the secret plan to close social security's offices and outsource its work

commondreams |  For months there have been rumors that the Social Security Administration has a “secret plan” to close all of its field offices. Is it true? A little-known report commissioned by the SSA the request of Congress seems to hold the answer. The summary document outlining the plan, which is labeled “for internal use only,” is unavailable from the SSA but can be found here.

Does the document, entitled “Long Term Strategic Vision and Vision Elements,” really propose shuttering all field offices? The answer, buried beneath a barrage of obfuscatory consultantese, clearly seems to be “yes.” Worse, the report also suggests that many of the SSA’s critical functions could soon be outsourced to private-sector partners and contractors.

Here are five insights from this austerity-minded outline.

isis could clean up the hood and the trailer park quick, fast, and in a hurry...,

theatlantic |  The best way to get a sense of ISIS’s blueprint for state-building is to look at how it has ruled al-Raqqa governorate and other territory in neighboring Syria. The group’s first move is often to set up billboards around town that emphasize the importance of jihad, sharia, women’s purity, and other pietistic themes. It reaches out to local notables and tribal leaders as well to blunt the kind of backlash that greeted AQI and its harsh interpretation of sharia during the sahwa movement last decade.

The group also has a surprisingly sophisticated bureaucracy, which typically includes an Islamic court system and a roving police force. In the Syrian town of Manbij, for example, ISIS officials cut off the hands of four robbers. In Raqqa, they forced shops to close for selling poor products in the suq (market) as well as regular supermarkets and kebab stands—a move that was likely the work of its Consumer Protection Authority office. ISIS has also whipped individuals for insulting their neighbors, confiscated and destroyed counterfeit medicine, and on multiple occasions summarily executed and crucified individuals for apostasy. Members have burned cartons of cigarettes and destroyed shrines and graves, including the famous Uways al-Qarani shrine in Raqqa.

Beyond these judicial measures, ISIS also invests in public works. In April, for instance, it completed a new suq in al-Raqqa for locals to exchange goods. Additionally, the group runs an electricity office that monitors electricity-use levels, installs new power lines, and hosts workshops on how to repair old ones. The militants fix potholes, bus people between the territories they control, rehabilitate blighted medians to make roads more aesthetically pleasing, and operate a post office and zakat (almsgiving) office (which the group claims has helped farmers with their harvests). Most importantly for Syrians and Iraqis downriver, ISIS has continued operating the Tishrin dam (renaming it al-Faruq) on the Euphrates River. Through all of these offices and departments, ISIS is able to offer a semblance of stability in unstable and marginalized areas, even if many locals do not like its ideological program.

That’s not to say this ideological project isn’t an integral part of ISIS’s social services. Its media outlet al-I’tisam sets up stalls to distribute DVDs of the videos it posts online. In a number of ISIS-held locales, a da’wa truck drives around broadcasting information about the group's belief system. Moreover, ISIS has established a number of religious schools for children, including ones for girls where they can memorize the Koran and receive certificates if successful, while also holding “fun days” for kids replete with ice cream and inflatable slides. For their older counterparts, ISIS has established training sessions for new imams and preachers. Schedules for prayers and Koran lessons are posted at mosques. In a more worrisome development, ISIS runs training camps for “cub scouts” and houses these recruits in the group’s facilities.

of course the uk gettin it in...,

telegraph |  Illegal drugs and prostitution are worth 0.7pc of GDP, which is roughly the same proportion as agriculture, gambling and accommodation services which includes hotels, bed and breakfasts and caravan parks. 

They are worth more than advertising, which is 0.5pc of GDP, and double the contribution of real estate activities, at 0.35pc. 

“In terms of the new concepts coming in, illegal activities is the biggest,” said Graeme Walker, head of national accounts at the ONS. 

“For the rest of GDP we do things like sending questionnaires to businesses, asking them how much they have earned. 

“We don’t think it would be right to directly collect information on [illegal drugs and prostitution] and we have no plans to contact people involved in these activities. 

"We think our data fits the purpose for giving people an idea of the size of illegal activity.”

The contribution of prostitution to GDP was calculated using a number of estimates, including the clients per prostitute per week based on Dutch practise, the average price per visit and the cost of room rental and clothing. 

Meanwhile the contribution of cannabis to GDP was calculated using estimated figures including sales, number of users, street price and imports. 

For drugs other than cannabis, estimates are based on figures such as sales, import price and value, purity from police seizures and street price. 

As a first estimate, the ONS says that from 1997 to 2009 the impact of the illegal drugs and prostitution on GDP ranges from £7bn to £11bn. 

