Friday, August 31, 2018

Nature is the Greatest Polluter

We began our posting on this blog on June 29, 2017 with this question: In a room 20 feet by 20 feet with a ten foot ceiling, how many matches would you have to light for the air in that room to have the same percentage of carbon dioxide as the atmosphere from the annual emissions of all the automobiles (about 800 million) in the world? The answer is provided by Ivar Giaever, a Nobel laureate in physics, The answer is one match. Incredible, isn't it? Even if the number of automobiles doubled, mankind's carbon dioxide emissions would still be trivial to our survival or that of the planet; our answer would simply require one more match. Of course, if people understood this they wouldn't support regulating fossil fuels to prevent global warming. Ergo, the need for global warming alarmism, a campaign of exaggeration and warnings of dire consequences unless the government acts. It's a tactic used over and over again to enlarge the scope of government controls.

Terpenes are natural pollutants emitted by pine trees. These hydrocarbons react with oxygen, the oxides of nitrogen and ozone to produce the same effect over the Great Smokey Mountains, the Blue Ridge mountains and many other heavily wooded areas. Professor Harold J. Paulus explains:

Pine forests exude particulate hydrocarbons that react photo-chemically with light to produce haze. The Blue Ridge Mountains in Appalachia are topped by this haze. It looks very beautiful over the trees, but if it were anywhere else, it would look like car exhaust.”

In July 1995 some 200 scientists completed a month-long field study of how ozone forms over a city with smog. The study involved six laboratory-equipped airplanes, weather balloons, 100 air-sampling ground stations and wind-measuring radar. Flying over the Nashville area, researchers noticed a big difference in flying over green fields and flying over thick oak forests around the city. Over the forests, there were markedly higher levels of isoprene, a highly reactive gas given off by the trees. Isoprene has an ozone effect just like the evaporation of gasoline.

Although ozone levels in the lower atmosphere are widely blamed on automobiles, three scientists at Michigan State University reported in 1989 that ozone measurements taken at twenty stations in Michigan between 1871 and 1903—when there were no automobiles—reveal ozone patterns that are the same as today. Furthermore, EPA's own five-volume study of ozone could find no adverse effect of ozone on human health.

In 1978 the EPA suppressed a scientific study showing that up to 80 percent of air pollution was caused by plants and trees rather than cars and smokestacks. If you have an average-size suburban lawn, the grass in your yard emits more hydrocarbons every year than your automobile. Following a suit filed under the Freedom of Information Act to pry out the report, EPA officials told John Holusha of the Washington Star that the report was suppressed because it “possibly would confuse hydrocarbon control strategy.” Associated Press International charged that EPA officials pressured the scientist involved to “put the data in a perspective that could be defended by EPA.”

Forests alone emit 175 million tons of hydrocarbons annually—more than six times the total from all man-made sources. And 2018 saw vast areas of the U.S. consumed by forest fires—nearly all of natural origin—which put vastly greater quantities of hydrocarbons into the atmosphere.

Van Nostrand's Scientific Encyclopedia says that the Augustine Volcano, which erupted in 1976, “may have injected 289 billion kilograms of HCL (hydrochloric acid) into the stratosphere. That is about 570 times the 1975 world production of chlorine and fluorocarbons.” The amounts of chlorine emitted into the atmosphere in millions of tons per year are: seawater 600; volcanoes 36; other natural sources 13.4, resulting in a total of 649.4 million tons. Compare this to man-made CFCS of 0.75 megatons per year, and we see that the alleged man-made increase amounts to 0.75/650= 0.0000115 percent.

Scientist Linwood Callis of NASA's Atmospheric Sciences Division studied a variety of factors causing ozone destruction, including sunspot cycles, volcanoes, tropical winds, and highly energetic electrons. He concluded: “CFCs come in a very poor last as the cause for lower levels of global ozone.”

