowstone is a disaster waiting to happen), sunspot activity, the release of methane in the farts of our cattle (yes you heard me right, it is far more serious than the emissions from our cars), changes of the salinity in the oceans and the volatility of the Earth’s magnetic field are factors of far greater impact than our own contributions to the carbon cycle, which on the upside by the way, is making the trees grow faster.

 Now the glaciers recede again, the Greenlanders are looking forward to a more comfortable life of plenty and easy access to their natural resources, the wine growers of Scotland will bask in lavender scented air like Southern France did before, and only a sun of bitch baking in the Sun of the planet’s more central regions is begrudging them their good fortune. So we may just as well enjoy ourselves as long as it lasts and in the meantime learn from our space technologies how to survive in the soon to be more hostile regions of our planet. We have the know-how, we have a trump card - genetics - but we misdirect our resources and what is worse continue catering to the wrong kind of expectations. I know it titillates our vanity to think about our presence in terms of a “stewardship” over creation. Come on people, get real! Neanderthal-man survived two ice ages by adapting to the circumstances, not by trying to arrest his environment in the comfort zone of his own expectations.

Instead what is it we are actually doing?

The English taxpayer is asked to subsidize the numbskull idea of “bio-fuels” which in actual fact will increase the “carbon footprint” and in countries which already can’t afford the loss of arable land it is going to accelerate the destruction of our rainforests. The much maligned “bureaucrats in Brussels” are fully aware of it and therefore call for a moratorium on the whole idea, and rightly so. But will Gordon listen? I mean, all we would be doing here is blow “sustainable fuels” instead of fossil fuels through our exhausts and what comes out of the pipe in terms of emissions has exactly the same effect on the environment; the environmental costs of introducing it are devastating and the effect this will have for the prices at the pump, which is the rationale behind the whole exercise, remains to be seen. Not to mention that we remove an incentive for the car manufacturers to actually come up with alternatives to our engine designs. The moon-rover did not run on bio-fuel.

Where is the optimism of the fifties gone?

We didn’t know then exactly how to do it, but in our fantasies we were already conquering the stars. We dreamed of cities at the bottom of the Sea, of genetically optimizing ourselves, of spaceships lifting off with the elegance of an albatross from the magnetic rails of kilometer long tunnel ramps drilled into our tallest mountains. All this is doable now, we have the means and the know-how. We now can design from the genome up new plants, new foods, even a new self replicating architecture. We can conquer the Oceans in ways never thought of before. Should the Sun be burning to hot then we may look at it from beneath the water. A new breed of microorganisms may even restore a pristine atmosphere, not just on Mars, but in the place where we are actually breathing - here. But our politicians and the Cassandras of the scientific community only know how to cower the level of our expectations and impose a kind of green misery, smelly, unhygienic, ugly, unfunny, conservative and groaning under an hitherto unheard of tax burden. Things need to change, no doubt, but we can do it. This is a new frontier. The old model of a Garden Eden is outdated and only the selfish complacency of its privileged peers deny the rest of us the prospect of a brighter future. It is time to come up with something better.

Climate change is an opportunity, not a disaster. Stop the whining and start doing it.    

© - 5/1/2006 – by michael sympson, 1,800 words, all rights reserved

July 2008

As I write, the German state has reached a crucial phase in the demolition of its system of state pensions. The betrayal of the elderly is now official, and here in Britain the victims of Margaret Thatcher look on somewhat bewildered how these efficient Germans can be so stupid to make the same mistake. Before Thatcher, Britain, too, had a working system of state pensions. It was not as good as the one on the continent, but it kept the wolf at bay and even offered the pensioner the occasional holiday at a spa. A thing like the current poverty trap of the elderly was not a prospect one would even imagine. And in Britain this is aggravated by the housing situation on the English Isles, but let us stay with the pensions.

The misinformation of the public in this matter is staggering. 

In economical terms every country in Europe had lost WW II. Whether victorious Great Britain, or the defeated German rump state(s), the countries came out of the war dead broke, the currency was barely good enough to wipe your ass with a banknote. So instead of tying up reserves in retirement funds and so intercept a much needed cash flow, the lifeblood of every economy, the “contract of generations” was introduced, which means that the people contributing to the gross national income pay towards their own retirement by paying for the elderly now and here, and when it is their own turn to retire, will receive pensions by the next generation to follow. Whatever you may think, this is fair. One day, you too, will be a pensioner and then somebody has to forward the funds for a pension covering 74% of your last income before the legal retirement age, with tax advantages. Should you have a private insurance, this will be deducted from your state pension. So your private insurance has to be very good indeed to exceed the 74% of the generation’s contract, and given the level of average income for salary earners, even in a rich nation, there is not a single pension scheme the private sector has to offer that would be able to deliver. 

The payout to the pensioner is not linked to the number of contributors paying in but to the gross national product, that is the productivity of the contributors in pay. If fewer people are working, that does not mean their productivety in a modern economy is lacking, in fact it might even be higher and still produce economical growth. If on the other hand, despite of full employment the overall productivity is falling so will the incomes earned. 74% of a small income is still 74%. The pensioner will feel the pinch, but a difference between a higher and a lower pension is beating hands down to be on social welfare with no pension at all.

The overhead of this type of state pension is minimal. With all the disadvantages of an overbearing bureaucracy it is just 1.5% of the contributions. There are no obscenely high salaries to be paid to CEOs and there will be no salespeople on commission crowding your doorstep. There are no promotional budgets, only public servants on a regular salary. And the money is transferred directly without taking a detour through investment funds and assemblies of stockholders keeping an eye on their profit margins.

