A Networked World

There's a reason that "Everything in your house is getting cheaper to buy"

The prices of durable goods have been falling pretty steadily since peaking in 1997, and now they are as cheap as they were in 1988, after adjusting for the constant improvements manufacturers have been making to their products.

What’s striking is how pervasive the price declines are. It’s not just a few items that are pulling down the average; prices are falling for almost every sort of durable good that consumers buy.

via www.marketwatch.com

There are 2 reasons that prices fall.

In times where efficiency or productivity or new processes or newly discovered, easily accessible resources are having their major effect, the prices of the products or services they provide will fall because the absolute cost of making them is being actually reduced, but this study accounts for those improvements. There are no new processes or massive new resources being discovered and put into service, especially not across the board.

And the lastest survey of American productivity show that it is falling, not rising.

There is another reason that prices fall and that is when the incomes of the customers fall. And in real terms, American incomes, except for the 1%, are about the same as they were in the 1980's. So prices have to fall to match them.

The reason they have not fallen earlier is that the difference has been made up with debt. But consumers have finally reached the point where they can no longer fool themselves into taking on more debt, or they are just plain maxed out, even by the corrupt standards of the banking system.

The second case has another facet; it is the indicator of a deflationary economy.

As wages fall, prices have to chase them down, but because each seller is still trying to maximise their profit, then their income, then finally their survival. Because they try to brake their fall, the prices always remain higher than the customer can actually afford so they inch down some more, preceded by the wages that companies pay their workers who are then supposed to be able to keep buying the products they make.

This is a deflationary spiral and the next phase is the failure of the companies that make this stuff. People like The Automatic Earth, Steve Keen, Chris Martenson etc have been predicting this for over a decade and the process is playing out pretty much according to their models. But those who are terrified of deflation, and that should be all of us, WILL NOT talk about it honestly.

If we refuse to talk about it, we can't even attempt to deal with it. So will will have to face it alone. NOT a good scene.

Gotta love the Swedes

From OilPrice.com comes this delicious headline, "Sweden has Run out of Rubbish for Waste-to-Energy Industry"

As a result of overzealous recycling, the nation of 9.5 million citizens must now import rubbish from other countries in order to feed its waste-to-energy incineration power plants. Each year the Scandinavian country imports 80,000 tonnes of garbage, mostly from Norway, to fuel homes and businesses.

via oilprice.com

While at one level its amusing and we can admire the Swedes' intelligence and ability to stick with an idea, it raises a problem that I have been harping on about for a long time. Right now we have a lot of people trying to figure out how to turn the vast amounts of waste we create into something useful, from insulation and other building materials to methane and other forms of energy.

In the medium term, however, that is a dead-end strategy because the waste stream itself is dependent on excessive, unsustainable consumption. As the Global Financial Crisis continues to roll out and become an increasingly economic one, our ability to generate waste streams will diminish; we will buy less stuff and that we do buy will have less packaging and we will throw out less of it.

Anyone trying to create a busines based on that waste is NOT an environmentalist nor have they thought through the whole process, they are every bit as invested in our failing waste-producing economy as the worst waste creator, literally.

Its a good way to start cleaning up the environmental damage that landfill is doing, but its also creating an even more concetratedly toxic material in the contaminated ash that is being shipped back to Norway. If all the Norwegians do is bury the stuff, they are lining up for an even worse problem down the track. At the very least it needs to be baked into building materials in a form that wont leach the heavy metals etc, or vitrified.

And then there's the energy budget. Right now its trucks burning diesel carting this stuff back and forth, they are talking about shipping stuff to and from the Italy, Romania and the Baltic states, much, much more diesel and then the energy costs of making the ash safe. I'm betting that quite soon we will reach a point where burning the diesel to make electricity will be financially better than moving the waste, so the only net benefit will be environmental, and that will be limited. If the sending nation has to pay dfor the transport they will very quickly decide that trading even more of their environmental standards will not only be preferable, it will be the only affordable option.

We are now in the phase of the process where we will reach the limits of every economic and energy strategy very quickly. This is just more evidence that the Club of Rome was right, we have reached the limits to growth and now we are trying to stave off the collapse instead of reorganising ourselves around the new reality.