The national accounts, published in September 2014, will include the import, production and sale of illegal drugs as well as the provision of prostitution services.

The ONS say that the figures “will be based on a variety of sources and assumptions” and add that there are “significant limitations in the availability of data”. 

This is part of a raft of changes being made to the national accounts that will increase the level of GDP in 2009 by between 4pc and 5pc. 

This will include the contribution of “non-profit institutions serving households” such as charities, universities and trade unions, which is the ONS have valued at £24bn, or 1.7pc of GDP.

People who build their own homes will also be included as a category, which contributes £4bn, or 0.3pc to GDP.

sprezzatura...,

businessweek | The Italians have a word for it: sprezzatura, or studied nonchalance. The news that Italy plans to include prostitution and illegal drugs in gross domestic product sounds like a joke. But it’s not just an Italian initiative. New European Union rules require member states to include in GDP the value of all income-producing activities, including prostitution, the production and consumption of illegal drugs, and black market sales of cigarettes and alcohol.

The beauty? By counting prostitution and drugs in output, Italy will raise its GDP and thereby lower the ratio of debt to GDP, which will make it easier to comply with European Union rules on indebtedness. The same will go for other countries. That’s sprezzatura.

Governments of European Union members are not supposed to let their annual deficits exceed 3 percent of GDP or accumulated debt exceed 60 percent of GDP.

This pyramid portrays the detailed process that the European Union has established to deal with countries that fall out of compliance. On paper, the penalty is a fine of 0.2 percent of GDP, plus a “variable component” that can range up to 0.5 percent of GDP annually as long as the breach continues. 

In reality, the European Union’s bark is worse than its bite. A fine would only make a country’s deficit worse. At the moment 17 member countries are being monitored under what the EU calls “excessive deficit procedures,” while another nine (Italy among them) have emerged from excessive deficit procedures. Only two member countries, Estonia and Sweden, have never had excessive deficit procedures.

Countries outside the European Union that want to make their economies look larger may want to follow suit. Italians have no monopoly on drugs and prostitutes. According to research by two Turkish economists, Ceyhun Elgin and Oguz Oztunali of Bogazici University in Istanbul, the shadow economy (not just drugs and prostitution) averages just under 18 percent of GDP in OECD and EU countries. It’s 42 percent in Latin America, 37 percent in post-socialist countries, 32 percent in the Middle East-North Africa region, 43 percent in sub-Saharan Africa, and 33 percent in Asia, by their estimates.

our way of life IS our polity and our way of life is non-negotiable...,

newscientist | We predict that blackouts will occur with greater frequency and greater severity due to trends in both electricity supply and demand. Supply will become increasingly precarious because of the depletion of fossil fuels, neglected infrastructure and the shift toward less reliable renewable energy. Demand, meanwhile, will grow because of rising populations and affluence.

Resource depletion is already having an effect on countries that rely on fossil fuels such as coal for electricity generation. Countries with significant renewable resources are not immune either. Weather is not predictable and is likely to become less so, courtesy of climate change: in the past decade shortages of rain for hydro dams has led to blackouts in Kenya, India, Tanzania and Venezuela.

Deregulation and privatisation have created further weaknesses in supply as there is no incentive to maintain or improve the grid. Almost three-quarters of US transmission lines and power transformers are more than 25 years old and the average age of power plants there is 30 years.

The looming threat of blackouts cannot be solely blamed on vulnerabilities in generation, however. Overconsumption is also a factor. Between 1940 and 2001, average US household electricity use rose 1300 per cent, driven largely by growing demand for air conditioning. And such demand is forecast to grow by 22 per cent in the next two decades.

Demand for aircon is also growing elsewhere. In China, ownership tripled in the decade since 1997 and aircon units already account for 20 per cent of the country's electricity consumption. A similar pattern is seen in India. Global warming will only add to demand.

Another future driver of demand is likely to be electric vehicles. The World Bank forecasts that these could total 10 per cent of all new vehicle sales by 2020, requiring a 15 to 40 per cent increase in electricity demand.

Overall, between 2008 and 2035, demand for electricity is expected to grow by 80 per cent across the world. No one knows how this will be generated.

These converging trends are already impacting the system's integrity. In the US, blackouts increased across all three five-year periods between 1995 and 2009. A report written for the Executive Office of the President concedes that the incidence of major blackouts is increasing.

It is worth reiterating what is at stake here. We analysed almost 50 significant power-outages across 26 countries. They had numerous causes, from technical failure to sabotage. Nonetheless, the same set of problems emerged.

