Floods

Vermont has taken a beating. The heavy rains from tropical storm Irene overloaded rivers and streams all across the state. Anyone reading this from within Vermont already knows the details, or is perhaps living the details. We’ve lost at least three people to the water. Eleven towns are essentially cut off from the world by washed out roads. We’ve lost a few bridges, including one covered bridge built in 1870, swept away like a handful of sticks. Roads are closed all over the state and a number of downtowns are wrecked. Twenty thousand homes and businesses are still without power.

It’s going to be days or even weeks before all the electrical lines get repaired. Some line crews were stranded by the flooding and had to stay with the families they were reconnecting. Some roads aren’t damaged as much as they are just missing. People are using the old cliché, “You can’t get there from here,” with a new tone of voice. The fresh pavement is still visible from the repairs to the damage from the floods in May.

Vermont is set up for this kind of disaster. I’ve always said that around here you can find your way back to town by always turning downhill. Our forebears located town centers down in the river valleys where there was flat land and water power. Many roads in our steep terrain parallel streams and rivers.

As the state rebuilds, we should plan for more of this. The climate models scientists use to analyze the progress of climate change indicate that the northeastern U.S. will see warmer and wetter weather. They predict that the Atlantic Ocean will produce more and larger hurricanes.

Part of our preparation should be the recognition that so-called 500 year floods will show up more often than every 500 years. This means redefining flood zones and building codes. We need to redesign our infrastructure for a new relationship with flowing water. In some places this means building things stronger. In other places it means building vital structures elsewhere. In an absurd development, Vermont’s emergency management center had to be moved out of Waterbury because of flooding. Siting the center in an area susceptible to flooding seems to have been a slight oversight.

The hard part will be, in some cases, accepting that nature is stronger than we are and yielding. Some parts of Vermont may not be viable for human habitation in the future. If a piece of land is going to be neck deep in rushing water every couple of years, then it makes no sense to keep rebuilding. This yielding will also manifest itself in new patterns of agriculture. Wetter springs can mean later planting or changing crops.

Your Minor Heretic is growing a microscopic crop of cold-hardy rice this year. I have just two 4’x8’ paddies, but a wheat farmer in Ferrisburg is hoping to produce 4,000 pounds on a perennially soggy and formerly useless field. A friend of mine who grows organic produce is building more greenhouses, both to control water inputs and to extend his growing season year round. These are small beginnings, but they point in a direction.

Out in the Atlantic, at latitude 12 degrees north, longitude 33 degrees west, Tropical Depression 12 just became Hurricane Katia. The computer models show it heading just north of Haiti and Cuba and becoming a Category 3 storm by Sunday afternoon. It is still far too early to accurately predict the path, but most of the ensemble models show Katia hooking northwards and sweeping up the east coast. We can hope that Katia stays well off the coast, but we need to be ready for even more rain, next week and in years to come.

China and the rule of 70

There is a rule of thumb in finance. If you want to know how long it will take for an investment to double, divide 70 by the annual percentage increase and you’ll get the number of years it will take. This will get you within a few months of accuracy. It works for any other number as well – population growth, or the growth of an economy.

China’s Gross Domestic Product has been growing at a rate of between eight and thirteen percent for the past couple of decades. It averages around ten percent. The math works out, since it has been faithfully doubling every seven years or so.

Here’s a chart I copped from Paul Kedrosky of China’s present share of world commodity resources.

 

 (Click to enlarge)

Try to imagine the year 2018, when China (theoretically) will be using 6.4% more than all the concrete that the world now produces, essentially all the iron ore now produced, plus 90% of all the coal, steel, and lead produced today. Add to that roughly three quarters of the present production of zinc, aluminum, copper, and nickel. I think I’m going to have to knock back a shot of Scotch to imagine that freely.

As vital as these commodities are, consider that China, if it continues on its present growth trend, will use 20% of the world’s oil, a number approaching our own. Try to imagine that with growth in oil production stagnant, despite a geometric growth in spending on oil exploration. That extra 10% will have to come out of everybody else’s share.

