Saturday, November 15, 2014

Questions for Danielle Smith and the #WRP

The Wildrose party of Alberta wants to better define their image, so I have a few questions for Danielle Smith or any other representative of the Wildrose. I've posted this comment here and emailed them as well.



Hi Danielle,

I would definitely consider myself one of those who has no idea what the Wildrose stands for. I used to think you were an ultra-right wing extremist party masquerading as Libertarian, particularly during the media circus around Allan Hunsperger (which I wrote about here http://www.canadiantrendsblog.ca/2012/04/youre-welcome-to-your-conscious-but.html ) though your more recent views and policy announcements have me less convinced of that. I don't know what label to apply to the Wildrose currently, and I'm perfectly ok with that, maybe you're just a "people" party, lord knows it's about time. So instead of attempting to figure out what label you are I'm simply going to ask some direct questions and if you'll answer them and I like your answer you can consider me a supporter and voter in the next provincial election. First I need to provide some context for them so you can see where my concerns are deriving from.

I personally am a political atheist. I don't believe in taking partisan sides, or even the phony "left" and "right" wing labels. In fact I am one of a younger generation that's quickly losing faith in a political and economic system that routinely puts their children, grand children, and unborn children on the chopping block for supposed "prosperity" today. It's clear that while politicians talk a good game about the concerns of a disenfranchised youth and the world they will be inheriting, actions always seem geared to maintain the status-quo and ensure any unaffordable or unforeseen costs of this great prosperity the older generations have enjoyed is promptly shifted onto the backs of their children.

From low interest rates which prevent those with little in assets to be able to save, to massive cost inflation that's routinely just excluded from government CPI calculations so subsequent costs don't increase with it, to public services at all 3 levels of government being routinely cutback or simply not expanded at the proper rate to account for population growth ( http://www.canadiantrendsblog.ca/2014/01/mp-brian-jean-resigns-to-concentrate-on.html ), to the addition of numerous "fees" for everything and red tape, the cumulative effects are continually and increasingly squeezing everyone, but especially those who are attempting to build a life, pay off student debt, pay off a mortgage, a car loan, and also save for retirement. It's so unrealistic it's laughable and yet it continues. The fact that Canada's central banker Stephen Poloz just recently told those being squeezed to just "wait for the recovery to take hold and take a job for free in the meantime" I think highlights what I'm saying here ( http://www.canadiantrendsblog.ca/2014/11/poloz-advocates-adult-children-take.html ).

I find the skewed reality of what's really going on to be especially bad in Alberta where a relatively small number of high paying oil jobs unbalance the cost-of-living for everyone else, further drive up the cost of housing beyond the bubble already created by low-interest rates, and pigeon-hole Alberta into a one-industry economy. The fact that this is occurring is seemingly ignored by the PC government (and the Federal government for that matter) with an attitude of "well just go get an oil job" which is hardly going to encourage industry diversification and economically suppresses those who choose not to or can't work in the oil industry. Which brings me to my first question: What would you do to help mitigate and raise awareness of this discrepancy and loss of opportunity?

QUESTION #1) What would you do to help mitigate and raise awareness of the skewed economic discrepancy and loss of opportunity Albertans not in the oil industry experience?

The problem, I fear, is that Alberta in general just doesn't have a very good grasp on what the future global economic situation looks like. We're constantly stuck in and trying to revive the past.

For instance, much of Alberta's current expectations on what economic growth and returns from oilsands development are supposed to look like are based on our experience from the run on oil prices leading up to 2007. The era of "The Alberta Advantage" and even though that time is long gone now in the rear view mirror of time it doesn't seem that Alberta's politicians are any closer to understanding why.

Even at $80, the price of oil compared to just 10 years ago is extremely high and yet now we talk as though this is a "low oil price". What I never see acknowledged though is the climate of the market at the time. Alberta's prosperity didn't come from the price of oil, it came from the fact the price of oil was always going up. If the price of oil hadn't continually gone up and levelled off for any significant amount of time (as it has done for the last 5 years) we would have hit these economic problems sooner. If you remember when oil was $40 the government went ahead and declared they needed a target of $70. When $70 was hit the target changed to $90. And so on. But the oil market has now reached the upper limit of affordability where a move from $80 to $110 causes a rash of frontpage articles about "pain at the pump". Given the rest of the economic environment and the stagnation of wealth natural market forces will not be pushing the price of oil beyond $110 barring the exception of some sort of supply disrupting geopolitical event - but if Alberta's future economic hopes are based on geopolitical destabilization (as the many news articles that come out around war declaring "such and such military action could be good for Alberta") then we're truly up s**t creek.

A few years ago "The minute" interviewed you and asked about Peak Oil ( http://itstheminute.wordpress.com/2011/01/04/the-minute%e2%80%94danielle-smith/ - Unfortunately it seems the video of the interview itself is gone, Jason Lamarche quit his 'The Minute' project awhile ago). However, suffice to say I wasn't very impressed with your answer.
But that said, it's nearly 4 years later and the effects of peak oil are becoming a lot more noticeable. There's been a lot of articles lately that declare the fracking boom in the U.S. and the oilsands are evidence against peak oil but in reality, with a proper understanding of peak oil, they are proof of it. Conventional, cheap oil is on the decline, and it's being increasingly replaced with expensive to produce oil such as fracking and the oilsands. Peak oil theory isn't about oil depletion, and it's only those who didn't take the time to understand the supply downside who were saying the price of oil will be going to $200 due to supply constraints. Few theorists considered that perhaps it would not be the oil supply that would be constrained but rather the ability for economic growth to truly ramp up.

The oilsands are encountering serious issues in financing, and these are only going to become progressively worse. Keep in mind that we are in an unprecedented low interest rate environment, credit has never been cheaper, and yet even still financing for these projects is a problem (and the U.S. fracking companies are experiencing the same issues - I've written more extensively about this here: http://www.canadiantrendsblog.ca/2014/11/oil-price-and-economic-recovery-pendulum.html ).

I very much appreciate your environmental outlook on oilsands development, and you're absolutely right in that something needs to be done before Alberta's image (which frankly has been rightfully earned due to the deception and propaganda the government has used to try to convince people otherwise instead of addressing the issue) deteriorates further and also, you know, the environmental situation there gets worse, but I think you're underestimating the challenges ahead.

With conventional 'cheap' energy declining (which inherently subsidizes aspects of more extreme energy extraction) projects like the oilsands are only going to become more difficult to maintain even at current environmental levels but what's more likely to happen to reduce costs is more and more corners will be cut as we continually lower the bar on what's acceptable to maintain profits. It's great that you believe that some "technology which doesn't exist yet" is going to save the day, but my second question is: what your contingency plan is if one doesn't materialize as I don't believe one is going to be forthcoming any time soon?

QUESTION #2) what's your contingency plan if "some new technology" doesn't materialize which can viably reduce the ever increasing environmental destruction of oilsand development if not eliminate it entirely?

QUESTION #3)  Likewise given what I've described above in terms of an accommodative financial sector which still barely keeps production's head above water and the understanding that peak oil doesn't necessarily describe diminishing supply but rather diminishing energy returned on energy investment (EROEI) what is your opinion on peak oil now and do you believe your policies are compatible with a future in which peak oil is a reality? If not, what gives you the confidence that the old normal in terms of growth can resume to the point the risk need not be considered?

