Saturday, March 24, 2007

Crisis On the Horizon 4: Infrastructure Collapse

The past couple of summers have been interesting in Northwest Indiana. The Borman has been getting rebuilt, Calumet Avenue has finally been completed all the way to US 30 (eighty years in the making), and the Dan Ryan if finally getting is total makeover. Meanwhile the Indiana Harbor Channel inches its way towards a dredging and cleaning (hah) and the Cline Avenue interchange is beginning to fall apart a mere few years after it was finished. Some parts seemed to be falling apart even before it was finished. And people are belly-aching over what happens when a stretch of CTA rail gets a needed rebuild.

Meanwhile there's reports that the pipes underneath the cities are falling apart. I know that one pipe going down Manor Street has opened up at two different places within a block, and while a water company's truck being swallowed up by a sinkhole in Portland Oregon may be funny, the loss of a billion gallons of water a day underneath New York isn't (especially since fixing that leak might be able to stop the damming of a river in upstate New York). And they're not the only tunnels worried about: Many of the passenger train tunnels on the Northeast Corridor are well on their way to falling apart, and would probably be closed down by now if it weren't for the fact that the trains are electric.

Meanwhile, the electric seems to be getting worse and worse. Mind you, part of that is the peak oil about to hit us full in the face, but ever since the idea of enlightened regulation was replaced by "markets, markets and more markets" (and you thought Libertarians were noiseboxes with no effect on American Politics) service has become worse and worse. It used to take an act of God to cause a blackout, now one tree limb touching the right spot causes whole states to black out. Thing is, we didn't used to have these limbs hanging out -- the companies would trim the trees back in the day. Now they cut corners, and millions lose power.

And let's not talk about New Orleans, either. I've done enough of that.

Mind you, I tend to go for the most expensive stuff, and that includes building and fixing things. While I can understand why one would want to do things a little less well than one would like (two rail lines instead of three, planning 75 years instead of 100 years), there's something absolutely wrong when we keep building to a thirty year lifespan for stuff that should be made to stand for centuries.

This problem will only become greater as oil and liquid energy becomes scarcer. After all, society is based on an allocation of energy. In the United States, we allow the energy to be distributed via private channels, with some used by public agencies to fix and build what's supposed to benefit the public. (Yes, the private sector is supposed to benefit the public, but that benefit is mainly to the investors and the companies, with society-wide benefits a side-benefit).

Presently we're pulling in enough energy of all types to do everything we seem to want, even at a price that's double of what it was less than seven years ago (and putting a lie to the idea that inflation has been controlled during the Bush Jr. Era, as fuel is an important part of the American lifestyle). What happens, though, once the amount of energy starts dropping? Sticking in Flourescent Lights in every lamp possible would only lead to a limited impact, and the amount of energy will keep dropping.

What will be kept up?

Will anything be kept up?

Surely the cities will find themselves falling apart, if they're not doing so already. Much of the rise of the American City has been less a return to the vitality of the fifties and before, and more a recreation of the city as a playground for empty-nesters and the Young and Childless. When society decides they can't keep up this fantasy, we're going to see things REALLY fall apart.

Whether this will lead to benefits for the rural areas is also iffy. After all, we're talking about city folk. Problem is, the people who make it to the city are less likely to survive in a rural setting. They tend to not have any of the skills that rural places need, and those who can make lots of money in an urban setting have skills that work ONLY in an urban setting. Poor, unskilled people can live in a city, place them in the hinterlands and they'll either run back to the city or they'll die.

And what happens when there's no city for them to escape to?

Sunday, March 18, 2007

Crisis on the Horizon 3: Global Warming/Climate Change

Okay, some might say this is number one while others think I'm making mountains our of molehills that exist only in my mind; I figure I'm placing this after some more acute problems because if we solve problem one and muddle through problem two, this will still exist.

In short, the industrial revolution has created an engine of change that, while small and local in isolation, adds up to worldwide changes when many are working at the same time. It's called the machine.

Think of it: You got millions of power generators burning up fuel, heating up the area around them and throwing heat-trapping gasses into the air. Add in millions of factories and millions of cars which, while they don't produce 24/7, add in their share of heat and gasses when operating. Also include air conditioners (which move heat outside and blow "cool air" inside"), heaters, refrigerators, computers, incadescent lights and other small items which throw up small amounts of heat themselves, and one shouldn't wonder why we're warming up but instead why things aren't yet over the edge.

Compare this with your average volcano: It spews forth tonnes and tonnes of gasses and dust for great effect, but the effect stops. There's no constant spewing, as is the case with the millions of factories, cars and houses. And when the volcanos are quiet for years, their effects tend to fade out. It takes a Krakatoa to affect weather for hundreds of years, and you get that rarely.