Short answer: it can’t happen. None of these commodities are on a trajectory to double in seven years. China would have to take demand shares away from other countries, which would quickly become self defeating as the economies of customer nations would suffer. Commodity prices would soar, driving down consumption.

Take one commodity, lead, as an example. It is vital for storage batteries and electronics. World lead production has been essentially flat since 1976. It hit 3.69 million metric tons in that year and didn’t reach that level again till 2007. It’s not going to obligingly rise to 7.4 million tons per year just because China needs it.

World zinc production has doubled – since 1971. It’s not quite keeping up with the seven-year plan. Aluminum production has been doubling on the 20-year plan and copper around 23 years.

World iron ore production has actually doubled in the past seven years or so. At the same time, the price per ton has gone from below $20 to above $170. Could production double again in the next seven years? I’m doubtful, and I wonder what price we will be paying at that time. Let’s say it does.

How will the Chinese mine and process iron ore minus the lead, zinc, copper, and aluminum needed for the motors, transformers, cables, and electronics of the production infrastructure? The production of any one of these commodities depends on the production of many others. The products that China sells to the world are mostly combinations of multiple commodities. What is the probability of all of these commodities doubling production on schedule? If they don’t, will the prices be doubling, and what will that do to demand for Chinese made goods? And what about that demand? As we slog through the beginning of our lost decade, Europe scrabbles at the cliff-edge of currency collapse. It isn’t a promising growth market.

A couple of decades ago the Chinese government cut a tacit deal with its people. Ditch the pursuit of democracy in exchange for prosperity. So far, they have delivered. Chinese GDP per capita has gone from around $200 in the early 1980s to over $3,500 today. It isn’t evenly distributed, but China does have an emerging middle class and some opportunities for the poor to get ahead, however unsatisfactory by our standards. I can’t see the opportunities keeping up with expectations over the next seven years. Even if the Chinese turn their focus away from exports and towards their own infrastructure and internal consumption they will still require those absurd increases in material supplies to fuel their present rate of growth.

If I were a member of the Chinese political elite I’d be planning my exit strategy right now.

A Quick Shot of Debt Perspective

I was just reading an excellent article by Dean Baker on the national debt and saw something that should be shouted from the rooftops.

"How about that $14.3tn figure for the debt ceiling? That's a really big number, really scary. So is just about every number connected with the United States budget. We are a huge country with a huge economy. Competent reporters would focus on this being about 90% of US GDP.

Is that big? Well, the debt to GDP ratio was over 110% after the second world war. The United Kingdom had debt to GDP ratios of more than 100% for much of the 19th century, as it was establishing itself as the world's pre-eminent industrial power. Japan has a debt to GDP ratio of more than 220% of GDP and can still borrow in financial markets long-term at interest rates of less than 1.5%."

So the U.S. is in the position of someone with an income of $100,000 a year and a $90,000 mortgage. Not so scary now, is it?

Baker accuses the news media of malpractice for ginning up the panic on this, and he's right. Calm down, increase the debt ceiling, and let's get on with things.

Obama and the Blazing Saddles Strategy

Do you remember that scene in Blazing Saddles where the new black sheriff (Cleavon Little) is surrounded by the angry white townspeople? He puts his gun to his own head and says, “Nobody move or the n----r gets it!” The idiot townspeople drop their guns and the sheriff leads himself away at gunpoint to safety. (Clip below for benighted souls who have never seen the movie)

Well, it worked in the movies. President Obama is doing essentially the same thing in the debt limit debate, except that the Republicans are ok with him pulling the trigger.

Politically speaking, the sitting president owns the economy. The president gets reelected (or not) on the state of the economy. If Congress doesn’t raise the debt limit and the government defaults, a cascade of economic failure will follow. Our ability to borrow will be damaged for the foreseeable future and interest rates will rise. Rising interest rates will raise the cost of everything, dragging our economy down and raising unemployment. Government workers will get laid off or furloughed, raising unemployment even more. It goes on, but I’ll stop there. The end result in political terms is a tougher reelection fight for Obama and Democrats in general.