According to Dr. William Pecora, former Director of the United States Geological Survey, just three volcanic eruptions in the last century (Krakatoa, Indonesia, 1883; Katmai, Alaska, 1912; and Hekla, Iceland, 1947) produced more particulate and gaseous pollution of the atmosphere than the combined activities of all the men who ever lived. And the modern era has been one where volcanic activity has been relatively quiet. There have been eras in which it has been at least ten times greater. The spectacular explosion of Krakatoa is often thought to be an exception, perhaps the worst disaster in the earth's history. However, there have been at least 18 volcanic explosions as large or larger than Krakatoa just since the year 1500. When Mt. Pinatubo in the Philippines erupted in 1991, it blasted 30 million tons of sulfur dioxide into the stratosphere. It blew 2 million tons of chlorine into the stratosphere in a single day. At that rate, it put the chlorine equivalent of all the CFCs produced in the entire world in 24 hours into the stratosphere every minute. Great though the Pinatubo eruption was, it was dwarfed by the Laki volcanic eruption on Iceland in 1783-84, which emitted 147 million tons of sulfur dioxide.

As for wind, it ranks with volcanoes as one of the two largest sources of pollution today. Analysis of the Greenland ice sheet shows that when some of its layers were formed thousands of years ago, the atmosphere contained forty times as much dust as it does today. What the world's industries emit is truly trivial by comparison.

Man is an insignificant agent in the total air quality picture,” says Dr. Pecora. “Those individuals who speak about restoring our inherited environment of pure air, pure rain, pure rivers, pure coastlines and pure lakes never had a course in geology. Natural processes are by far the principal agents in modifying our environment.”

Human efforts are so puny compared to those of nature that man has a difficult time doing serious environmental damage even when he tries. The gigantic fires from the more than 700 Kuwaiti oil wells deliberately torched by Saddam Hussein's government produced “insignificant” damage to the global environment, according to scientists at University of Washington and the National Center for Atmospheric Research in Boulder, Colorado. Their study concluded those fires had effects on air quality and some aspects of the weather in the Gulf but insignificant effects globally. Yet those fires produced 3,400 metric tons of soot per day—about 13 times the soot emitted daily from all combustion sources in the U.S. And those fires emitted sulfur dioxide at a rate equal to 57 percent of emissions from all electric utilities in the United States, an area 600 times larger than Kuwait.

For several decades the overwhelming factor of Mother Nature's pollution has been ignored in favor of political and ideological agendas that have perverted science and substituted scare tactics in place of truth that would benefit both the environment and the human condition.

Most of the above comes from my book MAKERS AND TAKERS: How Wealth and Progress Are Made and How They Are Taken Away or Prevented.  Abundant references can be found therein.

Monday, July 30, 2018

Welfare Programs, Promises, Pensions and Problems

Everyone knows that Social Security and Medicare are underfunded. They can only provide the benefits they have promised by borrowing from future taxpayers who are obligated to pay for them. And these programs will never be fully funded because the obligations are growing faster than the public's ability to pay for them. The nation's economic growth cannot keep up with the politicians' promises. But what the public doesn't realize is that beneath the gigantic funding gaps in these federal programs there are several levels of promised benefits that are similarly underfunded. These include state pension liabilities, city and county pensions, teachers' pensions, and pensions of private corporations, including those supported by the Pension Benefit Guarantee Corporation—which itself is underfunded and has indicated it will likely have to go out of business in a few years.

The PBGC has two kinds of programs: single-employer (light blue on graph) and multiemployer (dark blue). Both have lost billions of dollars, with the multi-employer programs being by far the biggest losers. A report by the PBGC projects it will run out of funds in 2022, which is close to the Congressional Budget Office projection of 2021. The CBO projects that almost $9 billion of additional funds would be needed to continue paying guarantees to multiemployer plans through 2024.

 A recent analysis by Wirepoints shows that between 2003 and 2016, accrued liabilities (what the states owe) grew more than 50% faster than assets in 28 states and more than twice as fast in 12 states. New Jersey grew 4.3 times faster than GDP, Illinois (3.32 times), Connecticut (3.18), New Hampshire (3.46) and Kentucky (3.08). The Wall Street Journal notes that the “solution” is always to raise taxes but “no tax hike is ever enough because benefits keep growing faster than revenues...The only salve to state pension woes, as the Wirepoints study notes, is to reign in current worker benefits.”

The PBGC supports 71 penniless union pension funds, but the payouts are often down to about one-third of what the worker is due. The average Local 707 retiree was getting $1,313 a month from the union pension fund, but the average monthly take home is now $570.

