Transportation: How long can we adapt before we fall off the Net Energy Cliff?

24 08 2017

This is an older post (2014) from Alice Friedemann’s blog, which somehow flew under the radar……. There is one bullet point in this that stunned me:

  1. America is likely to be outbid by China, India, etc., for oil exports.  At China’s current growth rate, China alone would consume ALL exported oil by 2020.

IF you have been following this humble blog long enough, you might know that I’ve been ‘forecasting’ that Australia will be totally out of oil by around 2020, and will therefore need to import 100% of our liquid fuel needs…….  what happens then?

When I asked Alice for more details, she replied “I suspect when I wrote this it was common knowledge, they’re rising empires as other nation fade. But now with China’s housing and other bubbles, and the corruption in both China and India, and ecological destruction, it’s probably not true now. I’ve met Australians who fear a China invasion someday but don’t know how realistic that is.”

Furthermore, as China’s spectacular growth rates have somewhat shrunk, we may get a few more years relief…. but how long will it last? Here’s Alice’s post, very interesting as usual….

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alice_friedemannThe problem we face is a liquid fuel crisis.  Absolutely essential vehicles, such as agricultural tractors and combines, railroads, and trucks run on diesel fuel, ships on bunker fuel.  They can never be battery or fuel-cell operated or electrified, nor do we have the decades it would take to build a new fleet even if there were a solution.

In 2011, the United States burned 29021 trillion BTU’s of mainly petroleum for transportation to move 13 billion tons of freight, worth $11.8 trillion, for 3.5 trillion ton-miles:

  • Trucks: 69%  1.4 trillion miles  9.0 billion tons
  • Trains: 15%   1.3 trillion miles  1.9 billion tons
  • Ships:   3%

Non-essential Transportation Fuel can be given to Trucks & Trains (see Table 1 below)

1) Cars (28%) and light trucks (26%) use 55% of transportation fuel.  All of that 55% could be shifted to essential vehicles.  Implication: That would force anyone who wasn’t 100% self-sufficient to move to a town or city because country gas stations will be closed (though rural freeway stations would remain open for essential long-distance trucks).  Also, petroleum will mainly be refined into diesel (this is already happening actually), which gasoline cars can’t burn.

2) Let’s give most of this fuel to essential vehicles: 7% air travel, 1% recreational water boats, 3% Construction and Mining, 1% recreational vehicles (snowmobiles, etc).  That’s another 11% shifted to essential vehicles (leaving 1% for the above, mainly to maintain and fix infrastructure).

3) Essential vehicles: 20% Medium (class 3-6) and Heavy trucks (class 7-8), 4% ships, 2% rail freight, 3% pipelines, 2% agricultural.  A lot of this freight isn’t essential, so about half of this, 15%, can be saved by not shipping non-essential cargo and shipping essential goods shorter distances.

Essential transportation has been given 81% of diesel from other non-essential sources (55% + 11% + 15%).

Meanwhile, production of oil will be dropping off rapidly, because:

  1. Global peak oil production was reached in 2005
  2. Oil producing countries will export less because they’re using more oil themselves (ELM model)
  3. America is likely to be outbid by China, India, etc., for oil exports.  At China’s current growth rate, China alone would consume ALL exported oil by 2020.
  4. The net energy cliff and the decline in the RATE of what we can get out of the ground now that petroleum is gunky and in remote places.
  5. The financial system can interfere with oil production —  when credit dries up after the next financial crash, the money to drill won’t be available.

Optimistic scenario: 20 years before we hit the wall 

The likely decline rate is expected to accelerate. We’ve been on a plateau since 2005, but once production heads downhill, here’s a guess at what the decline rate might be per year: 4%, 5%, 6%, 7%, 8%, 9%, and 10% from then on.

But not to worry, we’ve got some wiggle room. Remember, of the grand total of 29021 trillion BTU’s of petroleum burned in America (Table 1 below), 81% was reassigned from non-essential vehicles and cargo to essential agriculture, railroads, trucks, industrial infrastructure equipment, and miscellaneous important vehicles (ambulances, police cars, military, etc).

The other 19% — 5,541 trillion BTU — is the rock-bottom amount we need to  keep society going.

With a 4/5/6/7/8/9/10/10 /10/….. decline rate scenario, we’ll dip below the essential transportation fuel needed 16 years from now.

Of course, we can import/export less cargo, grow food locally, stop immigration, encourage 1-child families, ship goods shorter distances, and many other oil-reducing strategies as well.  This is when techno-optimists have a chance to shine, and Postcarbon, Bay Localize, Transition Towns, and many other groups help governments and communities adapt.  If all goes well, panic is avoided, and diesel fuel can be stretched out even further, that could delay collapse another 4 years.

Pessimistic scenario: 1-12 years before we hit the wall

What if states that produce energy and/or have refineries stop sharing diesel and gasoline with other states at some point? In that case, Alaska, California, Texas, Louisiana, etc., might last longer than 20 years and other states would hit the wall sooner.

Also, there are many black swans.  Here’s some wild guesses about how soon collapse might come if one of them strikes:

1 year if there’s a small nuclear war, China or some other nation takes down America’s electric grid(s) in a cyberwar, or a world war erupts.

2-5 years if there’s a major disaster, because that will probably bring down the financial system and also drive up prices of oil, natural gas, electricity, wood, cement, steel, and other resources needed to recover with.

3-8 years if the financial system collapses and several other events are triggered, such as social chaos, no credit left for new oil wells to be drilled, and other knock-on effects.

5 years if nations go back to negotiating deals between producing and non-producing nations and bypass the international oil market. That could suddenly cut off America’s oil imports. We’re already seeing this with the historic deal Russia and China just cut for natural gas. China, India, and other countries can afford to pay more than the United States for oil. Other nations are far closer to Russia and OPEC nations, where 83% of world reserves lie.

8-10 years if America decides to go back to the Middle east to keep other nations from getting the 2/3 of oil reserves there. Our military can’t fight without oil, so that means a lot less for everyone else

Okay. I’m going to stop guessing.  I have no idea how much sooner collapse would occur given various events, or what the actual decline rates will be.  But here are a few more black swans to think about:

  • Oil shocks make investors “Peak Oil Aware” and world-wide stock markets crash
  • Decline rates even higher than posited above due to a combination of the Export Land Model and middle eastern countries having lied about how much oil reserves they had.
  • Oil choke-points are blocked by terrorists or nearby nations
  • War breaks out in the Middle East
  • Peak coal, peak natural gas, peak uranium, peak sand, peak water, peak topsoil, peak phosphorous, etc
  • Electric grid outages increasingly common
  • Our infrastructure is falling apart, many bridges are beyond their life-span or dangerously in need of repair, ports, energy pipelines, water treatment, sewage treatment, and other essential infrastructure has a life-span less than 50 years. The steel is rusting and the concrete is falling apart.

So, what do you think?

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Crisis? Which crisis are we actually talking about…?

16 03 2017

Since writing about the perceived ‘crisis’ in Australia’s gas supplies, the amount of bullshit coming out of the media, not least social media, is bewildering…… Some of it is downright amusing, and most of it would be really funny, were it not so tragic.

There is so much disinformation out there, it’s hard to even know where to start. The Lock the Gate Alliance fell right into the fossil fuel industry trap with this ridiculous youtube video….