You’d think that this level of cruelty and cynicism would be beyond even the most callous and ideologically driven Republicans. You’d be wrong. There is a sizable group in the GOP that would rather see our economy fail than Obama succeed. The President is throwing the Republicans every bargaining chip he has, and with each one they say “more.” They are giving him nothing because they don’t have to. So what can he do?

With a Republican majority in the House and a filibuster-vulnerable majority in the Senate he can’t do much legislatively. That leaves the executive and judicial options.

He can pursue the 14^th Amendment option. Section 4 states, in part, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Defaulting on our debt is unconstitutional. Hence, the debt limit that congress is debating so vigorously can’t actually be enforced without violating the 14^th Amendment. Legal scholars can debate this, and they will, but it gives the President the option of calling the game on the debt limit. That leaves the Republicans with no hostage to kill.

He could also try a peripheral move that would partially solve the problem and distract the GOP from their present focus. I’ve written about the $70 billion or so that we lose in tax revenue each year to millionaire tax cheats offshoring their income. Obama could call a press conference with Attorney General Holder and some IRS officials at his side and announce the formation of a special task force to track down these wealthy cheats, extract the money they owe, and pitch them in jail. That would lower the deficit while striking at the heart of the GOP funding base. He could even offer a kind of amnesty. If the cheaters in question offer themselves up for audit voluntarily before the end of the year and pay what they owe (plus penalties and interest), then they won’t get prosecuted and imprisoned.

Likewise, he could propose a law to change the way certain intellectual property assets are valued when a corporation licenses them to a subsidiary. That sounds wonkish and abstract, but what it means is that a company such as Google rents its special search software to its subsidiary in Ireland for a fraction of the realistic price. Google pays U.S. taxes on the tiny amount it gets and shunts the foreign profits through the Netherlands to Bermuda, and thence to the shareholders’ pockets. Making companies charge their foreign subsidiaries market-rate licensing fees would add another $90 billion a year to tax revenues. The Republicans can, and will, come up with some bizarre rationalization as to why this is a bad idea, but it will at least shift blame to them.

No new taxes so far, just enforcing the law and closing a stupid loophole, and we’re up $160 billion annually.

How about those multi-million dollar executive salaries? Remember, every million dollars in salary and bonus that a company pays an executive is 20 median wage jobs going in one man’s pocket. Did you know that these mega-salaries are deductible for the company? Here’s a one-two punch: Make any salary/bonus/perk combination over five times median wage non-deductible. Anything over $250k stays on the company’s taxable side. That bumps up tax revenue and discourages that giant sucking sound of executive compensation bloat. Bill Clinton tentatively floated this and got screamed at by the CEO crowd.

Meanwhile, add a buck to the federal minimum wage. Most major corporations are sitting on cash, cash they won’t spend on expansion or hiring because they see no demand. 72 million Americans make hourly wage. Only about 3.6 million actually make the minimum, but an increase in the minimum tends to raise the bar for everyone. An extra buck an hour would mean they would gross $2,000 more each year, most of which they would take home and spend. It would end up as an annual $125 billion (roughly, after taxes) demand for goods and services. Demand and spending raises both employment and tax revenue. Again, CEOs will scream and the GOP will wail, but ordinary Americans will say, “Yeah, I could use $2,000.” Conservatives will say that increased wages will cause increased unemployment. Peer reviewed studies (as opposed to Wall Street Journal editorials) show a slight boost in employment for states that raise the minimum. Even if we call the employment question a wash, the net effect in terms of consumer spending and quality of life is positive.

I’m just fantasizing here. Barack Obama needs the approval of millionaires to raise the money for his reelection campaign. They would never allow this kind of thing. This is the hair tearing part of it: Obama doesn’t really care that he has no leverage with the Republicans. He’s cool with giving away everything. He’s looking at the GOP lineup for 2012 and seeing halfway rational people like Mitt Romney who have no chance with Republican primary voters and head cases like Michelle Bachmann who have no chance in the general election. Anyone to the left of Newt Gingrich will hold their noses, vote for him, and then go get drunk.

In terms of the Blazing Saddles metaphor, Obama is telling the mob “Ok, you got me.” He’s handing his badge and gun to the mayor and going to work for the banker. Don’t expect better.