On infrastructure and debt: You're definitely on to something here in regards to the ever-increasing overhead of Alberta's growth. This problem has been compounded by a government that has ridden on the illusion that they paid off the debt when in reality all they did was deter the costs and overhead of growth into the future where the investment now required to catch-up, let alone prepare for the future has risen multiple times over.

I've seen a few commenters on here mention that we shouldn't be afraid of taking on new debt to catch up our infrastructure because "interest rates are favourable". I believe this is an incorrect assessment, it's based on living in the past when the capacity to even have higher interest rates was possible. We've entered a new normal where low interest rates will likely be perpetual (the recovery is always right around the corner, right?) and as a result while the interest on new debt may be cheap such low rates of growth and rapidly growing costs will mean less resources available to pay it down in the future. The assumption that growth will resume is not a certainty and taking on large amounts of debt on the backs of the youth in hopes one day soon the economy will pick up is paramount to gambling, especially since most of Alberta's income is projected based on market moves. Not even day-traders would be so careless.

From my perspective Alberta has a serious problem on it's hands due to how far behind infrastructure already is. A more austere approach isn't going to provide what people need as Alberta pissed it's 30 years of decent oil profits down the drain rather than keeping up (Highway 63 is a perfect example: http://www.canadiantrendsblog.ca/2013/11/lack-of-foresight-dangerous-like.html ), but catching up with debt is also very risky and if the government's lofty hopes for growth and revenue don't pan out (which they likely won't as their projections and beliefs are still based on pre-2007 growth and I don't know if anyone has noticed this lately: always wrong - http://www.huffingtonpost.ca/2014/05/23/jim-prentice_n_5379875.html ) then we will simply once again be deferring the problem into the future where costs are once again sure to be a multiple of what they are now and available resources much less. I don't see an easy way out of this conundrum for us  so I'd like to hear a lot more from your party on how it can be addressed.

I really have a lot more concerns regarding Alberta's future and the path we're on but I've written a lot already and as is these aren't easy questions. I'm happy to see your party is embracing new media and directness as it's method of communication and perhaps you might consider incentives for citizen media as a policy initiative.

Thank you for your time.

Richard Fantin



I'll update should I get a response.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Friday, November 14, 2014

Oil price and the economic recovery pendulum

Something I've been noticing ever since oil (WTI) entered it's rubber band like pattern with constant support at $80 (to support lower EROEI extreme energy development) and it's upper resistance of $110 (because once it hits $100 affordability and gas prices become an issue causing demand to decline and usually reaching a downward turning point at around $110) is that symbiotic economies such as the U.S. and Canada keep going through opposing boom/bust cycles. In the last 5 years, generally, when Canada's prospects have been looking up (which usually corresponds to when oil is relatively higher) the U.S. prospects have been looking down, and vice versa. We see this also today, with a very depressed oil price (which has breached the $80 extreme energy support level - more on this later), Canada's prospects are looking down and our hopes are resting on the (new) U.S. recovery (it seems hopes for higher oil prices have been dashed in the near-term).

Of course currency valuations, and a whole host of other factors come into play but on a very basic level there has been a recurring pattern of boom in one country and bust in the other and they tend to follow the swings in oil. The reasoning is simple:
  • In the case of the America's, which relies heavily on consumption and spending to boost economic growth, cheaper energy means more spending power. This has suddenly become cheered by mainstream economists everywhere (most of whom were also cheering for oil prices to continue to rise as a sign of economic health, oddly) which has lead to headlines such as "America's Consumers Are Basically Getting An $80 Billion Tax Cut". It's interesting that you rarely see articles on expensive oil calling it an $80 billion tax increase though, isn't it? But I digress...
  • Canada however, does better when asset prices are high (or at least Canadian businesses do, not necessarily Canadians) as much of Canada's industry is in the business of selling raw resources. Asset prices tend to rise and fall together and I'd say are largely dictated by the price of crude oil as any change in oil price will usually have a direct effect on the operating costs of other asset driven business.
$80 is a significant support level particularly when it comes to the investment aspect of extreme oil projects. Projects that are already operational and funded can still squeeze profit out of these relatively low oil prices however when it comes to the investment side, particularly regarding startups, the situation becomes quite a bit more bleak.
That’s not the case for many small oil sands producers. Sunshine Oilsands Ltd., for instance, suspended construction at its West Ells oil sands project and signalled its intention to raise U.S. $325-million through a debt offering.
Another part of the problem is that some smaller oil sands companies have not produced bitumen as advertised.

“There’s a chill that’s been put on the ability to raise capital because of the performance of some of the assets,” Mr. Bloomer said of the junior oil sands industry. “There’s a number of them that have not performed very well at all.”

As Ms. Dathorne said, junior oil sands companies need to demonstrate their ability to generate cash flow from their operations above their breakeven costs. Many haven’t been able to do so.

Mr. Bloomer said that Connacher intends to grow its production steadily, by adding new wells to its two existing steam-assisted oil sands projects – rather than raising large amounts of capital and trying to build new projects from scratch.
But something strange is happening in the oil markets; WTI recently breached that $80 support and breached $75 today. Largely the narrative around this phenomenon is that it's a fracking boom energy miracle, that there is a glut in supply and thus prices are low. This narrative is likely playing a large part in the (new) anticipated U.S. recovery everyone seems to think is right around the corner.

It's not exactly a false narrative, as it is misleading. The basic facts are true, yes there is an oil glut, yes the fracking "boom" contributed to it, but the way these facts are being presented omits some parts of the puzzle that just don't add up.

Both Brent and WTI have fallen roughly $20 in the last 2 months. This of course has been largely driven by Saudi Arabia which has, despite the oil glut, kept right on chugging and even lowered their prices which gave the final push needed to break the psychological barrier of $80. This action is largely being chalked up to Saudi Arabia "battling for market share" which I believe is incorrect. Or again, perhaps, rather misleading in terms of what "market share" really means.



However, simply battling for market share isn't really their style. Certainly not to this extreme. You're probably seeing a lot of comparisons to oil price in 2010 right about now as that is the last time the price of oil was at these levels but let me remind you that that was on an upswing after demand had been destroyed by the 2008 economic collapse and the IEA's own data shows that while production overall has increased, so has consumption, and OECD oil stocks have remained relatively flat certainly nothing to warrant such a rapid decrease in price. Yes there was a drop in global demand but that in the last 5 years has never been enough to break the $80 barrier on price as that barrier is a required support to keep production at pace. Which maybe explains why the IEA is warning that these lower oil prices are actually going to lead to a supply crunch, and price spikes.
The challenges lie across the energy spectrum but are particularly acute in the global oil market, where the recent plunge in prices will deter capital expenditures that are needed to offset declining production from aging fields, even as lower pump prices spur demand growth.
That decline in supply and increase in demand would drive prices higher in the coming years than they would be under a stable price scenario.

“The short-term picture of a well-supplied oil market should not disguise the challenges that lie ahead as reliance grows on a relatively small number of producers,” primarily in the Middle East, it said.

In an interview from Paris, IEA chief economist Fatih Birol said Canada’s oil sands are an important source of secure supply as other major producing regions – from Russia and the Middle East – face political upheaval.