Hell, we aren't even starting the public conversation about that.

Not an Arab Spring - More Like a Winter

I've been a fan of Gail Tverberg's stuff since I first came across it on the late Oil Drum. Gail is not an oil expert, she's an actuary, she specialises in statistics and data and demographics and she sees stuff that most of us miss.

Like this little ball of dynamite from Syria

Syria’s oil production is dropping. The drop between 1996 and 2010 reflects primarily the effect of depletion. The especially steep drop in the last two years reflects the disruption of civil war and international sanctions, in addition to the effect of depletion.

When oil exports drop, the government finds itself suddenly less able to pay for programs that people have been expecting, such as food subsidies and new irrigation programs to support agriculture. If revenue from oil exports is sufficient, desalination of sea water is even a possibility. In Syria, wheat prices doubled between 2010 and 2011, for a combination of reasons, including drought and a cutback in subsidies. When basic commodities become too high priced, citizens tend to become very unhappy with the status quo. Civil war is not unlikely. Thus, oil depletion is likely a significant contributor to the current unrest.

via ourfiniteworld.com

In 30 years, Syria's population nearly trebled but its ability to provide for that population has been shrinking for exactly half of that time. That makes reral sense as a driver of unrest and civil war. 

Further down the piece she applies the same analysis to Egypt and Yemen and Saudi Arabia. In February 2004 I posted a piece (Now apparently missing from the blog) called "Did we just go over the hump" about why I thought we had reach global peak oil as Saudi Arabia gave all the political signs of no longer being able to pump the stuff at will. 

I've had no reason since then to change my opinion and endless yapping about fracking being a game changer etc is just that; you don't spend billions squeezing out every last drop if you could spend millions to get buckets-full.

Oh, and Norway is about to get a right wing government in part because they have been able to blame the current one for "wasting the oil opportunity", just as the UK did in the 80's.

In every case, countries that find significant oil piss away the opportunity, they talk and act as if this finite resource is unlimited and time after time, within a single lifetime, it proves not to be the case. But apparently we have zero ability to learn from the mistakes of others, we have to do it all over again for ourselves.

And then we refuse to acept the reality so we elect fantasists, our own current shower of "not quite-free market" true believers, now in Australia, and Norway and so on. We elect "conservatives" because, having changed everything about the way we live, we suddenly don't want to change away from the good times and we are suckered into believing that they can, somehow, magically as it happens, be prolonged forever.

They can't. We are living through the early phase of how that "can't" turns into "didn't". And if you aren't, right now, taking substantive action to wrap up, you will be naked in the cold; probably praying for more global warming.

More sustainability BS

I can't believe that we are still reading this stuff. We have secret to sustainable paint. Don't get me wrong, there is every reason to try new stuff and push the limits as far as they can go but where the hell was the journalist's mind here?

Resene believes it has identified the secret ingredient that will allow it to produce the world's first sustainable paint.

In August the paint-maker was the inaugural winner of What's Your Problem New Zealand?, a competition set up by the Crown research institute Industrial Research.

The prize was $1 million of research, and Resene has wasted no time in getting its project under way to develop a waterborne paint that is based on resins made up of 80 per cent sustainable ingredients.

Waterborne paints at present use acrylic as a resin, and existing environmentally friendly alternatives contain only 30 to 40 per cent sustainables.

The key is to find a substitute that will allow it to make a paint based on resins made of 80 per cent renewables.

The company will only say that the ingredient will be non-cropping (it won't compete with food crops for space) and is likely to come from existing industrial waste streams.

So lets go through that again shall we?

Resene believes it has identified the secret ingredient that will allow it to produce the world's first sustainable paint.

sustainable - Wiktionary
1. able to be sustained
2. able to be sustained for an indefinite period without damaging the environment, or without depleting a resource; renewable

OK? Simple; at the end of the day we have as much of the same quality of resources as we started with. So, how does it measure up?

The prize was $1 million of research, and Resene has wasted no time in getting its project under way to develop a waterborne paint that is based on resins made up of 80 per cent sustainable ingredients.