The last thing you need to do if you want to stop the fracking fiasco is to tell everyone there is a shortage of gas… because how do you deal with a shortage? You frack for more..! Especially when there is no shortage and Australia is swimming in gas.

There are no winners in this. The gas companies are forced to sell gas cheaply to Japan and South Korea, neither of which have any energy resources of their own. Australia is the second largest gas exporter after Qatar, and will overtake it within a few years. We export to the nations with the highest demand too. Japan alone, which imports 34% of the world’s gas, so desperate are they for the stuff, could take all our gas, were it not for the fact other arrangements are already in place. Ironically, we sell our gas there so cheaply, it beggars belief. Worse…Qatar raises three times as much in royalties as Australia for selling  the same amount of gas. You can blame John Howard for this….. he didn’t believe in peak energy all those years ago when the contracts were signed, and literally forced the hands of the companies to agree to stupid prices which they are now unable to get out of. Unless the government steps in again.

It borders on the ridiculous that Japanese gas customers buy Australian gas more cheaply than Australians, especially as the gas is drilled in the Bass Strait, piped to Queensland, turned into liquid and shipped 6,700 kilometres to Japan … but the Japanese still pay less than Victorians. And I’m reliably informed that piping the gas from Victoria to Queensland costs ten times as much as moving oil…… imagine the ERoEI of doing this..?

Notwithstanding Alan Kohler announcing on ABC news the other night that the era of cheap energy was over (yes, he actually said this… nearly fell of my chair…), energy is not dear. Remember this video? If people were paid for their labour energy at the same rate as fossil fuels, they would be paid SIX CENTS AN HOUR…… that sounds so dreadfully expensive….

While AGL was earnestly talking up gas shortages in 2014, BHP Petroleum chief Mike Yeager told journalists:

We want to make sure that the market knows that the Bass Strait field still has a large amount of gas that’s undeveloped … We have a lot of gas in eastern Australia that’s available. It’s more important to let the citizens of Victoria and New South Wales, and to some degree, you know, even Queensland … there’s plenty of gas to supply those provinces for – you know, indefinitely.

AGL later quietly issued a release to the ASX conceding it had plenty of gas supply. So there you go, it has nothing to do with those greenies locking their gates up after all….

Even the Guardian is at it…..:

Gas prices have doubled and in some cases tripled because gas suppliers are now capable of exporting our gas to high paying customers in Asia.

Like whom exactly…?

And…

Complicating matters is that gas suppliers rushed in to sign export contracts and then subsequently found they didn’t have enough gas to fulfill them. This has left the Australian domestic market very short of gas.

For pity’s sake, where do these people get their information from…?

Australia swimming in gas

Now, keeping all our gas to ourselves gets complicated here, and I hope I get this right, as this whole issue is really starting to make my head spin. It turns out, much of the money invested in the gas export system was actually borrowed from Japan. Ever heard of the yen carry trade? It is when investors borrow yen at a low interest rate, then exchange it for U.S. dollars or any other currency in a country that pays a higher interest rate on its bonds. Like Australia does. So if we decide to tell the Japanese to get stuffed, their banks may well want their money back, at which stage the brown stuff hits the fan…… Does our merchant banker PM know this I wonder……?

Luckily for us, last September, Japan’s energy minister informed the world that imports of LNG would continue falling. They fell by 4.7% in 2015 and another 2% in 2016 amid a rising commitment to renewables and the rebooting of nuclear reactors that were shut down after the Fukushima disaster……

Meanwhile, they are all panicking here in Australia trying to keep our ‘energy security’ intact by building batteries and a new gas powered station in SA, and pumped hydro energy storage in NSW at a cost of some three billion dollars. All made with fossil fuels of course, because there’s nothing like them… Most of the benefits will be swamped by population growth within less than a decade……

Because dear reader, the crisis is not a gas crisis, it’s a growth crisis, and it’s all coming to a head. But you already knew that, and we all know nobody will do a thing about it.





Is Australia’s energy crisis starting…..?

9 03 2017

This morning on the news, we were woken up to the fact we could be facing gas shortages in Australia. And because more and more electricity is generated with this fuel (Tasmania and South Australia immediately come to mind), the repercussions could be electricity rationing, as well as gas for heating and cooking.

An assessment from the Australian Energy Market Operator (AEMO) is warning that, without a swift response, Australia could face a difficult choice — keeping the power on versus cutting gas supplies to residential and business customers.

“If we do nothing, we’re going to see shortfalls in gas, we’re going to see shortfalls in electricity,” AEMO chief operating officer Mike Cleary said.

The analysis said without new development to support more gas-powered electricity generation, modelling showed supply shortfalls of between 80 gigawatt hours and 363 gigawatt hours could be expected from summer 2018/19 until 2020/21.

It’s not like we weren’t warned……  I wrote about this almost three years ago…. at the time, I quoted Matt Mushalik…: “In July 2006 then Prime Minister Howard declared Australia an energy super power. Two years earlier his energy white paper set the framework for unlimited gas exports while neglecting to set aside gas for domestic use”

Bloomberg agrees…..

Australia, the world’s second-largest exporter of liquefied natural gas, needs to remove road blocks to gas exploration on the east coast that Prime Minister Malcolm Turnbull blames for a looming domestic supply crisis.

“We are facing an energy crisis in Australia because of this restriction of gas,” Turnbull told a business conference in Sydney on Thursday. “Gas reserves or gas resources are not the issue. The biggest problem at the moment is the political opposition from state governments to it being exploited.”

Hang on a minute…… if we are indeed the world’s second biggest gas exporter, why do we need more exploration (code for really dirty coal seam gas)..? And if we are exporting so much gas, why can’t we cut down on the exports, and keep some for ourselves?

I smell a rat…….

According to Bloomberg again……

Origin Energy Ltd, Australia’s largest electricity company, on Tuesday said Queensland gas intended for LNG exports to Asia may be diverted to ease an expected supply shortfall this winter.

So there’s no problem then…?

Royal Dutch Shell Plc, owner of the $20 billion Queensland Curtis LNG development, said in an emailed statement that its QGC Ltd. subsidiary will continue to make gas available “where we have the capacity to do so.”

gas burning.So there’s capacity for export but not for domestic use…. and the hogwash continues at full speed with more statements like “Energy security has come under scrutiny since a state-wide blackout in September hit South Australia, the mainland state most reliant on renewable energy generation. Turnbull’s conservative leaning government called the state “utterly complacent” due to its over reliance on renewable energy following a partial blackout in February, whilst later attacking other left-leaning state governments for similar ambitions.” Oh I get it now…..  it’s the renewables’ fault that we are short on gas. And what on Earth is a left leaning state? You mean like Queensland’s ALP government going full steam ahead to support Adani’s project for the world’s largest coal mine..?

Give me a break Malcolm….  this is all your greedy lot’s fault, you damn well know you can get more money for gas overseas than we are willing (or able) to pay for it locally.

Do the morons in charge really think we are all dills who can’t see through all their propaganda?   “Economics and engineering, they should be the two load stars of our national energy policy,” Turnbull said. “We’ve got to get the ideology and the politics out of it.”  YOU first Malcolm….. you’re not interested in Australia’s energy security, you just want to kow-tow to the right wing nuts in your party, and maximise your mates’ profits…..