“We expect Canadian production will be a very important cornerstone of the security of global oil markets,” Mr. Birol said. The IEA forecasts that Canadian production will grow from four million barrels a day currently to 7.4 million by 2030, with virtually all of that growth coming from the oil sands.
Unfortunately the IEA, as an economically-political institution that is itself vested in the continuation of infinite growth, has to put hope somewhere. I expect that "deterred capital expenditures" in oilsands development are going to damper their Canadian outlook.

So, given this information and the supposed supply glut, isn't it interesting that everyone all of a sudden is drilling unabated to the point where it nearly becomes unprofitable? The Saudi's with their vast reserves of conventional oil and established networks can produce oil much more cheaply than the U.S. and many competitors, the Saudi's need for oil revenue largely comes from how much they fund with it to quell their population. However, when it comes to the U.S. or Canada we need that revenue simply to cover the added overhead the industry depends on and even then it isn't enough. Yet despite all this the drilling continues unabated. It's to the point where the in the U.S. they are fielding risky, and largely untested technology just to "keep the boom going".
Companies experimenting with downspacing, including ConocoPhillips (COP), Continental Resources Inc. (CLR) and Anadarko Petroleum Corp. (APC), are still trying to figure out how quickly wells will become depleted when they’re so crowded together, said Leo Mariani, an analyst with RBC Capital Markets in Austin. If that happens too fast, those initial extra profits might eventually become losses.

It may take as long as five years before the industry has a solid understanding of how much oil they’re leaving in the ground by crowding wells so closely together, Mariani said.

“It definitely works, but you might end up with 80 percent of the recoverable oil,” he said. “The question is whether the economics will be as good. It’s certainly not without risk.”

In the short-term, most tightly spaced South Texas wells so far are yielding more oil, not less, the Drillinginfo analysis shows. Technological advances including spacing and higher per-well productivity have been “important to maintaining production” amid falling prices, the Paris-based International Energy Agency said in an Oct. 14 report.

In 2013, Marathon’s Eagle Ford wells that were tested at the closest spacing levels were 34 percent more prolific after six months compared to wells spaced further apart in 2011.

“What we see is that we are getting better over time,” Robertson said in an April interview. “We have a very small body of knowledge about this kind of spacing so far in the industry, but this is our single greatest opportunity to create greater value.”
Seems a little odd, ya? To chase lower prices and create an even larger glut? Also keep in mind that all of this financing that's being talked about here is financing under central banking emergency measures. Ultra-low interest rates. If it's difficult for these projects to show they can break even now, or that the depletion rates of the wells are largely unknown due to the experimental technology being fielded then what would financing be like once interest rates rise? What will profitability look like?

It's often said in Canada that Big Oil runs the Harper government, but what's often left out is that the Big Banks run Big Oil as they are the ones that finance it and as oil is largely what provides for the excessive consumption we've become accustomed to, hence the tight correlation between oil consumption and GDP, which happens to be a direct requirement needed for the banks to operate the monetary system Ponzi-conomy. Banks by far have the single largest stake in oil production as aside from the loans given directly to the energy sector, virtually every other loan's probability of repayment rests heavily on an uninterrupted, stable, and affordable oil supply. For this reason I find it unlikely central banks will ever be able to raise interest rates (they may try but will likely be forced to re-lower them once again) as a full uninterrupted supply of a core component of GDP growth pretty well demands emergency low interest rates just to remain viable.

What you are seeing here is not normal, it is an oil price war, and one which I believe is largely targeted at the United States. The week put out a good article on how Saudi Arabia hopes to reduce U.S. output however I don't think market share is the true answer as to why. Here is an interview with an analyst from October of 2013:
Q. How worried Is Saudi Arabia about the U.S. shale oil and gas revolution?

A. They are worried more about the politics than shale oil and gas. Saudi exports to the U.S. have continued at previous levels — in fact they have increased slightly. The primary reason for that is Saudi Arabia is in a joint-venture partnership with Royal Shell Dutch (Plc) in the Motiva refinery operation [in Port Arthur, Tex.], which has throughput capacity of just over a million barrels per day. They are exporting around 1.2 million barrels per day to the U.S.

As far as gas is concerned, Saudis don’t export natural gas, so they are not worried about the shale gas revolution.

What they are worried about is the rapport between the U.S. and Iran with new president Hassan Rouhani extending his hand in friendship, and the discussion that followed in Geneva looking for a way around Tehran’s nuclear-enrichment problem.

Q. Do you expect the Saudis to embark on a bold move to express their unhappiness — such as a production cut?

A. No, no, I don’t think they will go that far. But they are indicating their unhappiness with U.S. [Middle East] policy, and also its non-policy regarding Syria.

Q. What about shale oil and gas potential in Saudi Arabia — they have been drilling offshore and north of the country?

A. I think that’s marginal. Experimentally they probably want to find out what kind of reserves they might have. But they are not concerned with so much oil and gas.

Regarding U.S. shale, I have a quote by Ibrahim Al-Muhanna, [an adviser to Oil Minister Ali al-Naimi]. His direct quote is as follows:

“The shale oil and gas revolutions are adding greater depth to the petroleum market. Diversification of energy supplies in terms of type location and sources.”

And he added, later on, “it is creating a floor around oil prices of around $80 per barrel.”

So, he is reflecting the views of the royal family and the government, that they are not bothered too much.

Q. What’s CGES’s own view on the U.S. shale revolution?
A. The North Dakota experience is that that you have to drill a lot of wells to keep production going because the depletion rates are rapid. Once you drill the well, the pressures drops, and they have to drill and go further out into the field. So this is costly, around US$50 per barrel.

If the Saudis were to increase their output with the intention of dropping the price to US$60, quite a lot of shale drilling would stop in the U.S. I am not saying the Saudis would do it, but they have the ability to stop fracking.
 Over at Zero Hedge they believe Saudi Arabia is colluding with the U.S. to essentially do the same sort of economic attack but on Russia further damaging the Russian economy in exchange for finally bombing Syria but I find it hard to believe they would be so reckless when they've recently been so suave at manipulating the world populations into supporting what they want. Too many vital dependencies of U.S. hegemony are at risk in such a collusion and so I'm more inclined to believe that the manipulated downward price is aimed at the United States as a geopolitical weapon.

One possible reason may be that Saudi Arabia is worried that if the U.S.'s lofty predictions for output work out that the incentive to remain in the pact with Saudi Arabia forged after the 70's oil shocks which provide them military equipment and international protection of their brutal archaic regime may evaporate.

So what does this all mean for you? It means in the near term if Saudi Arabia is successful you can probably expect oil to reach $60 / barrel. The perceived plentifulness and cheapness of energy will likely contribute to a new consumption trend which may actually end up being the longest leg of supposed growth in the recovery as oil price will have a fair amount of runway before affordability becomes a major issue again.

But don't get too comfortable, this glut is artificial and unsustainable, even if demand did meet supply at these price levels as the longer this goes on the less incentive there will be to continue. Should the Saudi's fail at their goal I anticipate oil price will return to it's previous pattern it's been following for the last 5 years at least until other factors start to interfere with the perfect storm of low interest rates and junk debt. However, if the Saudi's succeed in their goal I'd expect then an oil price spike shortly after and some pretty big fireworks in western financial markets.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Thursday, November 13, 2014

#C36

An anonymous woman offers sexual services
on the popular application Whisper
I hadn't really been paying attention to C36 throughout the year, generally bills of this nature fall outside the scope of what this blog is looking at in the sense the issue is too divisive, emotionally charged, politicalized, and I find to also fall under the aspects of human nature that a consensus will probably never be reached on.