Weasel number one. to put it another way, this paint is 20% UNsustainable. Now, unless you can throw out of the formula the 20% that is not sustainable, then as soon as you run out of the unsustainable ingredients, you stop making the paint. Here, take enough food for a walk across the Nullabor plain and 80% of the water you will need. Have a nice trip. There is no such thing as percentage sustainability, your ability to produce anything is absolutely limited to the least available element. When that runs out, you are done.

Waterborne paints at present use acrylic as a resin, and existing environmentally friendly alternatives contain only 30 to 40 per cent sustainables.

See above, it doesn't matter whether your sustainable elements are 10% or 99%, its the non-renewables that will kill you. Now, not adding to the environmental load is in itself a good thing so 80% renewables is better than 30%, but sustainability it isn't.

The company will only say that the ingredient will be non-cropping (it won't compete with food crops for space) and is likely to come from existing industrial waste streams.

More weasels. If the sustainable elements comes from existing waste streams then they are absolutely dependent on the continuance of those waste streams in sufficient quantity to feed the sustainable paint mix. If those waste streams are legislated out of existence, or if they are generated by non-renewables, they too are going to stop and the sustainable paint is wholly dependent on the least renewable constituent of the other company's waste stream.

Furthermore, if the recovered ingredients are themselves composed of non-renewable atoms, Resene has shifted the problem exactly one step and, while they may have reduced some costs by being able to discount the waste content of their providing industries, they have exposed themselves to all the uncertainties that those industries have to deal with. I would bet they have increased their business risk by 50% or more.

I'm all for safer paint, I'm all for products that remove anything from the waste stream that can be reused as something else, but I'm 100% against misrepresenting this as sustainable, it's not even close.

Reality checks and data points

This piece from CIO.com is a nice reality check and the general principles apply to everyone, not just IT people. Retire? How About Never?

Overall, the recession has had far more of an economic impact on late-middle-aged adults. In an April Pew Research Center study of 2,969 adults aged 50 to 64, nearly 75% said the nation's economic problems are making it difficult to afford retirement.
Click here to find out more!

Nearly two-thirds of those surveyed in that age bracket said their 401(k) accounts or individual stocks have been clobbered, with two in 10 claiming that their investments have lost 40% of their value and another four in 10 saying nearly 20% to 40% of their retirement funds have been erased.

I have never believed that I would be able to retire, not just because I could not save enough to do so, but because I have known half my life that when the moment came to kick back I would be doing it with millions of other boomers whose removal from the "productive" economy would shrink that economy and make it too small to support us.

I've also been pretty much convinced that rule number one of investing is "never give your money to someone else to play with on your behalf, never, ever, no, I really mean it, never"

So I have paid off my mortgage and I'm building an urban homestead where we are aiming to be able to live, not just survive, on about $200 a week in current dollars.

While most of the rest of my peers have spent their lives trying to get rich enough to retire, I've spent mine learning to live poor.

My wife is a teacher on a 4 year contract and she has 2 years to go. Here's how I rate that contract.

• Chances of it being renewed on similar terms - 20%
• Chances of being significantly cut on renewal - 40%
• Chances of not being renewed 20%
• Chances of being bought out before the end 20%
• Chances of surviving any of those otucomes, pretty good.
  

Now eher are some more data points.

1. 56 year old family member on contract for a company that provides training to large insurance and financial companies. Unpaid for several months, yesterday asked me for a loan to get through Christmas
2. 58 year old CFO for several medium sized north American companies. Laid off in march, 10 months on global search for new job. Nothing
3. 58 year old former exec and successful business man. Lost his company 3 years ago, still no job and about to run out of money

Just people close enough to hear about their actual problems and 2 of those in the last 4 days. Interestingly, all three are still in denial about their real situation, still looking for the silver lining that tells them all is going to come back to what they fondly believe is normal.

Economic recovery? Not close.

This thing hasn't even cleared its throat yet and as the CIO peives goes on to say, "there is no place to hide in this economy"

Do we still have the leisure to be "creative"?

As usual, Johnnie points to some interesting ideas that kick me off. Change and diversity

Jack Ricchiuto has some thoughts on how change happens in networks.