Consumer groups are saying it’s too early to advise people whether to switch away from gas, despite the forecast by the Australian Energy Market Operator of a looming shortage on the country’s east coast. Energy Consumers Australia (ECA) said householders should instead research the most competitive offers available from across the range of energy providers. I think consumers should look at alternative technologies myself. While I constantly discredit solar PV on this blog, the most sustainable form of solar power, solar water heating, is struggling to make inroads these days.

Some of the advice is simply ludicrous…. as if LED lights will save you from an energy crisis (let’s call a spade a spade here..) and “The main use of gas is in central heating and hot water, so if you’re building a new house think about reverse cycle air-conditioning or heat pumps” Mr Stock said.  But but…….  Mr Stock, do you realise it’s possible to build houses that actually do NOT need any heating and cooling?

And people wonder why I think we’ll be rooned…….. my wood fired AGA‘s looking pretty good right now.





Negative Interest Rates and the War on Cash (2)

6 09 2016

Raul is keeping Nicole Foss’ articles coming thick and fast, with this second part of the four part series published today on the Automatic Earth…… part 1 is here……

I find the looming war on cash rather worrisome myself…. a financial crisis happening right now would really put a spanner in my plans!

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Closing the Escape Routes

nicolefoss

Nicole Foss

History teaches us that central authorities dislike escape routes, at least for the majority, and are therefore prone to closing them, so that control of a limited money supply can remain in the hands of the very few. In the 1930s, gold was the escape route, so gold was confiscated. As Alan Greenspan wrote in 1966:

In the absence of the gold standard, there is no way to protect savings from confiscation through monetary inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.

The existence of escape routes for capital preservation undermines the viability of the banking system, which is already over-extended, over-leveraged and extremely fragile. This time cash serves that role:

Ironically, though the paper money standard that replaced the gold standard was originally meant to empower governments, it now seems that paper money is perceived as an obstacle to unlimited government power….While paper money isn’t as big impediment to government power as the gold standard was, it is nevertheless an impediment compared to a society with only electronic money. Because of this, the more ardent statists favor the abolition of paper money and a monetary system with only electronic money and electronic payments.

We can therefore expect cash to be increasingly disparaged in order to justify its intended elimination:

Every day, a situation that requires the use of physical cash, feels more and more like an anachronism. It’s like having to listen to music on a CD. John Maynard Keynes famously referred to gold (well, the gold standard specifically) as a “barbarous relic.” Well the new barbarous relic is physical cash. Like gold, cash is physical money. Like gold, cash is still fetishized. And like gold, cash is a costly drain on the economy. A study done at Tufts in 2013 estimated that cash costs the economy $200 billion. Their study included the nugget that consumers spend, on average, 28 minutes per month just traveling to the point where they obtain cash (ATM, etc.). But this is just first-order problem with cash. The real problem, which economists are starting to recognize, is that paper cash is an impediment to effective monetary policy, and therefore economic growth.

Holding cash is not risk free, but cash is nevertheless king in a period of deflation:

Conventional wisdom is that interest rates earned on investments are never less than zero because investors could alternatively hold currency. Yet currency is not costless to hold: It is subject to theft and physical destruction, is expensive to safeguard in large amounts, is difficult to use for large and remote transactions, and, in large quantities, may be monitored by governments.

The acknowledged risks of holding cash are understood and can be managed personally, whereas the substantial risk associated with a systemic banking crisis are entirely outside the control of ordinary depositors. The bank bail-in (rescuing the bank with the depositors’ funds) in Cyprus in early 2013 was a warning sign, to those who were paying attention, that holding money in a bank is not necessarily safe. The capital controls put in place in other locations, for instance Greece, also underline that cash in a bank may not be accessible when needed.

The majority of the developed world either already has, or is introducing, legislation to require depositor bail-ins in the event of bank failures, rather than taxpayer bailouts, in preparation for many more Cyprus-type events, but on a very much larger scale. People are waking up to the fact that a bank balance is not considered their money, but is actually an unsecured loan to the bank, which the bank may or may not repay, depending on its own circumstances.:

Your checking account balance is denominated in dollars, but it does not consist of actual dollars. It represents a promise by a private company (your bank) to pay dollars upon demand. If you write a check, your bank may or may not be able to honor that promise. The poor souls who kept their euros in the form of large balances in Cyprus banks have just learned this lesson the hard way. If they had been holding their euros in the form of currency, they would have not lost their wealth.

 

Even in relatively untroubled countries, like the UK, it is becoming more difficult to access physical cash in a bank account or to use it for larger purchases. Notice of intent to withdraw may be required, and withdrawal limits may be imposed ‘for your own protection’. Reasons for the withdrawal may be required, ostensibly to combat money laundering and the black economy:

It’s one thing to be required by law to ask bank customers or parties in a cash transaction to explain where their money came from; it’s quite another to ask them how they intend to use the money they wish to withdraw from their own bank accounts. As one Mr Cotton, a HSBC customer, complained to the BBC’s Money Box programme: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

In France, in the aftermath of terrorist attacks there, several anti-cash measures were passed, restricting the use of cash once obtained:

French Finance Minister Michel Sapin brazenly stated that it was necessary to “fight against the use of cash and anonymity in the French economy.” He then announced extreme and despotic measures to further restrict the use of cash by French residents and to spy on and pry into their financial affairs.

These measures…..include prohibiting French residents from making cash payments of more than 1,000 euros, down from the current limit of 3,000 euros….The threshold below which a French resident is free to convert euros into other currencies without having to show an identity card will be slashed from the current level of 8,000 euros to 1,000 euros. In addition any cash deposit or withdrawal of more than 10,000 euros during a single month will be reported to the French anti-fraud and money laundering agency Tracfin.

Tourists in France may also be caught in the net:

France passed another new Draconian law; from the summer of 2015, it will now impose cash requirements dramatically trying to eliminate cash by force. French citizens and tourists will only be allowed a limited amount of physical money. They have financial police searching people on trains just passing through France to see if they are transporting cash, which they will now seize.

This is essentially the Shock Doctrine in action. Central authorities rarely pass up an opportunity to use a crisis to add to their repertoire of repressive laws and practices.

However, even without a specific crisis to draw on as a justification, many other countries have also restricted the use of cash for purchases:

One way they are waging the War on Cash is to lower the threshold at which reporting a cash transaction is mandatory or at which paying in cash is simply illegal. In just the last few years.

  • Italy made cash transactions over €1,000 illegal;
  • Switzerland has proposed banning cash payments in excess of 100,000 francs;
  • Russia banned cash transactions over $10,000;
  • Spain banned cash transactions over €2,500;
  • Mexico made cash payments of more than 200,000 pesos illegal;
  • Uruguay banned cash transactions over $5,000

Other restrictions on the use of cash can be more subtle, but can have far-reaching effects, especially if the ideas catch on and are widely applied:

The State of Louisiana banned “secondhand dealers” from making more than one cash transaction per week. The term has a broad definition and includes Goodwill stores, specialty stores that sell collectibles like baseball cards, flea markets, garage sales and so on. Anyone deemed a “secondhand dealer” is forbidden to accept cash as payment. They are allowed to take only electronic means of payment or a check, and they must collect the name and other information about each customer and send it to the local police department electronically every day.