So we're in agreement that humans can affect weather. The question, of course, is which way.

There's two theories (three, really) for how we could affect the environment:
  1. Heat up the world until it turns into Venus
  2. Overload the system, freeze the world into an icicle
  3. Speed up the cycle of freeze/warm

All three of these scenarios has made it into the public mind at one point or another. Right now, of course, the first alternative is considered the most obvious, although I've always found it interesting that books, radio and movies always seem to evoke the freeze-over scenario readily (The Day After Tomorrow comes to mind). Michael Crichton believes that, ha in the third theory, in which we speed up what's alread happening.

Of course, it's not just warming. Recently we've felt a cooling, thanks to China going whole-hog into coal plants and lack of pollution controls. Indeed, many places along the Pacific Coast have found themselves in violation of The Clean Air Act through nothing of their own actions. That has been affecting Thailand and Bangladesh, because the dust spreads out and blocks the surround areas. We may even see a drop of average temperatures over the next few years as China's industrialization matures.

And, fo course, there's the question of whether this is such a bad thing. One thin line of thought involves the possibility of a coming Ice Age and that only Man's industrial activity keeps the earth from becoming an icebox. Not really much out there, but this interesting essay goes into some intriguing points, based oddly enough from a Gaian viewpoint. I don't necessarily believe in it lock, stock and barrell, but I find it entertaining and intriguing for what it suggests.

Three down, at least one more to go...then I'll probably go into detail some of the point of my second crisis (the debt stuff)

Friday, March 09, 2007

Crisis on the Horizon 2: Hyper-indebtedness

Read past the appearent health of the economy (as shaky as it is in March of 2007) and you find debt everywhere:
  • Federal Debt: The general fund is over 8 3/4 TRILLION dollars in the red and rising recklessly. We've got two entitlement programs which are actually running surpluses, but the main fund is so deeply in debt that it swamps them over.

    What's interesting is that when you control for inflation the debt of the United States Government has actually held stable between World War 2 and Reaganomics. That was through the Eisenhower Expressway Building, Vietnam, Watergate, OPEC's quadrupling of prices in 1973, and Iran in 1978.

    Not only that, but since then the only time the debt stablized or fell (yes, fell) was during Clinton's administration. Remember that? And once you forget the blue dress, you'll understand just how good we had it then.

    So...for the past twenty-six years or so, we've been spending ourselves into a feel-good emotion with no relation to reality. Deficit Spending, thanks to Reagan and Bush (with the surrender of the Congress to be sure, but they took their cue from the Presidents) and the Fundamentalist in love with Reagan/Bush/Bush and the Military Brass and the Super-Rich (who have benefited handsomely) and the Corporations.

    And what did we get for this spending? The belief that Government can only f*ck things up, safety nets wrecked and torn almost beyond saving, Corporate Welfare for companies willing to export their production to China, the Wal-Martization of Rural America, "public-private" as an adjective, the utter destruction of the public sphere in American Life and worship of the rich as our new "state" religion.
  • Consumer (Credit Card) Debt: Would you believe that for the past twenty months we (as American Consumers) owe more than we have saved?

    The last time that happened was in the Great Depression, when we had OFFICIAL unemployment rates of up to 25%. I'd be curious as to whether the measurements we used back then would give us the same level of unemployment as before.

    I remember this wonderful thing known as layaway. You'd make payments on an item you wanted to buy, and when you paid it off it was yours. No immediate gratification, no usurous levels of interest, no threats from lawers when you fell back on your payments. But hey...why worry about waiting when you can worry about making payments?

  • Housing Bubble (and Housing-based Debt): So now people have come to believe that buying a house is the same as gaining money for retirement. Never mind that wages have stayed steady or fallen for the lower 4/5ths of the population; housing prices have risen radically over the past ten years.

    What's really overheated the housing portion of this mix is that much of the loading was based on "adjustible rate mortgages" and "interest only mortgages" loans. It really appears that people were expecting the economy to go into overdrive and take them literally over the top within a few years. When that didn't happen (or they lost their jobs -- a increasingly frequent happening in this post-911 economy), the arms ratcheted upwards...and people are losing their homes.

    It's actually getting so bad that many mortgaging companies are beginning to die off in one way or another. One wonders what will happen when the government decides to re-regulate this. I know there's been a bunch of ugly loans, but can you imagine the problem when the government starts putting requirements on reporting earnings in the form of "you must report only money recieved, NOT FULL PAYMENTS REPORTED.