...the possibility space for change opens up when we connect different people who can begin resonating together around shared stories, opportunities, and dreams. It’s a process of liberating people from the confines of clusters of sameness and ideological colonialism so they can move toward more diverse connections and pragmatic alignments.

The phrase clusters of sameness resonates for me and I think organisations often clog up with those. He continues:

the fusion of difference and resonance is a powerful approach because in that space, people move away from trying to change each other, which opens the space for the possibilities of creating innovative.. changes.. Resonant listening to one another’s differences allows us to join in both-and innovations that could never be possible in an either-or constrained world

I agree about the processes, but I think the crucial thing that gets left out of all this is that there is no way to steer the process towards a "desirable" (for whomever) outcome, nor can we determine the result in advance.

We live in a control-oriented mindset, change that we do not initiate frightens us and we try to reassert whatever control we thought we had, change that we do initiate gets out of control very quickly and we waste more resources trying to get back in control.

In every case we resist any change that we don't think we can determine in advance. But we live in a real world where change is permanent and uncontrolled. Hell I remember writing in an essay in high school something to the effect that "in order to maintain a constant relationship with a constantly changing world, we have to change, constantly".

I thought it was pretty cool then and I still agree with its foundation, the only thing I'd add is that the constant relationship is itself impossible, that changes too.

The whole idea of change management is a crock. Change, like shit, happens. Our biggest problem is that we are not inclined, nor do we learn, nor are we taught as part of our education, to understand, adapt, participate in or benefit from the changes that happen. Still less are we able to abandon changes that are short term wins but long term failures.

For me, this is about opening space so that we can explore experiences fully, without the pressure to problem-solve.

I'd love that to be true but I think we are running out of the lleisure we've had to be purely creative. The number and urgency of problems that we are going to have to solve, on a personal and daily basis, as well as a community and national one, is getting bigger, faster. Those of us, like me, who have had it damned easy all our lives and had the luxury of being able to invent, innovate and think about the world rather than get our hands dirty in it are going to spend the rest of those lives working much harder for much less money and often less return of all kinds.

With dwindling resources, the small problems that we simply threw some money at are going to become harder to deal with and the big problems such as climate change and PO are starting to cause medium sized problems such as landslips and crop failures that just wont go away. We've had 2 generations of cruising on the capital, from here on we will be paddling like hell to stay afloat.

If anything we need tools like open space and theatre sports as a form of rapid prototyping; spaces where we can bring hard problems, trial a bunch of possible solutions and take them away to work on them.

Jim Kunstler asks the question

While he can go over the top a bit, Kunstler is definitely on my team when it comes to the reality-based life. And once again, in Self-jiving Nation he asks the question that nobody else seems to have thought of:

I'd like to know what folks imagine we are recovering to. To a renewed orgy of credit-card spending? To yet another round of suburban expansion, with the boys in the yellow hard-hats driving stakes out in the sagebrush for another new thousand-unit pop-up "community?" For a next generation of super-cars built to look like medieval war wagons? That's the "hope" that our officials seem to pretend to offer.

Exactly, the talking heads all talk about this recovery, but its always a recovery "from" the crash and never, ever, about what our lives and communities and economies will look like once we have "recovered".

It's completely inconsistent with any reality-based trend-lines, by the way.

When the Australian Government commissions a report that says nearly a million homes are in direct danger of rising sea levels and that it should consider compulsory acquiisition and demolition of some homes as an option, the destination of the recovery looks a lot less sunny than most of the discuission would have us assume.  Make evacuation plans

Urgent action to cope with the impact of rising sea levels needs to start now, including improving evacuation routes for coastal communities during extreme storms and flooding.

As well, a sweeping federal parliamentary report calls for an overhaul of the building code to make homes more resilient and for the legal liability for future property losses to be sorted out.

Warning that ''the time to act is now'', the bipartisan report brought down last night states that thousands of kilometres of coastline have been identified as at risk from the threat of rising sea levels and extreme weather events caused by climate change.

The only note of compulsory cynicism I can muster for this one is that, coincidentally, the coastline is disproportionately owned by the wealthiest members of society who would probably be handsomely bailed out by such legislation.

