Saturday, November 16, 2013

Income Inequality Worries Wall Street

     According to an article by Justin Lahart in the Nov 11, 2013  Wall Street Journal entitled "Worry Over Inequality Occupies Wall Street," Hedge fund managers are beginning to worry about the rising level of income equality in the United States.  Since they are on the receiving end of this outrageous unfairness,  why should they be concerned?   They are concerned because the last year that inequality reached the present level was 1928---just a year before the crash that triggered the Great Depression. When inequality reaches a certain point, the system breaks down and becomes unstable.  But any remedy to this instability would involve  raising working class wages, and raising taxes on the rich.    But low wages and taxes are the main reason that wealthy investors are making their present rip-off profits.  So any action to avert  a financial disaster in the long term would require the super rich to give up money in the short term.  And no matter how worried they get, they probably won't do that.
     There is a short story called "The Monkey's  Paw"  which begins with an anecdote about monkey trapping.    According to the story,  monkeys are sometime trapped by hollowing out a coconut and boring only one small hole in it.  The hole is just large enough so that the monkey can just barely put his hand through it if the palm is open. But if he is grasping something is his fist, it won't fit through the hole.  They chain the coconut in place and place a piece of fruit inside it.  The monkey smells the fruit and puts his hand in and grabs it,  but then he can't get his hand back out.  He could easily extract his hand if he dropped the fruit--but he won't ever do that.  Even as the hunter approaches to seize him, he cannot let go of the fruit once he has it in his hand---he is hard-wired to keep it.  I suspect that the hedge fund managers have the  same problem.

Saturday, November 2, 2013

Do We Eat Petroleum?

            Actually, that's what we mostly eat nowadays.   A chemical analysis would not show the presence of petroleum in anything you usually eat, but in a sense, you are eating it.   Your food comes from a machine that turns oil into food.   If I could show you a black box, made such that people were pouring oil into one end, turning the crank, and food was coming out the other, would you then agree that we turn oil into food?   After seeing such a machine, you might say, "Let's test it.  Stop putting oil into it."  So the man stops putting oil into the machine, but continues turning the crank.   And before long, food stops coming out.  At that point, you would concede, "Well, I guess it turns oil into food."   Do we have such a machine?
            Actually, we do.  It's the largest machine in the world, and almost all of our food comes from this machine.   The entire food production, processing, and distribution infrastructure of the civilized world can be considered a single, huge machine, and into it we feed a large percentage of all the oil produced in the world.  And most of the world's seven plus billion inhabitants consume  commodities disgorged from this device. We who live in the developed countries consume almost nothing else.   Without it we would all starve.  But petroleum is a finite resource and will eventually be gone. We don't know just when, but the point of peak global production is already behind us.   We have already quit using oil for some of the things we used it for 40 years ago.  So--how will we eat when it's gone?  That's a good question and perhaps it is time we began thinking about it.
            We got a good wakeup call just this weekend.  All of the papers carried a piece about the delayed corn harvest.  This is the kind of headline that scares the hell out of anyone who understands the food supply.  Corn is the starting point for almost everything we eat---everything from pork chops to cooking oil to bourbon whisky---it all comes from corn.   We had a record corn crop this year, but half of it is still in the field, and no one is straining to get it out.  Why?   In order to be stored in a bin, the moisture content of corn cannot exceed 15%.  But this year, we had an unusually rainy spring, and planting was delayed almost a month all across the corn belt.  We still got a large crop, but the point in the life cycle of the plant where the seed is set and starts drying down occurred a month late---well after the hot, dry, sunny weather of late summer was past.  The corn now standing in the field has a moisture content of 19% to 24%, and before it can be put in a bin, it must be artificially dried.  Most farmers have the grain dryers  to do this,  but this year, they cannot obtain the propane to operate them.  The reason that we now have a shortage of propane is due to the unusually large amount of grain drying that has already taken place---yet half of the crop is still in the field.  Even when propane supplies are available, every wet autumn we must decide whether to let half the crop rot or buy absolutely massive amounts of petroleum to dry it.  And when we decide to buy the propane  and save the crop, which we always do, we are turning oil into food.  But what happens when the petroleum isn't there to buy?