However, given recent economic events and the Jian Ghomeshi scandal and it's highlighting of violence against women and abuse by those with some form of power along with the royal ascent of C36 I've decided now is an ideal time to comment, if I'm going to comment at all.

To state my position clearly I oppose it completely; it doesn't in my opinion even come close to respecting the Canadian Charter, or even the spirit of the Supreme Court decision it's in response to.

Being I'm not a sex worker, or an expert in law, I felt compelled to examine some various sources, and the House of Commons readings on the subject as well as going through various parts of the bill itself, it's unfortunately a very big subject and I have a lot of catching up to do, however I feel confident in my position enough now to at least make a preliminary statement on the matter.

Perhaps what I find most egregious about this bill is it victimizes all sex workers, and villainizes all Johns supposedly with the intent of "ending demand", a lofty unrealistic goal that defies human nature. Sex is always, and will always, be in demand.

Reading through the House of Commons debates on C36 I noticed supporters of the bill repeatedly refer to protecting children, those unwilling or non-consenting, and human trafficking. None of the arguments made really showed how anything within bill C36 addresses those issues though, and I frankly don't believe C36 is meant to. I also don't believe it's meant to abolish sex work either as it claims to.

There is a reason criminal cartels prefer to engage in illegal activities, and why they prefer those activities remain illegal: by relegating them to the black market their rarity and risk increase their value. Prohibition doesn't work, and you can witness this now as a few tweaks to some U.S. State's drug laws are doing what years of bloody, brutal, endless "war on drug cartels" never could, perhaps to the disdain of Wall Street and the associated Federal agencies they control. So in the process of my research for this topic I came across an interesting statement by 'Sex Trafficking Survivors United', who support the C36 bill.
We urge Canadian Parliament to take a stand against the exploitation of the young, poor, and vulnerable by the richer, older and more powerful. Pass Bill C36. As all survivors know, the vast majority of people end up in prostitution because they have no other choices, and/or are the victims of coercion, fraud, abuse and violence. The untruth that “prostitution is a choice” only serves to stigmatize and further trap most of the sexually exploited. This empowers their traffickers and abusers, while erasing the truth that the exploited are the victims of multiple crimes.
The richer, older, and more powerful. This clicked with me as the bombardment of reports on Jian Ghomeshi, while not related to sex work or human trafficking, did have a recurring theme of women not willing to go to police for fear of reprisal, personally or professionally, stemming from Ghomeshi's power. I certainly don't want to get into Ghomeshi here as that definitely is beyond the scope of this blog however the Ghomeshi event then clicked when I remembered reading something else about an internal debate amongst sex workers about releasing a list of MPs who themselves seek sexual services. Of course the existence of this list is hearsay currently but I really have no reason to doubt it's existence, it's not like the idea of richer, older, and more powerful politicians paying for sex is really "out there".

So I started thinking about this bill then from the perspective of a cartel, or a group of individuals vested in keeping certain activities underground. Generally the richer, older, and more powerful are not prosecuted unless some sort of campaign the size of Jian Ghomeshi is waged against them. The conclusion I draw from looking at C36 is that the likely result will be that women in the sex trade that either choose to remain in it or can't get out of it are being further isolated.

The "protections" being offered to them are supposedly more resources to help them get out of the trade, and nothing else. The criminalization of Johns and the purchase of sex does nothing more than ensure that sex worker's must stay even further out of the lime light of the police, to protect their clients and their business (the exact reason that POWER will not release the list of MP's names), which is inherently less secure along with the added disadvantage that private third party security can not be employed.

In the speech on C36 by MP Joy Smith (Conservative) one paragraph particularly stood out to me.
I had one case very recently where a boyfriend said to this young girl, “We'll get married. I love you”. He was her knight in shining armour. What she did not know was that behind the scenes he was part of a little gang that were targeting young girls, getting their confidence, taking away all their support systems through their families, their schools, their churches, all their supports, my beloved colleagues, and he sold her. She serviced up to 40 men a night before we got her out of that ring.

This is something we cannot be silent about. This kind of crime has been below the radar screen for so many years here in Canada. Everybody talks about every other country but Canada. In Canada, predators are making between $250,000 to $280,000 a year off their victims. That is tax-free money. That is why they do it. Mostly, it is because they follow the cash.
Taking away all their support systems.

C36 takes away what little legal support systems sex worker's have and replaces them with a shaming and "I told you so" take on victimization, equivalent to promoting abstinence as sex education, "You won't get pregnant if you don't have sex.".

The current government, over the years, has demonstrated that it is a government of and for the rich and powerful, read into that what you may.

Now, before I continue, what I'm saying here is not analogous to being pro-prostitution in the sense that I'm now thinking due to the passing of C36, "oh no now I can't legally utilize prostitutes". It's really not something I spend a lot of time thinking about actually. I've never utilized the services of a sex worker, I'm barely comfortable in strip clubs and I've never had a lap dance. While I do understand that many enjoy their work (for the work, not just the currency), I personally would feel both degraded in the situation, as I prefer knowing that my sexual partner actually wants to be with me, and uncomfortable, as if it took currency to get them to be intimate with me then I'm probably not exactly what they desire. I think it would be difficult even to be in a relationship with a sex worker.  But that aside, these are my personal feelings on the matter, it's not an activity I ever intend to engage in (though you never know my opinion on that might change in 30 years) but I can recognize that it's existence, and it's continued existence, are inevitable.

Perhaps Poloz's recent statement that adult children that can't find jobs, are saddled with student debt, and can't afford to move out of their parents should start taking internships for free to keep their resumes updated best shows the detachment between the crusade for the vulnerable, and the reality of the vulnerable. A deteriorating condition as collectively the world borrows more and more from future generations to prop up asset bubbles and other illusions of wealth. With the flexibility of the internet and the ease of access for providing sexual services along with their potential to provide a living wage and endless demand from a protected upper class it will remain or perhaps become even more so an appealing way to make quick cash, especially as further inter-generational inequality takes hold.

Criminalizing the Johns, preventing advertisements, are not going to end demand for sexual services. Human trafficking rings are already illegal, and the smaller ones actively prosecuted all the time. The sexual exploitation of underage children is of course already illegal as well. The idea the criminalization of Johns somehow makes it easier for "the victims" to approach the police is laughable at best, founded in the belief that now because the burden of proof is no longer on the women they can feel more comfortable coming forward. But the removal of the burden of proof of being "victimized" does not help with the stigma that currently comes with being a sex worker or the way police treat them. It does not provide confidence in the police in general, especially after high profile events like the G20 protests where multiple women reported sexual assaults and humiliation by the police which were subsequently whitewashed and covered up.

Sexual exploitation is an institutionalized, profit driven, part of our society. From the girls being exploited by the Tilted Kilt working there because of the tips, to the perfect sexualized beauties marching out of Hollywood. The continued criminalization of sex work ensures those who are in a position to capitalize on and exploit it will be free to do so while the sex workers themselves are placed in a more vulnerable and submissive position to accommodate for the newly added risk their clients are taking on by continuing to do business with them.

Special thanks to @kwetoday for her insight and research on this matter.