The increasing application of de facto capital controls, when combined with the prevailing low interest rates, already convince many to hold cash. The possibility of negative rates would greatly increase the likelihood. We are already in an environment of rapidly declining trust, and limited access to what we still perceive as our own funds only accelerates the process in a self-reinforcing feedback loop. More withdrawals lead to more controls, which increase fear and decrease trust, which leads to more withdrawals. This obviously undermines the perceived power of monetary policy to stimulate the economy, hence the escape route is already quietly closing.

In a deflationary spiral, where the money supply is crashing, very little money is in circulation and prices are consequently falling almost across the board, possessing purchasing power provides for the freedom to pursue opportunities as they present themselves, and to avoid being backed into a corner. The purchasing power of cash increases during deflation, even as electronic purchasing power evaporates. Hence cash represents freedom of action at a time when that will be the rarest of ‘commodities’.

Governments greatly dislike cash, and increasingly treat its use, or the desire to hold it, especially in large denominations, with great suspicion:

Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place. Calls for the eradication of cash have been bolstered by evidence that high-value notes play a major role in crime, terrorism and tax evasion. In a study for the Harvard Business School last week, former bank boss Peter Sands called for global elimination of the high-value note.

Britain’s “monkey” — the £50 — is low-value compared with its foreign-currency equivalents, and constitutes a small proportion of the cash in circulation. By contrast, Japan’s ¥10,000 note (worth roughly £60) makes up a startling 92% of all cash in circulation; the Swiss 1,000-franc note (worth around £700) likewise. Sands wants an end to these notes plus the $100 bill, and the €500 note – known in underworld circles as the “Bin Laden”.

 

Cash is largely anonymous, untraceable and uncontrollable, hence it makes central authorities, in a system increasingly requiring total buy-in in order to function, extremely uncomfortable. They regard there being no legitimate reason to own more than a small amount of it in physical form, as its ownership or use raises the spectre of tax evasion or other illegal activities:

The insidious nature of the war on cash derives not just from the hurdles governments place in the way of those who use cash, but also from the aura of suspicion that has begun to pervade private cash transactions. In a normal market economy, businesses would welcome taking cash. After all, what business would willingly turn down customers? But in the war on cash that has developed in the thirty years since money laundering was declared a federal crime, businesses have had to walk a fine line between serving customers and serving the government. And since only one of those two parties has the power to shut down a business and throw business owners and employees into prison, guess whose wishes the business owner is going to follow more often?

The assumption on the part of government today is that possession of large amounts of cash is indicative of involvement in illegal activity. If you’re traveling with thousands of dollars in cash and get pulled over by the police, don’t be surprised when your money gets seized as “suspicious.” And if you want your money back, prepare to get into a long, drawn-out court case requiring you to prove that you came by that money legitimately, just because the courts have decided that carrying or using large amounts of cash is reasonable suspicion that you are engaging in illegal activity….

….Centuries-old legal protections have been turned on their head in the war on cash. Guilt is assumed, while the victims of the government’s depredations have to prove their innocence….Those fortunate enough to keep their cash away from the prying hands of government officials find it increasingly difficult to use for both business and personal purposes, as wads of cash always arouse suspicion of drug dealing or other black market activity. And so cash continues to be marginalized and pushed to the fringes.

Despite the supposed connection between crime and the holding of physical cash, the places where people are most inclined (and able) to store cash do not conform to the stereotype at all:

Are Japan and Switzerland havens for terrorists and drug lords? High-denomination bills are in high demand in both places, a trend that some politicians claim is a sign of nefarious behavior. Yet the two countries boast some of the lowest crime rates in the world. The cash hoarders are ordinary citizens responding rationally to monetary policy. The Swiss National Bank introduced negative interest rates in December 2014. The aim was to drive money out of banks and into the economy, but that only works to the extent that savers find attractive places to spend or invest their money. With economic growth an anemic 1%, many Swiss withdrew cash from the bank and stashed it at home or in safe-deposit boxes. High-denomination notes are naturally preferred for this purpose, so circulation of 1,000-franc notes (worth about $1,010) rose 17% last year. They now account for 60% of all bills in circulation and are worth almost as much as Serbia’s GDP.

Japan, where banks pay infinitesimally low interest on deposits, is a similar story. Demand for the highest-denomination ¥10,000 notes rose 6.2% last year, the largest jump since 2002. But 10,000 Yen notes are worth only about $88, so hiding places fill up fast. That explains why Japanese went on a safe-buying spree last month after the Bank of Japan announced negative interest rates on some reserves. Stores reported that sales of safes rose as much as 250%, and shares of safe-maker Secom spiked 5.3% in one week.

In Germany too, negative interest rates are considered intolerable, banks are increasingly being seen as risky prospects, and physical cash under one’s own control is coming to be seen as an essential part of a forward-thinking financial strategy:

First it was the news that Raiffeisen Gmund am Tegernsee, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee, with a population 5,767, finally gave in to the ECB’s monetary repression, and announced it’ll start charging retail customers to hold their cash. Then, just last week, Deutsche Bank’s CEO came about as close to shouting fire in a crowded negative rate theater, when, in a Handelsblatt Op-Ed, he warned of “fatal consequences” for savers in Germany and Europe — to be sure, being the CEO of the world’s most systemically risky bank did not help his cause.

That was the last straw, and having been patient long enough, the German public has started to move. According to the WSJ, German savers are leaving the “security of savings banks” for what many now consider an even safer place to park their cash: home safes. We wondered how many “fatal” warnings from the CEO of DB it would take, before this shift would finally take place. As it turns out, one was enough….

….“It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,” said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344), including part of his company pension that he took as a payout. Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump in sales of home safes in the first half of this year compared with the year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”….

….Unlike their more “hip” Scandinavian peers, roughly 80% of German retail transactions are in cash, almost double the 46% rate of cash use in the U.S., according to a 2014 Bundesbank survey….Germany’s love of cash is driven largely by its anonymity. One legacy of the Nazis and East Germany’s Stasi secret police is a fear of government snooping, and many Germans are spooked by proposals of banning cash transactions that exceed €5,000. Many Germans think the ECB’s plan to phase out the €500 bill is only the beginning of getting rid of cash altogether. And they are absolutely right; we can only wish more Americans showed the same foresight as the ordinary German….

….Until that moment, however, as a final reminder, in a fractional reserve banking system, only the first ten or so percent of those who “run” to the bank to obtain possession of their physical cash and park it in the safe will succeed. Everyone else, our condolences.

The internal stresses are building rapidly, stretching economy after economy to breaking point and prompting aware individuals to protect themselves proactively:

People react to these uncertainties by trying to protect themselves with cash and guns, and governments respond by trying to limit citizens’ ability to do so.

If this play has a third act, it will involve the abolition of cash in some major countries, the rise of various kinds of black markets (silver coins, private-label cash, cryptocurrencies like bitcoin) that bypass traditional banking systems, and a surge in civil unrest, as all those guns are put to use. The speed with which cash, safes and guns are being accumulated — and the simultaneous intensification of the war on cash — imply that the stress is building rapidly, and that the third act may be coming soon.

Despite growing acceptance of electronic payment systems, getting rid of cash altogether is likely to be very challenging, particularly as the fear and state of financial crisis that drives people into cash hoarding is very close to reasserting itself. Cash has a very long history, and enjoys greater trust than other abstract means for denominating value. It is likely to prove tenacious, and unable to be eliminated peacefully. That is not to suggest central authorities will not try. At the heart of financial crisis lies the problem of excess claims to underlying real wealth. The bursting of the global bubble will eliminate the vast majority of these, as the value of credit instruments, hitherto considered to be as good as money, will plummet on the realisation that nowhere near all financial promises made can possibly be kept.