Writing in the San Diego Union-Tribune, Dick Vorkmann says, “Almost every public pension plan is underfunded, some severely so. Illinois and Connecticut have only 35 percent of their liabilities covered by assets. San Diego County, at 77 percent funded, has an unfunded liability of $3.3 billion. San Diego City‘s unfunded liability is $2.1 billion....[Under the current system] taxpayers don’t pay for the cost of the pension being earned by employees in that year, but rather just pay for the pension checks to the current retirees who worked many years ago. Then, years from now, taxpayers will pay for the pension costs of the public employees working today. This is what our Social Security and Medicare systems have become: unfunded pay as you go plans. And that is why there is concern that these systems will go broke in the not too distant future.”

Dallas has the fastest-growing economy of America’s 13 largest cities. Last year, the Dallas Police and Fire Pension Fund paid out $283 million and the city put in just $115 million.

The Manhattan Institute’s Josh B. McGee reports that teachers’ pension plans, which cover more people than all other state and local plans combined, have at least a $500 billion difference between promised benefits and money set aside to fund them.
 

Standard & Poor's 500’s biggest pension plans face a $382 billion funding gap. Of the 200 biggest defined-benefit plans in the S&P 500, based on assets, 186 aren’t fully funded. They simply don’t have enough money to fund current and future retirees. U.S. private pensions overall have only 82% of the funds necessary to meet their liabilities. That's a U.S. $3 trillion shortfall.


Ania Zalewska, professor of finance, University of Bath, concludes: “The pension industry is already in a deep financial crisis and could well be the trigger for another global financial and economic meltdown.


Saturday, June 30, 2018

Last Days of the European Union?

Greece is on the verge of settling the repayment of its bailout loans from the International Monetary Fund, European banks and other creditors. The bailout program is scheduled to end on August 21, 2018, but the creditors agreed June 22 to grant an additional ten years to repay nearly 100 billion euros ($116 billion) and to defer interest payments and amortization for another ten years, to 2033. In return, Greece will have to endure tight controls by its creditors to make sure the nation does not revert to its previous profligate behavior. It is already enacting yet another round of painful reforms demanded by its creditors—including a 13th round of pension cuts.

During the years Greece was sustained by a series of three bailouts, it was apparent if one of those failed, Greece would be out of the European Union and could well result in the end of the EU. Now the likelihood of Greece being out of the EU and perhaps the dissolution of the EU is no longer viewed as a concern. But a similar threat has arisen from another country, Italy.

In the recent Italian election, two minor parties regarded as no real threat to the nation's mainline parties did surprisingly well for the seats up for election among the 900 members in the two houses of parliament. When the president chooses someone to be the next prime minister, each house must approve. The 5-Star Party and the League got about half of the votes among the six parties in the election. Those two parties have both spoken in favor of Italy withdrawing from the EU, which they regard as a failed experiment.

When the president picked someone to form a new government, he deliberately avoided choosing someone from either the 5-Star or the League. This created a furor since he was single-handedly eliminating the people's most popular choices in the election; he was accused of usurping the popular will expressed in the March parliamentary elections. Clearly, this tactic was not going to win approval of the two houses of Parliament. So he would have to find another candidate. Both the 5-Star Movement and the League spent weeks trying to find a mutually acceptable candidate, finally agreeing on Guiseppe Conte, and then persuaded President Matarella to appoint him prime minister. Conte is a law professor, unaffiliated with any party and has no political experience.

The 5-Star Movement and the League have given voice to the many who are disenchanted with the mainstream political parties for their continuing failure to provide economic growth. Italy's economy is 5 percent smaller than it was in 2001, the only EU country other than Greece whose economy has shrunk over that period. Nearly 60% of unemployed Italians have been jobless for at least a year, and about 5 million live in absolute poverty (defined as being unable to afford basic goods and services)—nearly double the number of a decade ago. Last year the Italian economy grew a puny 1.5 percent, the fastest in six years, but that growth is already slowing, and wages haven't risen. Almost 30 percent of Italians age 20 to 34 aren't working, studying, or in a training program, more than any other EU country. And about half of that age group live with their parents, more than double the European average.

“Italy is collapsing and yet nothing has changed in this country for at least thirty years,” said Carlo Gaetani, an engineer. He says with conviction that he voted for 5-Star because it is “our last hope.” Apparently a lot of other young people agree because they are flocking to 5-Star and the League. In just the three months since the March election, the League's popularity has grown from 17% to 28%.