In other words if the gross national income is the cake, the pensions are the big wedge, admittedly a large wedge, from which every slice and every crumb is paid towards the pensions. But the private sector wouldn’t be what it is if it wouldn’t try getting its paws on the wedge; at least a slice of it. And when I speak of private sector I mean sharks like the biggest Insurer in Europe if not world wide, the Alliance, who in 1974 was capable to sell a front end loaded product they had the audacity to label as “life insurance” where the insured after having paid in 12,000 got the princely lump sum of 8,500 paid out, because he had failed to read through the obtuse prose of twenty pages in fine print. Not the insurer's fault, is it? The last time I checked they still sold life insurance. So, the industry’s spin doctors went to work, and they employed the services of statisticians and mathematical wizards. 

The first thing these people did, was to put a linguistic muzzle on the term ‘gross national product’ and instead talk at great length about the “bell-curve.” In fact they talk about nothing else. What is this supposed to mean? It is the demographic ratio between people paying contributions and the number of elderly and their rising life expectancy. 

Whatever BS the sales-pitch is giving you, don’t be led to believe that the bell curve has any bearing whatsoever on the size of the wedge. (The distribution and redistribution of this wedge to an increasing clientele of elderly with a growing life expectancy, that would be a different story and for the politician in charge it is a hot potato that has the potential for ruining his career.) Even if only one person is actually working and producing all the gross national income, his productivity is the link to the pensions, not the fact that he is the only one paying contributions (from a presumably insanely high salary - remember he or she is the nation’s last working person). The percentage of a pension in relation to the last income may change according to strains or improvements of the overall productivity, the annual growth is a necessary buffer for little matters like inflation, even the 74% margin is not hewn in stone, but it has nothing to do with the number of people who pay contributions.

But that’s not what politicians and sales-agents are saying. 

They dare telling us with a straight face that the state, meaning the tax-payer, all of a sudden can no longer carry the burden of the bulging bell-curve. What do Mr. Brown and Mrs. Merkel think the state is for? Despite Kennedy’s sound bite, we have the state to protect us and to serve, nothing else. Would it be different, then in 1789 the thousands of aristocratic heads would have sneezed in vein into the bucket under the guillotine. This is not a cost cutting exercise for a company in receivership, this is the state, the sharp edge of the people, who pay for it with their taxes to be protected against those in their midst who take undue advantages and gamble with our future on the market for futures. If such individuals don’t quake in their boots with fear what the state can do to them, then something is very wrong. To say that the developing geriatric curve on the bell-shaped graph of our demographics would force us to add to the wedge from our own contributions if we wish to secure retirement, is a sales pitch. The pitch of an unholy alliance of insurance sharks and Tories. It is a downright lie. Don’t get me wrong. If you can afford it then by all means do add privately to the allocated percentage of your future pension, which may very well be lower than currently expected, and I am all for reducing overheads, but there is everything wrong with giving up custody over this wedge of the big cake and handing it over to the private sector to be sliced up and sold peace meal to the dorks - us - who don’t have a clue about insurance mathematics if we don’t work in the industry ourselves. 

This is not “minimizing the state” and adding “choices” to how we wish to live our lives. This is high treason and a blatant betrayal of parents and grand parents who had fed us, sent us to school and guided our steps into what they thought would be a better future.

They didn’t anticipate Margaret Thatcher, they didn’t anticipate Angela Merkel, both of them by the way people with a background in the sciences who get infatuated not just with their own political slogans, but with figures and graphs of a neat looking mathematical theorem. Incidentally Mrs. Thatcher is now a peer and her income has lifted her way above the margin where her only hope of survival would be that state and people honor the contract of generations. What does she know about people cheated out of their pensions? Is she even aware that it was she and her advisors, who was the scam artist?

Because that’s what it is: a scam.

In Britain the “reform” has almost come to a close, Germany is still busy working towards it. Now as then the employer is paying a percentage of the employee’s retirement contributions, but the money no longer is carried towards the state owned wedge. Instead uncounted slices of private insurances and company insurance schemes are supposed to secure you in old age. You are made to believe that it is your own money that will secure your own retirement. As it turns out however, the cash you think you are paying towards your own pension has a fatal tendency to disappear entirely in a black hole - there is no such thing as stability for company pensions in the volatile world of boom and bust - and the insurance industry who has caused the debacle has the nerve to call on the state to pitch in. In other words, you, the tax payer, is made to pay twice for services not received. But should you by some miracle succeed in seeing it through and the company or the receivership has not had sticky fingers with these funds, it will be paid out to you in form of a lump sum which the pensioner then has to reinvest again in order to live on the monthly interest. After a lifetime of working and paying the old state pension had offered retirement and enjoying old age with the occasional spa visit; instead the poor soul is now left with a fistful of cash he can’t afford to spend and is expected to shop around and go through the chicaneries of endless paperwork written in legalese. 

This is where the much vaunted “choice” is coming in, and it comes in the form of brokers and insurance salesmen all of whom with a finger in the pie. If you are naïve, you may think they are here to advise and help - get real: they are here to make money from your money.

Since most of these pensions fall considerably short of the margin that allows to relax on the interest payments, the pensioner who enjoys the miracles of modern medicine and lives well into his nineties and beyond, inevitably will face the day when his pension scheme is running out of funds and the insurer will ask him to advance more contributions. But then it will be too late. The state has no longer any obligation to help.

The overhead is enormous. The wedge has been divided in countless slices, each slice ending up in some or other money scheme in the speculator’s big casino, like trading “futures,” which is still waiting to be branded for what it is, a criminal activity, that so far has driven up oil prices by 40% and is the current cause for world wide food shortages. Considering the salaries, commission margins and profits skimmed from the pool for the investors, the average overhead for every front end loaded single slice is nearer to between 28 and 45% than the 1,5% administration costs of the old state pension.

It is a crying shame. And they dare telling us Karl Marx is passé?