A few years ago they were squawking about their properties being protected and told they would have to suck it up and take the hit because the community could not afford to protect coastal landscape to that degree. Looks like they may have found a good fairy after all.

Towards the new normal

Whenever I'm with Steve barnett, he's usually drinking and I'm the designated driver. Mostly because he and my wife are members of a wine club and when they go on high-class pub crawls (or winery tours) and I of the cardboard palate drive the people mover. When he talks about business he reminds me a lot of Johnnie Moore and Rob Paterson; and me. Learn fast: things aren’t (ever) returning to “normal”.

National Bank (NZ) Chief Economist Cameron Bagrey... confessed he’s embarrassed that his profession’s consistently got it wrong: failed to predict the current recession and doesn’t have a clue how to fix.

He says only one thing’s for certain: we can’t go back to the way it was. Anyone who thinks that things will return to “normal” is stupid. The policy makers are determined it won’t; determined we figure out new ways to do, manage and teach business and the economy. Previous answers are wrong.

[...] I seriously doubt NZ Business Education can change from its prescriptive right-answer model any time soon, hobbled as it is by administrators and their anti-professional, centralised rules and controls, and know-no-better student and employer market.

I’m sceptical too that NZ business managers can abandon their manager-knows-best, right-answer approach any time soon: go deeper than recite the superficial lists of “secrets” peddled in popular business management literature.

Actually, if Steve thinks its only NZ managers, he's dreaming. The managerial class is global, its largely responsible for the problem and will cling to its paycheque till the collapsing businesses they parasitise crumble in their hands.

[...] Here’s the guts: (really) involve everyone; confess ignorance (starting at the top); spend time together generating a long term goal that everyone’s passionate about but not sure how to achieve; get very clear on the medium term strategy and short term goals that stand to take you towards the long term; openly generate and agree clear individual and collective accountabilities in achieving the change; openly measure progress to keep individuals and groups (at all levels) openly accountable for their contribution; continually review and revise in the light of individual and collective experience; take every opportunity to talk about the long term goal and the actual action and progress towards it.

I think he's optimistic here.

In the new normal, we have so little idea of what will work that the idea of goals and strategies may be a waste of time as well. As our energy and financial resources are decimated we will gain new appreciations of those resources that are left.

I think there might be some new parameters that will have more power in the future.

• We will demand much higher value returns for any of those irrecoverable resources that we expend, especially if we hand them to someone else.
  
• We will increasingly trade time for goods and services. Where we have invested a lot througout my lifetime in "saving time" we will now "spend" or invest, that time ratrher than use a resource like energy.
• Things will slow down in some areas such as travel and material flows
• Information shipping will speed up as we reduce even further the documentary exchanges and rely more on electronics (saving paper, energy etc)
• Discretionary spending will evaporate and the industries based on them will disappear. If we spend more time waiting, travelling or producing things we will have less liesure time and less money to spend in it.
• Energy and material flows at a personal, community and business level will become a critical part if every economic model and activity.
• The idea of waste will disappear, we will be much more conscious that we can't 'afford" it any more. The idea that we should pay for packaging, then pay to have it taken away and pay again in opportunity costs merely to have a wrapper will become laughable, if not criminal
• Product design, durability, ease of use and fitness for purpose will become absolute criteria for everything
• We will all need to try many, small actions that may or may not succeed. We will need to be deadly honest about the outcomes and rethink those that fail while iterating those that seem to succeed.
• We will need to acknowledge that, at a time of paradigm shift, nothing will be reliable for quite a long time; what worked yesterday may not work again tomorrow. That is why small, iterative actions will be the only safe ones, there will be no more going large.
  
• Your turn. What other geenral rules do you think might fit here and does this make any sense at all?

I'm planning some renovations to my house - we have been since we moved in 2 years ago - and the other night I was using Google Sketchup (a brilliant bit of software) to turn the 2D plan into a 3D model so we could try stuff out.

I put in a work bench for building things and a wet area for wine making and a pot still for recovering essential oils from the flowers and herbs and plenty of space for creating stuff and storing it and for tools and consumables like glues and screws and so forth.