Cash would then represent the a very much larger percentage of the remaining claims to limited actual resources — perhaps still in excess of the available resources and therefore subject to haircuts. Not only the quantity of outstanding cash, but also its distribution, may not be to central authorities liking. There are analogous precedents for altering legal currency in order to dispossess ordinary people trying to protect their stores of value, depriving them of the benefit of their foresight. During the Russian financial crisis of 1998, cash was not eliminated in favour of an electronic alternative, but the currency was reissued, which had a similar effect. People were required to convert their life savings (often held ‘under the mattress’) from the old currency to the new. This was then made very difficult, if not impossible, for ordinary people, and many lost the entirety of their life savings as a result.

A Cashless Society?

The greater the public’s desire to hold cash to protect themselves, the greater will be the incentive for central banks and governments to restrict its availability, reduce its value or perhaps eliminate it altogether in favour of electronic-only payment systems. In addition to commercial banks already complicating the process of making withdrawals, central banks are actively considering, as a first step, mechanisms to impose negative interest rates on physical cash, so as to make the escape route appear less attractive:

Last September, the Bank of England’s chief economist, Andy Haldane, openly pondered ways of imposing negative interest rates on cash — ie shrinking its value automatically. You could invalidate random banknotes, using their serial numbers. There are £63bn worth of notes in circulation in the UK: if you wanted to lop 1% off that, you could simply cancel half of all fivers without warning. A second solution would be to establish an exchange rate between paper money and the digital money in our bank accounts. A fiver deposited at the bank might buy you a £4.95 credit in your account.

 

To put it mildly, invalidating random banknotes would be highly likely to result in significant social blowback, and to accelerate the evaporation of trust in governing authorities of all kinds. It would be far more likely for financial authorities to move toward making official electronic money the standard by which all else is measured. People are already used to using electronic money in the form of credit and debit cards and mobile phone money transfers:

I can remember the moment I realised the era of cash could soon be over. It was Australia Day on Bondi Beach in 2014. In a busy liquor store, a man wearing only swimming shorts, carrying only a mobile phone and a plastic card, was delaying other people’s transactions while he moved 50 Australian dollars into his current account on his phone so that he could buy beer. The 30-odd youngsters in the queue behind him barely murmured; they’d all been in the same predicament. I doubt there was a banknote or coin between them….The possibility of a cashless society has come at us with a rush: contactless payment is so new that the little ping the machine makes can still feel magical. But in some shops, especially those that cater for the young, a customer reaching for a banknote already produces an automatic frown. Among central bankers, that frown has become a scowl.

In some states almost anything, no matter how small, can be purchased electronically. Everything down to, and including, a cup of coffee from a roadside stall can be purchased in New Zealand with an EFTPOS (debit) card, hence relatively few people carry cash. In Scandinavian countries, there are typically more electronic payment options than cash options:

Sweden became the first country to enlist its own citizens as largely willing guinea pigs in a dystopian economic experiment: negative interest rates in a cashless society. As Credit Suisse reports, no matter where you go or what you want to purchase, you will find a small ubiquitous sign saying “Vi hanterar ej kontanter” (“We don’t accept cash”)….A similar situation is unfolding in Denmark, where nearly 40% of the paying demographic use MobilePay, a Danske Bank app that allows all payments to be completed via smartphone.

Even street vendors selling “Situation Stockholm”, the local version of the UK’s “Big Issue” are also able to take payments by debit or credit card.

 

Ironically, cashlessness is also becoming entrenched in some African countries. One might think that electronic payments would not be possible in poor and unstable subsistence societies, but mobile phones are actually very common in such places, and means for electronic payments are rapidly becoming the norm:

While Sweden and Denmark may be the two nations that are closest to banning cash outright, the most important testing ground for cashless economics is half a world away, in sub-Saharan Africa. In many African countries, going cashless is not merely a matter of basic convenience (as it is in Scandinavia); it is a matter of basic survival. Less than 30% of the population have bank accounts, and even fewer have credit cards. But almost everyone has a mobile phone. Now, thanks to the massive surge in uptake of mobile communications as well as the huge numbers of unbanked citizens, Africa has become the perfect place for the world’s biggest social experiment with cashless living.

Western NGOs and GOs (Government Organizations) are working hand-in-hand with banks, telecom companies and local authorities to replace cash with mobile money alternatives. The organizations involved include Citi Group, Mastercard, VISA, Vodafone, USAID, and the Bill and Melinda Gates Foundation.

In Kenya the funds transferred by the biggest mobile money operator, M-Pesa (a division of Vodafone), account for more than 25% of the country’s GDP. In Africa’s most populous nation, Nigeria, the government launched a Mastercard-branded biometric national ID card, which also doubles up as a payment card. The “service” provides Mastercard with direct access to over 170 million potential customers, not to mention all their personal and biometric data. The company also recently won a government contract to design the Huduma Card, which will be used for paying State services. For Mastercard these partnerships with government are essential for achieving its lofty vision of creating a “world beyond cash.”

Countries where electronic payment is already the norm would be expected to be among the first places to experiment with a fully cashless society as the transition would be relatively painless (at least initially). In Norway two major banks no longer issue cash from branch offices, and recently the largest bank, DNB, publicly called for the abolition of cash. In rich countries, the advent of a cashless society could be spun in the media in such a way as to appear progressive, innovative, convenient and advantageous to ordinary people. In poor countries, people would have no choice in any case.

Testing and developing the methods in societies with no alternatives and then tantalizing the inhabitants of richer countries with more of the convenience to which they have become addicted is the clear path towards extending the reach of electronic payment systems and the much greater financial control over individuals that they offer:

Bill and Melinda Gates Foundation, in its 2015 annual letter, adds a new twist. The technologies are all in place; it’s just a question of getting us to use them so we can all benefit from a crimeless, privacy-free world. What better place to conduct a massive social experiment than sub-Saharan Africa, where NGOs and GOs (Government Organizations) are working hand-in-hand with banks and telecom companies to replace cash with mobile money alternatives? So the annual letter explains: “(B)ecause there is strong demand for banking among the poor, and because the poor can in fact be a profitable customer base, entrepreneurs in developing countries are doing exciting work – some of which will “trickle up” to developed countries over time.”

What the Foundation doesn’t mention is that it is heavily invested in many of Africa’s mobile-money initiatives and in 2010 teamed up with the World Bank to “improve financial data collection” among Africa’s poor. One also wonders whether Microsoft might one day benefit from the Foundation’s front-line role in mobile money….As a result of technological advances and generational priorities, cash’s days may well be numbered. But there is a whole world of difference between a natural death and euthanasia. It is now clear that an extremely powerful, albeit loose, alliance of governments, banks, central banks, start-ups, large corporations, and NGOs are determined to pull the plug on cash — not for our benefit, but for theirs.

Whatever the superficially attractive media spin, joint initiatives like the Better Than Cash Alliance serve their founders, not the public. This should not come as a surprise, but it probably will as we sleepwalk into giving up very important freedoms:

As I warned in We Are Sleepwalking Towards a Cashless Society, we (or at least the vast majority of people in the vast majority of countries) are willing to entrust government and financial institutions — organizations that have already betrayed just about every possible notion of trust — with complete control over our every single daily transaction. And all for the sake of a few minor gains in convenience. The price we pay will be what remains of our individual freedom and privacy.