ADDENDUM

If the government really wanted to help with the exploitation of youth they'd be funding armies of guys like Mark Cherrington.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Tuesday, November 4, 2014

Poloz advocates "adult children" take "unpaid work" and "wait for the recovery to take hold"

Having trouble finding a job, especially one that can pay for the exorbitant and ever-increasing cost-of-living in Canada? Well Stephen Poloz has some advice for you: simply take some unpaid work, it'll look great on your resume.
How bad are things in Canada’s job market? Bank of Canada Governor Stephen Poloz says bad enough for young people to consider working for free.

Adult children stuck in their parents’ basements because they can’t find adequate employment should take unpaid work to bolster résumés as they wait for the recovery to take hold, Poloz said Monday in Toronto.
Of course I'm not exactly sure how it's lost on Poloz, who is Canada's central banker and one of the people directly responsible for the low interest policy (along with Mark Carnage) that has put speculative ever-rising housing costs as one of the primary drivers of Canada's domestic consumption economy, that perhaps alongside wages that haven't budged in 30 years and certainly haven't kept up with real price inflation that the other primary reason these people are still living at home with their parents is they can't afford to move out because excessive low interest rates have now made housing in Canada nearly the most expensive in the world.
Canadians are struggling with steep housing costs, according to a large global survey which found that high mortgage, rent and utility payments are leaving little for saving and investing. 
The global investor pulse survey, released Thursday by money manager BlackRock Inc., found that “many Canadians feel that they are in a financial squeeze – hard pressed to save amid what they perceive as a high cost of living, including devoting much of their income to paying for their homes.”
Somehow I highly doubt that even finding "adequate employment" is going to result in an "adequate paycheque" that even comes close to matching the highly speculative and rising cost of housing, or that will protect these people from the losses when (not if) this massive bubble in housing we mistakenly call a "recovery" finally collapses like it should of in 2008. Canada may not have been as over-leveraged as the U.S. back then but we sure as hell are now and the consumer trends currently at play simply don't signal that it has any support beyond continued low interest rates and immense foreign investment.

On top of driving up the cost of assets the low-interest rate policy (being set by the man warning about low interest rate policies and their effects) also has the nice little side-effect of ensuring this generation he claims to be oh-so-concerned about never gets any returns on their savings. As the entire purpose behind stimulus is admittedly "to drive savers into riskier assets and get capital flowing" of course that's assuming you have any capital to flow in the first place though now isn't it? Most of those reasonably well off today accumulated that wealth not by trading on the market, or investing in companies, but by putting a little bit of cash away in a savings account which returned enough in interest to either meet or exceed inflation. The current generations of "adult children" as Poloz likes to call them is being robbed of this opportunity in the name of ensuring those who have already accumulated the wealth believe they still have it (by transferring what little wealth those younger have into their hands).

For those not well off enough to benefit from the new "income splitting tax credit" (which oddly seems only to help families which mirror that of Stephen Harper's) Canada has another solution for you, it's called the food bank, and plenty of Canadians are already taking advantage of it!
Food Bank Canada report: Number of Canadians in need of help 'alarmingly' high

Food bank use in Canada increased slightly this year in comparison to 2013, and it remains significantly higher than it was before the economic recession, according to a report released Tuesday by Food Bank Canada.

In the month of March 2014, more than 840,000 people received food bank assistance, one per cent higher than the same snapshot period last year. More than a third of them were children, and nearly half of households helped were families with children.
So don't worry, "adult children", you can live with your folks rent free (I'm sure they won't mind) and if you need to eat? Well there is always the food bank. What's important is that you take some unpaid work and get your resume up to speed until "the recovery takes hold" (and I'm guessing you'll have to wait until employers stop complaining about how much labour costs in Canada and they stop pushing for TFWs as well too).

Of course I'm struggling to see how generation(s) that can't afford anything and isn't to be paid for their contributions in employment is going to help drive an economy that's based entirely on over-leveraged consumption and help it "recover". This is what it looks like when an unsustainable Ponzi-conomy reaches the end of the road: something has got to (and will) give, it's only a matter of time, and it's not going to be pretty when it happens.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Friday, October 10, 2014

RE comments on Infinite Exponential Growth.

I've received a comment by 'Ron Waller' on my previous post on infinite growth, this is my response.
The anti-growthers are barking up the wrong tree. Whether or not a society has a sustainable economy based on renewable energy and recyclable materials depends entirely on regulations, not economic growth. The focus needs to be on convincing people to support green regulations and a green-energy economy.
I'll get to the points about a "green-energy economy" later. However "anti-growthers" I will address now. I am not "anti-growth", rather I simply don't believe in it, have faith in it, and have never seen any convincing cases that it is possible into infinity. We are seeing limits to growth all around us everyday.
Fact is we will create GDP growth transforming to a green economy whether we want to or not. Some ways to go greener: build mass transit systems; subsidize broadband internet (wired and wireless) to reduce need for high-energy-consumption travel; build green-energy power systems; change from combustible engine cars to electric cars; develop driverless cars which will change the nature of transportation; etc. All these activities create economic growth.

Whether we want to or not? Not quite. Utilizing all types of energy available and skirting regulation while central banks have kept monetary policy in emergency response mode to supposedly entice borrowing and drive liquidity hasn't exactly been working too well. It's now 6 years since 2008 and we're still "recovering".

As for the initial suggestions: The major problem I see with most of them is that you believe we can both simultaneously grow from our already engorged state which will require even more energy and resource consumption from that which we currently consume (it's been 100% proven there is a direct correlation to energy consumption and GDP growth) while also changing from what is a very dense high return energy source to a more diffuse one. The other problem is that technological changes at the top do not alter the fact that our entire technological base is founded on oil. Don't get me wrong, I'm very much in favour of sustainability, but real sustainability, you know the kind that.. sustains. Forever.

So for instance you mention electric cars: first of all electricity is not a power source, it must be generated from another power source and I don't know if you've compared the costs and power generation capacity of wind farms, or solar panels, but they certainly will not be powering everything we have now and the addition of 800,000,000+ electric vehicles all running on the grid. Second you are not accounting for the materials and energy consumption that is going to be required to replace 800,000,000+ cars on the roads today. It takes 7 gallons of oil to create a tire, 3 times the car's body weight in oil to produce a whole car. We have to mine metals, pave roads and run regular maintenance on all of it. We can barely keep up with road deterioration as is.

You're correct however in that "all of those activities create economic growth", that does not mean however that the economic growth generated by those activities will be enough to actually grow the economy in aggregate.

So like evolution in electronics (smart phones and TVs, for example,) there is a process of creative destruction going on that puts an emphasis on energy efficiency. As long as it's done responsibly (recycling materials) it is not only positive, but necessary. We need technological advancement to go green. For example, if we build arrays of wind turbines across the country and find ways to make them more efficient, we need to rebuild or upgrade them. Same with solar power arrays. Same with cars, homes and buildings. 
GDP (economic) growth means wealth creation. Wealth is created by people getting a return on their savings and investments (compound interest.) As long as all segments of society benefit from wealth creation, wealthier is always better. It provides the means by which a society can go greener. It provides the means by which people can realize their potential. Since health and education spending are measured as a percentage of GDP, GDP growth means we will have more money to invest in these and other areas. 
No, wealth is not created by people "getting a return on their investments" with compound interest. In fact compound interest, along with fiat currency (which represents debt or "wealth from the future"), and fractional reserve banking are all large parts of the problem which put society into a situation where infinite economic growth is required to service the status quo. Mike Maloney does a great series on how the modern monetary system actually works, I suggest you look at it. But for the purposes of this response I will say wealth is a return on energy invested. The more energy you get in return for the energy you expend the wealthier you are. We use currency to represent this stored energy.