That the upsurge in popularity of 5-Star and the League is due to younger voters is shown by recent polls. In the March election, about 35% of Italians under age 35 voted for those two parties combined. About 43% of Italians over 65 voted for the old mainline center-right and center-left parties, while only 28% voted as the young Italians did.

Economic growth is one of the two major political issues in Italy. The other is immigration. Italy has taken in 750,000 immigrants. The EU cannot solve Italy's immigration problem; other EU members have problems with immigrants, too, and no law or policy on this subject will solve this EU-wide problem. Lack of EU help for Italy's immigrant problem has turned Italians towards anti-EU populism. 5-Star became Italy's largest party by running a strong anti-EU and anti-immigration campaign. This is likely to continue with an unstoppable rise in populism and the growing political power of younger voters. Italy has changed from a very pro-EU country to a strongly anti-EU country, and all the ingredients are at hand for this to continue.

It is likely, therefore, that a populist leader will one day be running the Italian government not at some distant point in time but perhaps quite soon. 5-Star and the League have solid majorities in both houses of Parliament. If Conte stumbles as prime minister, he might fail a vote of confidence, which would require a new election. That would almost certainly result in a victory for 5-Star or the League, most likely for Matteo Salvini, who is the real power in the League. And the first thing the government will then do is vote to withdraw from the EU. If Conte does not stumble and is not thrown out by a Parliamentary vote of no confidence, he will sooner or later have to face an election against 5-Star and the League, whose populist appeal to the voters will probably have grown even greater than it is today.

In 2011 Italian Prime Minister Mario Monte issued a statement describing a closed-door conference with [French] President Sarkozy and [Angela] Merkel in Strasbourg on November 24, 2011. It said that those two had declared Italy the decisive battleground in the euro-zone crisis and that “they are aware that a collapse of Italy would inevitably lead to the end of the euro.” Of course that was long before immigration emerged as a problem, but there were other reasons, which I explained in my book, and which still exist, for Italy to become crucial for the existence of the EU. Nevertheless, with this perspective, it is interesting that Chancellor Merkel on June 28, 2018, told the German parliament, “Europe faces many challenges, but that of migration could become the make-or-break one for the EU.”

Thursday, May 31, 2018

Gold Appears Quiescent

Gold news has not received much media coverage lately. That's not because what's been happening is unimportant. Rather it has been eclipsed by sensational stories of the latest school shooting, the eruption of a Hawaiian volcano, the on-again-off-again summit plans with North Korea, tariffs on steel and aluminum, Italian political problems, the price of bitcoin, the latest on who's been raped or suffered other sexual abuse.

Thus few people know that central banks have been huge buyers of gold. In the 4th quarter 2017, central bank reserves increased by 73.1 metric tons, bringing the total for the year to 372t. The pattern of central bank purchases in 2017 continued in the 1st quarter 2018, when Central Bank gold purchases increased a whopping 42%. Do the central banks know something that others don't? In contrast to the central bank buying, sales of gold bars and coins to non-bank customers have been tepid.

Who has been buying? 2017 was the eleventh consecutive year of growth in Russia's official gold holding. For several years Russia was buying about 100t per year, but each of the last three years show gains of over 200t.

Another notable buyer of gold recently was Turkey. Beginning in May 2017, it averaged 11t of gold per month, increasing its reserves by 86t by the end of the year.



China does not disclose its purchases on a regular basis. So we must do with estimates. The best of these are calculated by Koos Jansen of Bullionstar, which we print above with his courtesy. Note that Aggregate Net Imports are the fastest growing category.

India just eliminated 86 % of the nation's cash by withdrawing from circulation its 500 and 1000 rupee notes. How can that be when India has run on cash? According to Bloomberg, “India has among the highest usage of cash across global economies,” accounting for up to 98%. So what will the people of India now do for money? What chaos and mischief will now occur there? And how about the U.S., where it has already been suggested that the U.S. $100 bills and even the $50 bills should be taken out of circulation. Replaced by what? A new fiat currency, a new digital one, or a national credit card that the government will issue to everyone? --and by which the government could know—and tax—every transaction of anyone in the country? And micro-manage every detail of the nation's economy, in the excuse of “the public interest” or “national security"?