Part 3 is here





The Fertile Ground of Bewilderment

9 07 2016

Excellent article by Charles Eisenstein….. originally published at his own site.
The Fertile Ground of Bewilderment 

The other day I was speaking to a small audience at a music festival and thought to allude to Brexit to make a point. Some in the circle looked a bit mystified, so I asked, “Everyone knows what Brexit is, right?” It turned out that quite a few of them did not.

“Congratulations!” I said. “You have ignored what the media has been offering to you as important. Maybe that is because you recognize that the whole thing was a diversionary spectacle.” Apathy about “the issues” is only a bad thing if those issues are what is actually important.

When I was growing up, a responsible citizen was one who read the newspapers, held positions on the political issues in currency, and fully participated in the dominant modes of civic and political life. Today (although it may have been true then too) the choices we are offered take the rules and premises of the game for granted, and it is these, about which we are never offered a choice, that are driving the fatal decline of our society.

Beneath the frenzy, many of us sense a vacuousness in the choice of Stay or Remain, the same one that sucks the meaning out of electoral politics as well. Democrat or Republican, Christian Democrat or Socialist, even Marxist parties like Syriza – when they take office they enact the same policies as before. Their differences, while not entirely inconsequential, are mostly minute compared to the range of what is possible. Moreover, public referendum votes against establishment policies are often ignored anyway, as was the case in Greece and as may well happen in Britain too.

So it is with Brexit – almost. Something is different this time. It is significant, although not for the reasons some people (though not my festival audience) think it is.

On the left, Brexit has been framed either as a blow against neoliberalism or a victory for xenophobic right-wing nationalism. Both framings are problematic: the first is over-optimistic, and the second is invidious.

On a practical level, Brexit needn’t be more than a minor hiccup on the onward march of neoliberal globalism. Even if Britain abides by the vote and does leave the EU, perhaps after much delay, the political and financial authorities will probably cobble together a plan that preserves the freedom of capital while continuing the erosion of wages, social services, and the public sphere. Perhaps they will ride the wave of right-wing populism to enact pro-business policies and further dismantle the social welfare system by associating it with the coddling of immigrants, turning the working class against itself. Alternatively or additionally, they can ride the counter-reaction to the vote, associating opposition to free trade policies with xenophobia and racism. They can also exploit the chaos resulting from Brexit as an object-lesson in the consequences of disobeying the elites. The vote will be called “irresponsible,” and responsibility will be associated with complying with the program of the technocrats and functionaries who administer the present system.

As for the xenophobic nationalism frame, to attribute Brexit to xenophobia is to disregard the deep economic and social stressors that fuel both anti-EU sentiment and resentment toward immigrants. If you buy into that narrative, you have to believe that Britain is home to 17 million bigots, ignoramuses, and nutjobs who foolishly sabotage their own economic wellbeing for the sake of exercising their bigoted opinions. (The same, of course, applies to the X million Trump supporters, about whom the same narrative is applied.) Please take note of the tone of this narrative: patronizing and contemptuous, embodying the same rage, dehumanization, and hatred that it attributes to its enemies.

There are in fact very sound reasons to be hostile to the EU, transnational economic and political institutions, and the authorities who ordain them in the name of progress for civilization. True, the average “Leave” voter is not consciously aware of these critiques; nonetheless the critiques identify a wellspring of discontent that, while perhaps channeled through xenophobic narratives, cannot be reduced to them. How much more convenient it is to the system’s guardians, to dismiss any rejection of their plans as xenophobia and bigotry. It’s the responsible, educated people versus the yahoos.

The European Union was from the outset a deliberate instrument of globalization, deregulated markets, and transnational financial capital. It is a profoundly undemocratic institution that has accelerated trends toward centralization of power and homogenization of culture. It has been an enthusiastic partner with NATO and with US militarism in the Middle East (which, ironically enough, has generated the tsunami of immigrants that has intensified anti-EU sentiment). It has also, especially in the Eurozone, promoted austerity policies that have impoverished whole countries in order to keep debt payments flowing to international bondholders. While the EU cannot be directly blamed for Britain’s own tilt toward austerity and neoliberal economics, which dates back to the Thatcher years, both participate in the same global trend driven by the financial system. The result is familiar to everyone: rising inequality, a frayed social net, and weakening community ties as economies have become delocalized. Britain is no stranger to these trends, afflicted as it is by rising income inequality, youth unemployment, and housing costs, falling wages, falling life expectancies, and one of the highest misery indexes in the developed world.

In other words, the middle-aged white Brexit or Trump supporter has legitimate grievances that cannot be dismissed as white entitlement just because things are even worse for people of color. If they feel betrayed by the system, it is because they have been. Look around at the world. We can do much better than this. Everybody knows it. We don’t agree on what to do, but more and more of us have lost faith in the system and its stewards. When right-wing populists blame our problems on dark-skinned people or immigrants, the response they arouse draws its power from real and justifiable dissatisfaction. Racism is its symptom, not its cause.

The Brexit vote was an expression of anti-elitism, pure and simple. Leaders of the mainstream parties, business leaders, entertainment figures, J.K. Rowling, President Obama, rock stars and literati… everyone urged the public to vote Remain, to uphold the status quo. Does defiance of authority mean the defiant need to be reprimanded and put in their place, or does it mean that authority has abused its position?

The Brexit vote was supposed to be one of those inconsequential exercises that legitimize the system by lending it the appearance of real democracy. Something went wrong though – the public voted no when they were supposed to vote yes. While not quite as unexpected as a victory for Donald Trump would be, it still came as a shock to the elites, not because the damage to neoliberalism can’t be easily fixed on a technical level, but because it shows the fragility of their legitimacy. As such, it evokes a panic far beyond what technical considerations would justify.

It is not only the legitimacy of the elites that is fragile, nor just Britain’s economy; it is also the entire financial system: an overleveraged agglomeration of bubbles that will all pop when one pops. Maybe the Brexit vote induces panic because it reminds the financial markets and their administrators that they cannot hold it together much longer. They can’t even buy public allegiance in one of the world’s richest countries. Who knows, perhaps Brexit will start the bubbles popping.

The Brexit vote marks a rare moment of discontinuity, when the usual normalizing narratives falter and a society experiences a fertile and frightening moment of bewilderment. Brexit, though, is a mere foreshadowing of the vertigo that will ensue with the next economic crisis, which will dwarf that of 2008.

To prepare for it, we have to operate on a level much deeper than current politics offers. It is the tacitly assumed narratives lurking beneath conventional political discourse that need our attention. By this I do not mean merely addressing the neoliberal and imperial motives cloaked in the pro-EU language of internationalism, tolerance, and cosmopolitanism.