The problem with compound interest and debt based currency is that because there is always more interest owing than there is currency in existence due to the fact that all currency is loaned into existence and has compound interest attached to it is that we make the assumption embodied in our monetary system that the future will always be larger than the past. We assume that we will always be able to increase production, exponentially, to pay off in real wealth the interest + principal of the outstanding loans and when that can't happen the whole system goes into a tailspin.

What precipitated the 2008 financial collapse? Oil at $147 / barrel and gas prices on the frontpage of every newspaper. The cost of everything skyrocketed, people had to use credit to afford their gas bills, and eventually when the credit ran out the missed payments began and the whole house of cards came down. Was the issue the banks? Yes, but it could have gone on longer had oil prices not dampened consumption and created a deflationary situation. Though had the banks acted proper "economic growth" would be nowhere near what we claim it is today, the overblown housing market created wealth out of thin air -- for awhile. As it is today too with the central banks and their ultra low interest rates, expensive energy, limited credit. Our inability to really get economic growth going is a direct result of an energy crisis, not a shortage but a crisis in the sense that we have it but it is becoming very expensive to produce and very expensive to consume due to the shrinking energy return on energy ratio we are getting for production.

So while we may be "swimming in oil" as the latest buzzword says, we're drowning in costs, and the central banks are trying to offset this by "creating wealth" through loans and returns to investors but currency itself is not wealth, its just paper, and printing more paper or creating more digital signals does not put food on tables - cheap energy does. We can print all the currency we like but the reality is it does not change our actual balance of excess energy which we utilize for economic production. The more energy we spend producing energy the less energy is available for "growth". It's simple math that if growth requires production of more energy than we had before, and our excess energy (that energy we do not spend extracting more energy) is shrinking, then growth is going to likewise shrink too. Contraction.
The real problem is free-market social Darwinism that allows a small minority of oligarchs (whether "democratic" or fascist) to hog up most of the wealth.
The anti-growthers don't realize their alternative to economic growth is some form of communism (full government control over the economy.) Historically, the cause tends to get lost in the revolution and a totalitarian dictatorship is created.
I don't know if you've realized this or not, but we're pretty much already there. All of the "democratic nations" have fully armed militarized riot police trained to put down the coming protests and riots as the economic situation around the world worsens. We saw them at the G20 in Toronto, we saw them in Ferguson recently. The oligarchs you speak of know that a major economic contraction is already in the works and are simply kicking the can down the road long enough until they're prepared to handle the result. It's not like it's going to be a voluntary thing either though, I am not against growth - I've simply accepted the reality that it is a mathematical impossibility. It's not going to be optional, but the further pursuit of it is only going to lead us into more dangerous territory. The more expensive the world becomes due to diminishing energy supplies, the more shortcuts were going to start taking, the more activities like fracking, and oilsands become appealing.


Another positive about GDP growth is that it created wealthy developed countries which have negative population growth. They only way to stop runaway population growth is to raise living standards across the globe and increase immigration to developed countries.
At this point I have to question if you really understand the concepts I'm talking about. It created wealthy countries during the cheapest energy era the world had ever seen. It's very easy to grow and raise living standards with lots of plentiful cheap energy, but its a much different ball game going from cheap energy to expensive energy. Yes, wind-farms and solar panels - relative to conventional oil - are very expensive and provide poor returns. They are also not nearly as mobile, depend on an oil based supply chain and advanced oil based technologies like micro-computers. They are not truly "alternative energy" but rather "derivative energy" as their production and operation depends entirely on an oil based supply chain.
In order to accomplish this we need to use the centrist mixed-market economy — which created modern living standards in the post-war era — on a global scale (it's a balance between free-market capitalism and communism.) Communism is not an option. Free-market ideology creates a balkanized globe and regulatory race to the bottom which is the cause of all our problems, economic and environmental.
In the post-war era energy was cheap, currency was sound and based on real money, and Ronald Reagan hadn't happened yet. The world economies today are a much different beast and also rely much more heavily on financial magic and market fraud to "balance the books". The system as a whole is much more unstable, much more dependent, and much less resilient. In the post-war era "farming" was still a viable career, today most people get their food from the grocery store. Comparing the two is like apples and oranges and the thing about economic growth is, if you don't grow then you're contracting. We can't go back in time and "do it right", we have a huge economy now and much of it is based on fraud and junk bonds and it must grow. The emergency financial measures, currency wars, trade wars, and resource wars that have broken out over the last 20 years are growing evidence that those with a vested interest in the world's resources are getting antsy. We'll likely blow ourselves up into instability long before the economic impacts take their logical course.
"How exactly do you produce more without utilizing more resources to do it? It's pretty simple, you don't."Physical goods can be produced without using more resources if they are created using renewable energy and recyclable materials.Of course, many of the goods and services being created are information based, which use very few (potentially renewable) resources in their creation, reproduction and transportation.

Actually, the resources required to run "the internet" are massive. Multitudes of servers, wires, and electronics which are produced, and reproduced at an alarming rate - giant server farms on the electricity grids. The internet is the single largest energy and resource consumer mankind has ever created.

What we really need to focus on is uniting activists around the globe to demand action that representational governments are unwilling to take (because they represent oligarchs, not people.)
Whether one believes in economic growth or not, the people need to unite to demand that: a) we put the right regulations in place to create a sustainable economy; b) we tax the rich (income taxes, wealth surtaxes, estate taxes, financial transaction taxes, etc.) so we can make the necessary investments to create a sustainable economy. 
I think its better to focus on what kind of regulations and investments are needed, because any which way you slice it, they are sorely needed.
I agree. The problem is that under the current economic model there is simply not enough capital to make the transition - the cheapest, biggest return will always win. Due to the dependence of advanced energy sources on older energy sources and an oil based supply chain it is incredibly unlikely derivative energy sources can become cheaper in terms of energy invested and energy returned than the energy and materials upon which the technology is based on and which have a much better rate of return. The fact that we're even willing to pursue projects like oilsands whose returns are dubious at best shows where we are in this energy story and how desperate we might get. We're not going to be making smart decision, we're going to be making what appear to be the cheapest solutions and that is reinforced by a GDP economy which demands growth. When a company needs to enact cost savings for growth they are usually cutting corners, or over working people, reducing quality, etc. This is not an avenue towards a better future, but rather a worse one.

Absolutely we need to go after the oligarchs. They are the bankers putting compound interest on the currency we borrow into existence and which we must pay back with our hard earned labour. I'm not exactly sure where you got the idea compound interest is providing returns for anyone but the oligarchs, for compound interest is one of the ways they rob us. I'm all for a sustainable economy, but sustainable and growth are not going to go hand in hand. Nothing sustainable grows forever, nothing.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Thursday, October 9, 2014

Infinite Exponential Growth: The religion of modern "economics" and blowing steam up your ass

Perhaps one of the most difficult aspects of writing about the obvious limits to growth we're encountering is trying to clearly describe the difference between infinite exponential growth, and limited linear growth. True believers in the infinite growth model supposedly fuelled by infinite fiat currency often try to use linear models to justify their claims which might sound good until you fully examine exactly what it is they're saying, and exactly what it is they're claiming often to discover that the evidence provided doesn't back the claim.