    You know how this housing bubble started, do you? It started when they started tearing down those oversized buildings known as "the projects" in the inner cities. With nothing being added to replace the towers (outside of hyperexpensive rat-traps for the rich and decadent), the former residents of these ghettos (poor, usually black (yes, it's fact), used to violence as a way of life, death and getting things, and deeply into the drug culture) scattered into other poorer neighborhoods, where they immediately raised the violence ante in what were once poor but relatively peaceful inner suburbs. That, of course, put pressure on all suburbs, leading to the housing bubble in the Suburbs and the new Downtowns.

  • Student Loans: Since when did we come to believe that an educated populace was a luxury that had to be paid for by those seeking that education?

    For the past forty years, state and federal funding for colleges and universities has dropped, both in relation to inflation and often in relation to the year before. To fill in the blanks, tuition prices have risen at rates well above inflation. Add into that the spiraling inflation of textbooks (with the practice of a "new edition" ever three years despite nothing being added on) and the now ever-shaky job market, and you have a situation where the less-than-heavily-endowed student (whether through sports or a fat trust fund) must take out loans and gamble on making a success of him/herself.

    Consider what you get nowadays when you take out a "student loan:" a loan which you will have to repay, whether you're able to or not. While you can get some very good rates (I have one at 3.26%) and "liberal" payment postponement plans, there will be no way for you to cancel it. If you get sick, the principle increases. If you're unemployed for a long time, the principle increases. If you lose your house due to a disaster, you'll have to put your student loan ahead of your house and car. You owe and retire, your student loan gets to raid your retirement and Social Security.

    I understand why they did this in the first place -- student loans used to be done only to people trying to be doctors, lawyers or something else that would earn them millions; all the while attending Ivy League schools. But now, with many people taking out the loans because they feel they have to (especially the poor), lots of people are making school into a high-stakes gamble hoping they'll strike it rich enough to pay back what they owe in a job market which has pretty much turned on anything not sporting a CXO title.

  • Retirement Indebtedness: While much of this is a Governmental problem (thanks to Supreme Court judgements that tied Governments' hands while freeing Corporations to act as they please in this issue), this reaches to many companies and corporations who once gave their retirees promises of a good retirement and are coming to regret this decision.

    And this has nothing to do with underfunding, at least on the governmental level: many cities, townships, school districts, counties and states are now staring at retirement responsibilities which threaten to eat up the whole of their budgets in the future. Because the Supreme Court has ruled that governmental entities can't really do much to reduce their upcoming responsibilities, many of these places (especially cities which have historically had wealthy workers but have since lost the industries that made these workers wealthy) will find their residents ready to kill because they're stuck with roads that need fixing, pipes that need relaying, buildings that need fixing and staffs that need filling; but their budgets will be forced to go wholly towards former workers who retired years before.

    Corporations have done stuff to protect themselves from the above threat; but whether it will be enough is another question. Health outlays threaten to throw all calculations out the window, making even the healthiest corporation with a pension responsibility in threat of bankruptcy.
Not a pretty story, is it?

Now admittedly this debt would make sense if it were investments; say like the spending for the Interstate System. Indeed, if one were to look at an inflation-corrected graph of the National Debt, you'd find that the debt stayed steady during much of that time. That was because much of the debt was investment that was returned over the years, with the Inflation working as wealth redistribution (during low-inflation times the money went to the poor, with high-inflation times it went to the rich). So how does this debt measure up?
  • Too many governments have recently been gutted of all but the basic forms of taxation power. While a little fiscal responsibility never hurt anyone, there's something wrong with a government that creates lotteries so that they can steal money from the schools in order to fund tax write-off and boat docks for the rich.
  • Consumer Credit works best in limited areas. Housing (see below), Automobiles and certain items need credit, other areas can be done through layaway (you pick something, you pay it off, the store keeps it for you, when you're paid off you get it. Requires discipline to pay off for stuff you don't have yet). They can help during emergencies (injury, broken refridgerator, death of grampa) and credit cards can be used to reduce your need of on-hand cash. However, credit cards are almost always used for purchases, so rarely can they be called investments in the future (and if anyone tells you to charge like crazy for this reason, RUN!)

  • The housing bubble, while an investment in buildings, depends too much on people earning money. Not only that, but at some point people won't bite at the excessively expensive houses built or existing, no matter how many ghetto refugees you throw at them.

  • Student Loans would make sense if there were the possibility for steady employment that paid well and allowed the student loanees to pay it back (assuming reasonable decisions; one cannot expect a philosophy major to get a PhD on Student Loans as there would be an extremely low chance for payback). However the job market and job environments make this almost a crap-shoot.

  • Retirement Indebtedness has no relation to future investments, and whomever owes it has to fund it from their income.
Again, not a nice picture. Like we're paying for the past instead of investing for the future (even with student loans; when there are no jobs or you spend buckets of time looking, you're not reaping the benefits). And paying off the past is always harder than investing for the future, as catchup is harder than moving forward.