To illustrate, let me return to the observation I made above: that the blaming of the Leave vote (and Trump, and all the xenophobic know-nothing parties) on ignorance and unenlightened attitudes is “patronizing and contemptuous, embodying the same rage, dehumanization, and hatred that it attributes to its enemies.” Next time you read the news, especially articles enjoining us to take a conventional political position, pay attention for the subtext of “Here is whom you should hate.” The right-wing populists incite hatred and anger at the blacks, the immigrants, the Muslims, the gays, the transgender, the “libtards,” etc. The mainstream liberals stir up outrage against the bigots, the nationalists, the contemptible narrow-minded over-entitled “crazy” (a common adjective) climate-change-denying Bible-thumpers. Further left, the critics of neoliberal imperialism follow the same formula by invoking images of heartless corporate executives, greedy bankers, cowardly political elites, and drone-like bureaucrats and technocrats who should surely know better.

Herein lies a near-universal political formula: identify the enemy, arouse anger and hatred against that enemy, and then defeat the enemy. It is based on this analysis: Cause: bad people. Solution: defeat the bad people. Problem solved. The media, whether news or entertainment, has immersed us in that outlook, which informs everything from action films to the War on Terror. But I am afraid we cannot blame the media either, because it is part of a mindset that is integral to modernity and has roots going back to the first mass societies. It is fundamentally the mindset of war, in which progress consists in defeating the enemy: weeds or locusts, barbarians or communists; germs or cholesterol; gun nuts or traitors. And that mindset rests on a foundation more basic still: the Story of Separation that holds us as discrete, separate individuals in a world of other, in opposition to random forces and arbitrary events of nature, and in competition with the rest of life. Well-being comes, in this story, through domination and control: glyphosate, antibiotics, GMOs, SSRIs, surveillance systems, border fences, kill lists, prisons, curfews…

It is from this story too that neoliberal capitalism sources its power. It depends on the idealization of competition, encoded in “free markets,” as a law of nature and primary driver of progress; on the sanctity of private property (which is a primal form of domination) and, most of all, on exercising control over others through the creation and enforcement of debt. It finds a natural home within the Story of Separation; it is, perhaps, Separation’s culminating expression, threatening as it does the ecological basis of human existence. We cannot change it without letting go of that story in all its dimensions. Part of that is to let go of war mentality in politics, and replace it with compassion.

This doesn’t mean sitting in a room thinking nice thoughts about race-baiters and vulture fund managers, retreating from political engagement into a safe realm of inner work. It is to enact politics from a different place. Our political reflexes are conditioned by a story that is deeper than politics. If we want to produce something other than endless variations of the same result, we have to transcend the customary terms of discourse and examine the false truisms that become transparent only when things fall apart. I am not sure what strategies, tactics, and narratives will come from a compassion-oriented worldview, from a story that holds us as interdependent, interconnected, even inter-existent with all. Various forms of nonviolent direct action, narrative change, and solidarity movements foretell what they might look like, but I think future politics is largely unknowable at the present time when most of us are still deeply conditioned by the Story of Separation. Whatever it is, it will spring from a basic inquiry – the essence of compassion – that must be sincere: “What is it like to be you?”

The bewildering glitch in the matrix that is Brexit has prompted many in Britain to ask, perhaps with some anguish, “Who are we?” It is time to ask that in earnest, which requires stepping outside the usual polarizing discourses in which both sides play the game of find-the-enemy. To my English friends, I would ask, “What kind of England do you want?” Is it one where the forces of racism are suppressed and politically defeated? Or is it one in which the source of racism has been healed? If we want the latter, we have to recognize the conditions that cause it. What is it like to be a racist?

Ordinarily in politics, everyone pretends that they know what to do. Politicians pretend that to voters, who then inhabit and perpetuate that pretense by voting. When do you ever hear a politician, when asked about an issue, say, “I have no idea what to do about it”? Well, I don’t have any idea what to do about Brexit either, but if I have any advice to Brits (and this will apply to all of us even more when the next normal-destroying crisis hits) it would be not to rush too quickly to a position. Instead, abide for a while in a state of openness and curiosity, pursuing the question, “What is it like to be you?” The kind of socioeconomic analysis (neoliberalism etc.) I offered above might help answer that question in a general, theoretical way, but it is no substitute for actually listening to one another’s stories, temporarily free of the pressure of having to find a solution. If the Prime Minister asked my opinion (I’m still waiting for the phone call), I’d say to declare a national month of listening, in which the immigrants, the angry rural pensioners, the bureaucrats, the financial industry workers, listen to each other in small forums, and in which media publications print unslanted stories of the people they have demonized. The goal of that month would not be to figure out what to do. It would be to understand each other better. The goal of the storytelling would not be to make a point. It would be to be heard and to be known. To hear another’s story is to expand oneself. It is an act of intimacy, of connection, and it subverts the ideology that holds us separate. When we take in new stories, we change and grow.

Of course it is unrealistic to expect people to drop their hidden agendas and listen with open ears. Normally our ears are shut, because we think we know. That is why Brexit and the bigger breakdowns it foreshadows are so potent. It shows us that maybe we don’t know, after all. That moment of stumbling, of humility, is precious. It may be that the Brexit vote isn’t a big enough shock to interrupt the onrush of normative political discourse that seeks to make sense of things in familiar terms. Rest assured: bigger shocks are coming.

 

Image Credit: Flickr, Creative Commons. Copyright CMYK.





Tasmania’s Greek Tragedy…..

23 03 2016

Just when I thought Tasmania’s electricity woes could not get any worse…….  they did. And they haven’t just gone from bad to worse, they have morphed from tragic to farcical.

Tasmania’s dam levels are dropping fast, some so critically, like the Great Lake, that it has been shut down altogether.  There’s talk of draining Lake Pedder to raise water levels elsewhere in the system, but would you believe it, the morons in charge are actually balking at the idea.  There are rumors that if Lake Pedder’s iconic beach was brought back from the dead, Hydro Tasmania would not be allowed to flood it again.  But if you think that’s weird, wait, there’s more…..

Here is a chart showing the flow of electricity through Basslink, the electric cable, now down for several months, joining Victoria to Tasmania…..:

basslink-flows

If you’re paying attention, unlike the morons in charge of Tassie’s electricity, you will notice something odd happened on the way to the market…..  the electricity market that is.

Until 2010-11, Tasmania was overwhelmingly a nett power importer. Then, during 2010-11 and 2011-12, Tasmania dramatically increased its exports to the point of equaling imports. Suddenly, in 2012-13, Tasmania’s Basslink’s imports plummeted to 2.6% of its electricity consumption (see page 130 of the link).  By 2013-14, Tassie was importing almost nothing at all via Basslink – shedloads of energy was going the other way.  What was going on you are likely to ask?

Well, remember the Gillard government? (yes I know, it’s a lot of Prime Ministers ago….) In August 2010, Julia Gillard cheerfully introduced a ‘carbon tax’. Gillard’s scheme (not a ‘Carbon tax’ according to the ALP) made ‘renewable’ hydroelectricity artificially more price competitive in the energy market. In turn, Tasmania’s government, who owned Hydro Tasmania became decidedly giddy with excitement… and greed.  After all, why worry about Tasmanians’ electricity requirements when you can make money hand over fist, seemingly for free?  (you knew the environment comes for free, right??)