And then I stood back and realised that I am making not just a workshop a small artisanal factory that would fit in the 19th century or earlier. I'm doing it because it is the logical outcome of thinking about local production andtrying to close the energy and material flow loops as tightly as possible.

When i build stuff, I use screws not nails so that everything can be dismantled and used again in something else. More rules.

• Low energy dismantle-ability
• Repurposing all manner of manufactures
  
• Building things that can be applied to new uses
• Shared spaces, shared tools, shared skills
  

What else?

Peak everything

Now diamonds
Diamonds aren't forever, the pipes are running dry

A CUT diamond is the ultimate in discretionary expenditure. So when the global financial crisis hit last September, it was no surprise global demand for sparklers collapsed.

But it isn't all gloom for diamonds. In fact, the world is short of new mine supplies. According to Rio and BHP Billiton analysis, most existing mine resources for rough stones will be gone within 15 years.

This is because new diamond discoveries are becoming increasingly rare. According to Rio, annual discoveries of kimberlite ''pipes'' - kimberlite is a host rock for diamonds - have fallen (on a five-year moving average basis) to little more than 100. And history shows that only one in 10 kimberlite pipes contain diamonds and only one in 100 of those are economic to mine.

The lack of new discoveries since the mid-1980s means the world's mine reserves of rough diamonds have fallen from 80 years' supply to the 15 years that Rio now forecasts.

The squeeze on new mine supplies comes as Rio forecasts 4 per cent compound annual growth rates in rough diamond demand out to 2020 - as supply contracts at a 1.6 per cent rate.

Unlike most things that have peaked and are now in decline, diamonds are, mostly, optional and discretionary.

It will be interesting to see whether the diminishing possibility of owning diamonds increases the desire for them or causes it to wane. For a while it will drive the desire even higher, along with prices, but I'd bet that, once they are all gone, like Tuna, we will discover that we didn't really need them after all and our desire for them will disappear.

Except, of course, for those things for which they are a commodity, like drill bits, and a black market will open up where drillers sneak around back alleys buying up stolen necklaces and bracelets for their bits and grinders.

Illargi does it again

The Automatic Earth: is one of my favourite hangouts and has been for a long time. They have been ahead of the economic game for years and right now they are coming under fire because they refuse to resile from their hard line of "it ain't over, not by a long shot".

But in defending their position Illargi touches on something so fundamental that it gives me the shivers to read it. I once suggested to my niece that there is a serious question whether our species is amny smarter than yeast and so far the outlook is not good. But this one nails it. The one fatal trait

People are by nature so hugely biased against the possibility of bad things happening to them, they'll all sign up for the first soothsayer with a story that uses the appropriate words. They’ll choose short-term gratification over the prospect of long-term hardship any time, any day. It matters little to nothing what tomorrow brings, as long as tonight the booze and the music's good enough to make them forget, and to evoke memories of better days.

And the morning after, they'll go look for another smooth voice. If it weren't like that, no-one could ever sell a second-hand car again. Or a good book. Or a detergent or a president. Regardless of the limits the world around us places on us, our hopes and dreams know no limits. That is a beautiful thing, as long as you put it in the right (re:smooth) words.

It also means, however, that we cannot put limits on ourselves, on what we do; maybe as individuals, but not as a species, not as a force of nature. The same need for comfort and redemption that makes us follow the circus, is the one that makes us penetrate ever deeper into the few corners of the world we haven't seen yet, and drag out of those corners what could make us belive that the clown, Bernanke, is our savior.

We can't help it, it’s what we are. There are exactly zero species on the planet that have been outfitted with an inbuilt limiter, and we are no exception. We will continue until the planet, the system, whatever you want to call it, imposes such limits on us. There has never been a need for nature to make species stop themselves, it's the one fatal trait that would destroy the driving force behind evolution.

The driving force behind evolution is the acceptance of species' extinction as the environment changes and the ecological niches shift. As we refuse to confront climate change, as we choose to squint at peak oil and especially as we sprinkle pixie dust on the economic blunders its disheartening in an existential way, to consider that this mad rush at the wall is hard wired.