The other day I came across an article by Paul Krugman where he uses an example of "slow steaming", a process enacted by cargo ships following the spike in oil prices in 2008, to attempt to show that you can indeed "produce" more for less. His example sounds great taken out of the context of the larger macro economic implications and ignoring externalities. Let's take a look:
After 2008, when oil prices rose sharply, shipping companies — which send massive container ships on regular “pendulum routes”, taking stuff (say) from Rotterdam to China and back again — responded by reducing the speed of their ships. It turns out that steaming more slowly reduces fuel consumption more than proportionately to the reduction in speed.

So what happens when you switch to slow steaming? Any one ship will carry less freight over the course of a year, because it can do fewer swings of the pendulum (although the number of trips won’t fall as much as the reduction in speed, because the time spent loading and unloading doesn’t change.) But you can still carry as much freight as before, simply by using more ships — that is, by supplying more labor and capital. If you do that, output — the number of tons shipped — hasn’t changed; but fuel consumption has fallen.

And of course by using still more ships, you can combine higher output with less fuel consumption. There is, despite what some people who think they’re being sophisticated somehow believe, no reason at all that you can’t produce more while using less energy. It’s not a free lunch — it requires more of other inputs — but that’s just ordinary economics. Energy is just an input like other inputs.
Interesting isn't it? I tell you, this is a doozy and for someone not versed in energy economics it probably sounds pretty convincing but let's take a closer look.
 
First of all, notice the huge jump in language: Here he is talking about shipping product - not producing product - yet his conclusion is "no reason at all that you can’t produce more while using less energy" yet examining the energy used in the actual production of the product being shipped is mysteriously missing. How exactly do you produce more without utilizing more resources to do it? It's pretty simple, you don't. But when it comes to his argument and the glaring holes in it this is just the tip of the ice berg and you don't have to be very "sophisticated" to figure this stuff out.
 
His second big glaring hole in his argument is where he then goes to say: "But you can still carry as much freight as before, simply by using more ships — that is, by supplying more labor and capital. If you do that, output — the number of tons shipped — hasn’t changed; but fuel consumption has fallen.". So you get that folks? If you go a little bit slower but deploy more ships, more capital, and more labour, you can carry the same amount of cargo. So three "mores" to get the "same" and supposedly this proves you can do "more" with "less"? Perhaps in terms of the energy consumption of each individual ship itself but when you aggregate all of the additional inputs required (such as the energy and materials to build even more ships to ship the same amount of cargo) you're not really doing more with less at all now are you?
 
Krugman dismisses this inconvenient truth by saying "It’s not a free lunch — it requires more of other inputs — but that’s just ordinary economics. Energy is just an input like other inputs.". Of course what he doesn't say is that all of those other additional inputs also require energy, at the end of every point in the supply chain is energy and resources so to say other inputs are like energy isn't very accurate as those other inputs likewise have their own inputs and at the very tip of all of them is energy. You must aggregate the energy demand from the entire supply chain to prove a gain. More capital, more labour, more materials translates to more energy required just simply coming from different places. As we discuss often on this blog, and as my readers should know, capital or currency simply represents spent energy. Your paycheque represents the energy you exerted during your working hours. All capital represents energy and all transactions are an exchange of energy thus "more capital" is directly equivalent to more energy that's either been already spent or has been borrowed from the future.
 
The third issue with his argument is he doesn't describe the scale of growth at all. His assertion is that should this shipping company want to continuously expand they will continuously find new energy efficiencies that either match or exceed the demand for growth which is of course a ludicrous assertion. The reality is you can only enact "slow steaming" once and once implemented the savings are made and all future demands for the company to grow will put more aggregate demand on their base energy usage thus for Krugman's assertion to be true for the company to scale infinitely larger their energy usage would have to scale infinitely smaller which is just pure insanity. Eventually the energy usage will be as efficient as efficient can be unless Krugman is also claiming that one day in the future we'll be able to ship many times the product we do today using no energy at all. At some point, even with energy savings, some energy must be spent to ship the product due purely to physics and when that point is reached any additional product the company would want to ship will add additional demand to energy usage and as mentioned before this example just covers the shipping of product already produced; for a shipping company to ship more product that product must exist which itself requires energy and resources to create.
 
The fourth issue with his argument is a little theory called "Jevon's Paradox".
In economics, the Jevons paradox (/ˈɛvənz/; sometimes Jevons effect) is the proposition that as technology progresses, the increase in efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.[1] In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal-use led to the increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological improvements could not be relied upon to reduce fuel consumption.[2]

The issue has been re-examined by modern economists studying consumption rebound effects from improved energy efficiency. In addition to reducing the amount needed for a given use, improved efficiency lowers the relative cost of using a resource, which tends to increase the quantity of the resource demanded, potentially counteracting any savings from increased efficiency. Additionally, increased efficiency accelerates economic growth, further increasing the demand for resources. The Jevons paradox occurs when the effect from increased demand predominates, causing resource use to increase.[2]
So let's take the example of this shipping company and let's say you're in charge of it. Now that you have discovered slow steaming which (excluding the "other inputs") has reduced your operation costs, what do you do? Do you say "thanks for the savings we're going to keep shipping the same amount"? Or do you say "now that we can ship more for less we have gained additional capacity to ship more"? Well for the company, and economy, to have growth they're going to have to expand and thus any company interested in "growth" is going to redeploy those saved resources in their efforts to expand. If the company gets a 50% cost saving then they will have gained 100% more capacity now able to double the amount of product shipped with the same amount of inputs. Being that the economy demands expansion, which is growth, it is inevitable that any energy saved by increased efficiency will be spent by expansion.

This sort of example extends all the way down to households: let's say that out of nowhere the cost of food for you is cut in half, is it more likely that a household will cut its food budget in half, or is it more likely they will deploy the same amount of resources either on more food, or higher quality food? It's easy for a family to expand their lifestyle, not so easy to contract it, and expansion tends to be the default when the extra capacity for expansion is made available.

If you look at the last 100 years of human development this is very evident. We have gained incredibly in energy efficiency yet energy usage has never been higher, and the more efficient we become the more energy we use. Krugman's example doesn't examine the likely results of the energy gains simply assuming that the amount the company decides to ship will just stay the same forever (which isn't growth at all, now is it?).

The fifth problem in his argument is that claiming a little bit of energy efficiency translates to a justification of infinite growth ignores all of the other types of inputs required. It ignores the heavy droughts in California and Texas where entire towns no longer have drinking water and which is severely hindering agriculture and other industrial processes such as fracking. It ignores peak oil (and peak everything) where energy efficiencies being made come nowhere close to offsetting the rapidly rising cost of extracting the oil (and other resources) in the first place. It ignores the 99% fit between GDP growth and resource consumption as shown by Chris Martenson.