Will gold have a role in the future of money? Is that why central banks have been buying gold? Since the formation of the European Union in the 1990s, there has been a concerted political effort to phase out gold in the international monetary system and replace it with a fiat currency, the euro. The euro experience has shown that an unlimited ability to print money with no backing cannot replace the effectiveness of a tangible monetary asset, gold. Central bank buying of gold now may be recognition of that. In this regard it may be useful to look at the history of the EU's agreements on gold.

The first Central Bank Gold Agreement took place in 1999.  At that time, central banks held nearly a quarter of all gold held above ground, about 33,000 tones.  The second gold agreement (CBA2) took place in 2004. CBA3 followed in 2009 and CBA4 followed in 2014. The first clause in each of these four agreements began: “Gold will remain an important element of global monetary reserves.” In one of its first pronouncements, the ECB governing council decided the capital subscriptions of euro-zone members would be paid 15% in gold and 85% in dollars or Japanese yen. (The capital subscriptions were based on population and GDP of the members.)

The national debt now $21 trillion keeps on growing.  It will never be paid off because it is growing faster than the economy.  And it is obvious to everyone that this cannot continue forever, because  credit cannot be expanding forever.  At some point, the whole system will break down because somewhere there will be a default that cannot be covered, leading to a cascade of interrelated debt defaults. Then we shall see a crash comparable to the Great Depression of the 1930s or the more recent Great Recession, only worse.  

Since 1971 when President Nixon severed the last link between the dollar and gold, the world has seen the longest period of money with no link to gold or silver.  Eventually there will be a need to connect supply and demand factors for gold with other supply and demand factors in the economy. This will mean an adjustment of the price of gold in relation to the realities of other market factors. Nixon cut the link between gold and the dollar because U.S. debt--from excessive government spending--made it impossible to maintain convertibility of the dollar at $35 per ounce. Since our national debt is now $21 trillion, making the dollar again convertible for gold will require a far, far higher price for gold. Either that or we shall see gold made convertible to a different currency, if not in the U.S. then somewhere else on the planet. There have been some 3,400 fiat currencies; they all became worthless.  It remains to be seen whether the U.S. will add to that list or return to a gold-backed currency.

 The U.S. says it has 8,133.5 tonnes of gold, but questions have arisen over the years as to whether that is accurate.  Records of audits are sparse, incomplete and show a troubled history of government accounts. Recently Koos Jansen of Bullionstar.com has completed the most extensive research ever done on the U.S. government gold holdings. Through the use of the Freedom of Information Act, he has unearthed startling information never before available.  He encountered a wide range of problems that document the audits have been executed with an inadequate degree of integrity, including:

  • Most physically verified and sealed vault compartments have been re-opened, for which the auditor can provide no valid explanation.
  • Auditing personnel has proven to be utterly incompetent and did not follow the auditing policies and procedures.
  • Repeatedly metal has been excluded from verifications.
  • Many of the audit and assay documents have been destroyed.
  • The US government goes to great lengths in withholding information and spreading false information.

"The protocol was designed to open, audit, close and seal all compartments once, in order to avoid the necessity to repeat these procedures. Despite these rules, my research points out nearly all compartments have been re-opened after being audited....This is a story about misconduct, deceit, inconsistencies, and loose ends. At risk is the safety of the gold meant to underpin the world reserve currency....

"Whilst the function of the audits was to prove the existence of the gold, what they’ve achieved is to make us doubt about the existence of the gold. Up to 200 million ounces are stored in compartments that either have been subjected to dubious re-audits or have been re-opened and/or re-sealed for a vast array of other suspicious reasons....

In response to a question from Ron Paul, a member of the committee hearing testimony, Thorsen, a member of the Office of Inspector General, replied, "It should be noted that most workpapers associated with our reports issued prior to 2004 have been destroyed in accordance with our records retention policy." Thus Jansen writes: "Stunningly, the US government has destroyed most documents drafted from 1974 until 2004 associated to the audits of its 261,498,926 ounces (8,134 tonnes) of gold that serve to underpin the world reserve currency....The OIG lost 10 audit reports from 1974 through 1986...."

"Factually, seals can survive for 32 years, but by 1981 the seal on Fort Knox compartment 1 had been replaced five times. Remember we have the audit reports of 1974, 1977, 1980 and 1981; these mention nothing about perpetual re-sealing of compartments. That’s suspicious."