The results look like this……..:

hydro-tasmania-storage-graph-2010-2016

You can clearly see the Winter inflows making the levels rise, and the Summer dry season making the levels go down…..  Now, before the Carbon Tax was introduced, levels rarely dropped below 30%, giving this state a relatively good safety cushion in case of a drought…. and seeing as Climate Change is going to bring us more droughts, then it’s a good idea to keep this buffer.  Right?  Unless of course there’s money to be made….!! Never get between a conservative government and a stash of free money, let me tell you…. they will run straight over the top of you (by the way I consider a Labor government to be conservative these days…)

Hydro Tasmania must’ve been licking its lips as it flicked the Basslink switch into reverse, and recklessly ploughed through more than half of its stored energy supply (i.e. stored water) during the carbon tax period:

The figures show that Tasmanian hydro generators have been selling electricity into the mainland market at unprecedented rates, drawing down storage levels dramatically since the carbon price was implemented in July 2012.

And if you operate a hydroelectricity plant and you flog off all your stored water much faster than the rain can re-fill your dam, you’re going to be in a lot of pain….

Along comes the drought we had to have (sorry Paul…)

You think the drought’s bad right…… well wait, there’s more!

According to the Mercury….:

BASSLINK owners sought to restrict Hydro Tasmania’s electricity exports and enforce a “cooling off” protocol during the period of the carbon tax to ensure the undersea cable was operated safely and reliably.

The news comes as Basslink prepares to cut the cable today [March 10 2016] and enable the cause of the fault to be pinpointed.

After three outages in July 2012, Basslink parent company Cityspring Infrastructure Trust sought to enforce what it called a “dynamic protocol” on the service agreement between it and Hydro, which enable it to transmit at “certain elevated levels”.

But the company said the outages came after Hydro transmitted electricity at levels above these in early July.

Yes, you read right, the greedy bastards fried the cable……… Look, I’m no electrical engineer, but I do know that if you put too much current through a cable, the black smoke locked inside that cable will be released.  Except you can’t see it underwater….!

The cable has been cut…….  but they still haven’t found the fault.  If you ask me, this doesn’t look good.  And a whole lot of other Tasmanians agree.  Just the other night on ABC TV news, Hydro Tasmania engineers were interviewed about why they are installing external plugs for running their houses off generators, and stocking up on batteries and, you won’t believe this, candles…….  only in Tasmania!  CSIRO is also planning for the worst.

Yes Tasmania, you are run by buffoons…….

On a personal level, my off the grid system is coming along.  Today, the Victron inverter arrived; I purchased the steel Pete the blacksmith will turn into a lean-to frame to be bolted onto the shipping container; and I have located eight 260W Trina panels for $2000 locally which I will pick up after Easter.  All I need now is for my Nickel Iron batteries to arrive from Russia, and I will be ready for the rolling blackouts now looming on the horizon.  As my freezer is the biggest energy consumer in the shed, I will move it to the container as soon as the solar power system is up and running…. and if rolling blackouts do eventuate, I will also move the fridge there, and maybe the TV too and abandon the shed to Hydro Tasmania……  they can all get stuffed.

UPDATE

This story got some airtime on ABC TV the other day, and to my utter disgust it was mentioned that the executives of Hydro Tasmania paid themselves $900,000 in bonuses at the height of the Carbon Tax frenzy, then $650,000 the year after, and $450,000 the year after that, for a grand total of $2,000,000…….

Not only should heads roll over this, but they should pay all that money back in my not so humble opinion.





The shipping crisis…..

13 01 2016

It looks like “my initial reaction of turning my BS filter on full tilt” was right. I was a bit quick off the mark publishing that post about North Atlantic shipping grinding to a halt. Here’s a better analysis from Mish Shedlock, along with a retraction of sorts from me. The real story yesterday was the Royal Bank of Scotland advising clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach $US16 a barrel.  The bank’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.  “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.

Mish Shedlock

Anyhow, here is a very good analysis of how so many got taken by the shipping crisis from Mish, lifted from his website, which is always a place for good information, if you’re an investor. Because I’m no investor, or rather because My ideas of investing lie in surviving the crisis rather than trying to save my wealth, such as it is, I haven’t bothered going there for some years…….

 

 

Investigating Claims “North Atlantic Trade Ground to a Halt, No Ships Moving”; The Real Shipping Story

Commerce Ground to a Halt?

Claims have surfaced that not a single transport ship in the North Atlantic is moving.

For example, “Superstation” claims that in a Historic First, hundreds of ships are said to all be anchored along coasts, with nothing moving.

ZeroHedge picked up the story in “Nothing Is Moving,” Baltic Dry Crashes As Insiders Warn “Commerce Has Come To A Halt”.

Countless others picked up the story from ZeroHedge who “confirmed” the story.

ZeroHedge said “We checked VesselFinder.com and it appears to show no ships in transit anywhere in the world. We aren’t experts on shipping, however, so if you have a better site or source to track this apparent phenomenon, please let us know. We also checked MarineTraffic.com, and it seemed to show the same thing. Not a ship in transit…”

The Real Shipping Story

Let’s sort out reality from hype from Marine.Com.

Cargo Vessels and Tankers Anchored

image: https://damnthematrix.files.wordpress.com/2016/01/b0c52-ships2banchored.png?w=300

click on any image for sharper view

Cargo Vessels and Tankers Underway

image: https://damnthematrix.files.wordpress.com/2016/01/c7944-ships2bmoving.png?w=300

Tankers Underway

image: https://damnthematrix.files.wordpress.com/2016/01/39f83-tankers2bunderway.png?w=300

As you can easily see, the numbers vary from chart to chart. Ships are moving.

The first thing I do when I see reports like “No Ships Moving” is look for mainstream news confirmation.

If no ships were moving, this would indeed be news and some reputable news site would have the story. The “no ships moving” story failed the “sniff test” from moment one.

Confirmation of economic stories is different than confirmation of political stories. Coverups of sex attacks in Germany and Sweden, and police killings in Chicago and other US cities highlights the difference.

Other Shipping Measures

Let’s now investigate other indicators of slowing shipments Including the Baltic Dry Index and the Harper Petersen shipping Index.

Baltic Dry

image: https://damnthematrix.files.wordpress.com/2016/01/c6505-baltic2bdry2b2016-01-11.png?w=300

The above chart from Bloomberg.

The Baltic Dry index measures shipping rates for dry goods.

The problem with Baltic Dry is the index is a function of excess shipping capacity and volumes shipped. It provides little information on shipping container sizes. Rates can sink because of increased shipping capacity (new ships) or sinking demand, or both.

Week after week I receive emails telling me the Baltic Dry Index is plunging. Stop the Emails! I know.

Harper Petersen provides much more information.

Harper Petersen Shipping Index – 10 Year History

image: https://damnthematrix.files.wordpress.com/2016/01/bd92f-harper2bpetersen2b2016-01-11a.png?w=300

Harper Petersen Shipping Index – 2 Year History

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Harper Petersen Vessel Size Rates – 2 Year History

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TEU

TEU stands for twenty-foot-equivalent unit. It’s an imprecise term because lengths have a 20-foot long (6.1 meters) standard but heights vary. Heights range from 2 feet three inches to 9 foot six inches. The most common heights are 8 feet 6 inches (2.6 m) and 9 feet 6 inches (2.9 m).

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Myth vs. Reality

Contrary to popular myth, shipping has not ground to a halt. However, shipping volumes and shipping rates have both plunged. 2015 was a disaster by any measure.

There’s no need to exaggerate. Reality is bad enough.

Mike “Mish” Shedlock

Read more at http://globaleconomicanalysis.blogspot.com/2016/01/investigating-claims-north-atlantic.html#Hy6hSZRAd1SRkk3t.99