Here’s the Blazing Saddles clip.

Galen, Darwin, and P.T. Barnum

My friends would tell you that the Minor Heretic is an easygoing guy. Rarely does anything make me pound my fist on the table and utter a sharp Anglo Saxon verb. Something I saw in the paper did just that the other day.

First, I should lay some historical groundwork. The Greeks, around 400 BCE, adopted a view of human health based on the theory of four humors, which in turn was based on the four elements of ancient physics. The elements were earth, air, fire, and water, and the humors were blood, black bile, yellow bile, and phlegm. By this theory, disease was caused by an imbalance in these humors. An attempt at restoring this balance constituted medicine as it was known, and consisted of bleeding, purging, or sweating the patient, until death or recovery.

A Roman of Greek extraction named Galen (b. 129 CE, d. ~217) popularized this method in his writings. His work was preserved and disseminated by scholars of the Byzantine Empire, and physicians merrily bled and purged according to his system, filling graves till the mid-19^th century. Like a gambler attributing his occasional wins to the efficacy of his lucky rabbit’s foot, a fifth or tenth or seventeenth century physician thought that Galen had shown the one path to human health.

Of course, it was all a crock. Patients of antiquity survived despite the ignorant cruelties of their doctors. It’s a wonder anyone did. Some unfortunate medieval burgher already struggling with influenza, malaria, or cholera would be fed emetics or laxatives, burned with heated metal cups, or have a vein cut and a pint or two drained off.

The practice didn’t let up until the beginnings of modern medicine appeared in the mid 19^th century.

Imagine my dismay when I came across a calendar listing in a local paper advertising a workshop in “Traditional Bleeding and Cupping, Module III” Some quack by the name of Julia Graves has the temerity to charge money for instruction in self mutilation and semi-suicide. Just to add to the hair-tearing aggravation of it, she tagged it with “Module III,” as if it were part of a legitimate course of medical study. The kitchen table in the Minor Heretic household received a minute of serious abuse.

I am trying to imagine who actually signed up for this. I am assuming that P.T. Barnum was correct, that there really is a sucker born every minute, and that some gullible wretches showed up, forked over real money, and offered up their veins to the knife.

I should note that the practice of cupping often involves soaking a small piece of cloth in flammable liquid, placing the cloth in a metal or glass cup, igniting it, and then placing the cup against the victim’s skin. The flaming cloth is thereby doused and the resulting vacuum sucks out a bump of skin. In Galenic theory this extracts some humor or another. In reality it just creates circular burns.

It staggers me that people living in 21^st century America, whatever their religious or political beliefs, could be so ignorant of the basic-below-basic foundations of human biology. We learned things in junior high school that blew this out of the water. Junior high? Hell, elementary school. And yet there are dimwits out there who will consider pre-medieval torture a plausible alternative to medical treatment.

I was talking (ok, ranting) about this with my neighbor, and he suggested that there is a knowledge elite in this country. Information about the physical world is all around us for the taking, essentially free. Only a small percentage of us are paying attention to it, absorbing it, processing it, and acting on it. Many people are just skating along on the minimum information necessary to do their jobs and get through the rituals of daily life.

When confronted with something outside their normal range of experience, these people have no tools for analyzing the truth or falsehood of claims. Armed only with emotion (an instinctive distrust of profit driven corporate medicine?) they think, “’Traditional’ feels good, and ‘Module III’ sounds official,” and expose their throats to the butcher.

And yet, a trip to the emergency room will save them. Natural selection has been blunted by the Trauma Center. Modern medicine, for all its faults, is at its best when confronting the results of abject human stupidity. Reckless drivers, YouTube stunt artists, careless gun owners, and neo-medieval self-medicators will mostly get reassembled and sent off to breed. Critical thinking and impulse control are both made irrelevant by QuickClot bandages, fine suturing, and a ready supply of blood plasma.

I am hoping that the VT Department of Health and/or the Attorney General’s office catch up with Ms. Graves and shut her down. She certainly doesn’t have to worry about a skeptical and informed populace.

For those of you who want further information on medieval medicine, I refer you to the third season of Saturday Night live and a performance by Steve Martin.