Finally, Krugman doesn't touch the exponential nature of GDP growth using an example of linear growth to justify it (increasing "production" directly relative to energy efficiencies gained). The nature of GDP growth is exponential, so when we say the economy grew "1%" last quarter it might not sound like much but that 1% is relative to the size of the economy. A multi-trillion dollar economy requires hundreds of billions to achieve even a small percentage increase in growth which can easily dwarf a multitude of total production from the previous years leading up to it.

I don't think you have to be very sophisticated to get this stuff as Krugman claims those who discuss limits to growth must be, you just have to have a very basic understanding that nothing in the history of the planet has ever grown forever so why on earth would we ever believe we can buck that trend now? It's a finite planet, with finite resources, claiming they won't run out (or more accurately that we will continue having the excess energy (aka. affordability) needed to extract them) is just stupidity. Krugman's "slow steaming" argument is just blowing steam up your ass.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Monday, October 6, 2014

Say goodbye to the "employee's market"

The 'employee's market' was perhaps one of the last saving graces of the middle class and workers in general. It was always inevitable that when wages stagnated allowing businesses to expand that eventually the labour market would have to balance out. Eventually demand for employment would outpace the availability of workers and in this event worker's were then given the upper hand. Expanding businesses and the resulting currency creation meant inflation would rise and inflation rising and the availability of jobs meant workers had the upper hand in negotiating their pay. Sooner or later any business that wanted to retain good labour was forced into a position where they would have to up the ante and the cycle would repeat.

But now - in what may be one of the final breaking points between crony capitalism and outright feudalism and usury - the government is working to ensure that the labour market remains an "employer's market", perpetually, forever and who better to examine as an example than Alberta's newest industry insider masquerading as a public servant, Jim Prentice.

So a few weeks ago Norwegian oil company Statoil called off one of it's Canadian startups for three years citing:
Statoil said it decided to delay construction because inflation was pushing up the cost of labor and materials, while tight pipeline space to the U.S. market was pushing down the price of its oil.  
"Costs for labor and materials have continued to rise in recent years and are working against the economics of new projects," Staale Tungesvik, Statoil's country manager for Canada, said in a statement. "Market access issues also play a role, including limited pipeline access, which weighs on prices for Alberta oil, squeezing margins and making it difficult for sustainable financial returns."
 Inflation? Hmm. Yet the governments and central banks all around the world have been insisting that "inflation is weak". Perhaps not *that* weak, it would seem. Take note of the problem here, it's not "market access" as Alberta has been claiming, these problems do not exist because of limited market access and up until recently limited market access hasn't been an issue. Market access was never a problem or was never even mentioned during the era of the "Alberta Advantage". No, market access is actually being promoted as a supposed solution for a different problem: Rising inflation which is pushing up material costs, labour costs, and isn't seeing a similar rise in the price of oil. That is the real problem here and the hope (and I can't stress that enough, that it is a hope without any data provided to prove that the claim is true) is that increased market access will increase the price Alberta receives for bitumen (which is not oil). Also take note Alberta was warned about this situation of increasing costs years ago and I've been warning about it longer.

When it comes to oilsands, and the economy in general which by the way is still on central banker life support with cheap currency pushing up inflation even more, this all derives from the real problem were facing as a society: energy is a fuck load more expensive than it used to be. Ok? Like, so many tons of fuck it's nearly unquantifiable especially in an economic environment which has not adjusted to nor has accounted for higher energy prices, and continues to bury it's head in the sand thinking if we just print a little more currency everything will be like it was when energy was cheap, it won't! We've gone from what used to be well over a 100:1 energy invested on energy returned ratio to what is now regularly around 5:1 (3:1 for oilsands surface mining, yippee!)

So, back to this Statoil thing.. Jim Prentice is very concerned.
"Underlying the kinds of capital investment that are being made in the oilsands is the needed assurance that we can access global prices," said Prentice. "If we cannot and people do not have a line of sight on infrastructure and tidewater access, it's going to start to affect our prosperity as a province."

Last year, Statoil president Stale Tungesvik said the company
might have to choose between developing projects in the Alberta oilsands and the offshore sites near Newfoundland due to the industry's rising cost.

The costs of oilsands projects are rising because of construction and labour costs, while the price of oil is
20 per cent lower than it was six months ago, making large investments less viable.
See what he did there? He didn't address the problem at all in his solution did he? remember back when oil was $40 / barrel and Alberta upped it's target price to $70? Then when we finally hit $70 it just wasn't enough either so the target was pushed up to $90? and so on? Alberta has always had this problem of the cost of production approaching returns and when that happens alberta always has a new excuse ready to go. When the price of oil still had upwards mobility that was a lot easier to accomplish, but now that it doesn't "access to global prices" has become the new tune. So when the cost of production due to ever rising inflation then approaches "global prices" what will be the next excuse? We need access to Martian markets? Universal prices? No, probably not.. Alberta's public relations is shitty, but not that shitty, but rest assured there will be a new excuse why the province's prosperity on the end of the stick keeps moving further and further away.

However, Prentice may be concerned, but he's also very excited for Alberta's "red hot economy" (you know, red hot as in project shutdowns are becoming a regular thing as the Alberta government was warned they would be).
Alberta Premier Jim Prentice says time is becoming a critical factor in solving the temporary foreign worker shortage, but he dismissed criticism that an exploitative province is to blame.

“I’ve never agreed with the suggestion that really this is about Alberta business people trying to underpay. That is not my experience. That’s not what I’ve heard. That’s not what I’ve seen,” Prentice said in an interview.

“To be sure, there are always going to be people taking advantage of any government program.

“But by and large the employers I’ve met across Alberta just want hands and feet. They just want people to fulfil these jobs.

“They’re quite prepared in most of the cases I’ve seen to pay a premium to get people here. They just can’t find people given the red hot economy.”

Prentice plans soon to meet with Prime Minister Stephen Harper to discuss, among other issues, the temporary foreign worker changes that he says have hit Alberta’s roaring economy hard.
So on one hand you have Prentice concerned about project shutdowns that are directly related to "the rising cost of labour" and on the other you have Prentice claiming that Alberta's need for TFWs has nothing to do with employer's wanting to "underpay" employees, in fact they're willing to pay a premium! Bullshit. Companies are laying people off left, right, and center. Projects are shutting down one after the other. And all of them.. ALL OF THEM, cite rising labour costs as the reason which is the same reason provided to the Albertan government in the confidential memo back in 2012 that warned that projects would be shutting down due to inflation and the rising costs of labour. Hmm.

If the demand for labour is so high, then what the government is citing as a problem is the fact that the labour market is an "employee's market" and not an "employer's market", but why is this a problem? It's a problem because "growth" or what we now like to claim is growth has been completely financed by cheap loans and free currency to the top 1% but real consumer spending isn't moving. That's why the price of oil just can't manage to breach $110 / barrel and why when the market tries to "growth stalls" and the cycle repeats. We have ever increasing amounts of currency representing the same or perhaps even less wealth. You can cut a pie into 2 pieces, or 100 pieces, but at the end of the day you still have just 1 pie.

The government's focus on the "need" for temporary foreign workers is to perpetually tilt the market in favour of the employer's filling their pockets. An "employee's market" no more, and the changes to employment insurance and the government's "any job is a good job" attitude reflect that. This is deliberate, and orchestrated in an attempt to permanently stagnate the wages of Canadians to continue the status-quo and the illusion of growth. Sure, you might not believe me, but what I ask you is: can you really afford to find out?

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.