Blackouts affect computers, microprocessors, pumps, fridges, traffic and street lights, security systems, trains and cellphone towers, with consequences across society. The economic losses can be enormous: power outages are already estimated to cost up to $180 billion a year in the US.

As the world becomes more reliant on digital technology, where interruptions of as little as one-sixtieth of a second can crash servers and computers, the negative effects will only multiply.

dementia sufferers have a duty to die...,

telegraph |  The veteran Government adviser said pensioners in mental decline are "wasting people's lives" because of the care they require and should be allowed to opt for euthanasia even if they are not in pain.

She insisted there was "nothing wrong" with people being helped to die for the sake of their loved ones or society.

The 84-year-old added that she hoped people will soon be "licensed to put others down" if they are unable to look after themselves.

Her comments in a magazine interview have been condemned as "immoral" and "barbaric", but also sparked fears that they may find wider support because of her influence on ethical matters.

Lady Warnock, a former headmistress who went on to become Britain's leading moral philosopher, chaired a landmark Government committee in the 1980s that established the law on fertility treatment and embryo research.

A prominent supporter of euthanasia, she has previously suggested that pensioners who do not want to become a burden on their carers should be helped to die.

Last year the Mental Capacity Act came into effect that gives legal force to "living wills", so patients can appoint an "attorney" to tell doctors when their hospital food and water should be removed.

But in her latest interview, given to the Church of Scotland's magazine Life and Work, Lady Warnock goes further by claiming that dementia sufferers should consider ending their lives through euthanasia because of the strain they put on their families and public services.

Recent figures show there are 700,000 people with degenerative diseases such as Alzheimer's in Britain. By 2026 experts predict there will be one million dementia sufferers in the country, costing the NHS an estimated £35billion a year.

Lady Warnock said: "If you're demented, you're wasting people's lives – your family's lives – and you're wasting the resources of the National Health Service.

i'd rather be a cow manager than a people manager...,

NYTimes | The cows seem to like it, too.

Robots allow the cows to set their own hours, lining up for automated milking five or six times a day — turning the predawn and late-afternoon sessions around which dairy farmers long built their lives into a thing of the past.

With transponders around their necks, the cows get individualized service. Lasers scan and map their underbellies, and a computer charts each animal’s “milking speed,” a critical factor in a 24-hour-a-day operation.

The robots also monitor the amount and quality of milk produced, the frequency of visits to the machine, how much each cow has eaten, and even the number of steps each cow has taken per day, which can indicate when she is in heat.

“The animals just walk through,” said Jay Skellie, a dairyman from Salem, N.Y., after watching a demonstration. “I think we’ve got to look real hard at robots.”

Many of those running small farms said the choice of a computerized milker came down to a bigger question: whether to upgrade or just give up.

“Either we were going to get out, we were going to get bigger, or we were going to try something different,” said the elder Mr. Borden, 59, whose family has been working a patch of ground about 30 miles northeast of Albany since 1837. “And this was something a little different.”

The Bordens and other farmers say a major force is cutting labor costs — health insurance, room and board, overtime, and workers’ compensation insurance — particularly when immigration reform is stalled in Washington and dependable help is hard to procure.

The machines also never complain about getting up early, working late or being kicked.

“It’s tough to find people to do it well and show up on time,” said Tim Kurtz, who installed four robotic milkers last year at his farm in Berks County, Pa. “And you don’t have to worry about that with a robot.”

The Bordens say the machines allow them to do more of what they love: caring for animals.

“I’d rather be a cow manager,” Tom Borden said, “than a people manager.”

american middle-class no longer the world's richest

NYTimes |  The American middle class, long the most affluent in the world, has lost that distinction.

While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.

After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.

The numbers, based on surveys conducted over the past 35 years, offer some of the most detailed publicly available comparisons for different income groups in different countries over time. They suggest that most American families are paying a steep price for high and rising income inequality.

Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago.

In European countries hit hardest by recent financial crises, such as Greece and Portugal, incomes have of course fallen sharply in recent years.

The income data were compiled by LIS, a group that maintains the Luxembourg Income Study Database. The numbers were analyzed by researchers at LIS and by The Upshot, a New York Times website covering policy and politics, and reviewed by outside academic economists.

The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.

LIS counts after-tax cash income from salaries, interest and stock dividends, among other sources, as well as direct government benefits such as tax credits.

The findings are striking because the most commonly cited economic statistics — such as per capita gross domestic product — continue to show that the United States has maintained its lead as the world’s richest large country. But those numbers are averages, which do not capture the distribution of income. With a big share of recent income gains in this country flowing to a relatively small slice of high-earning households, most Americans are not keeping pace with their counterparts around the world.

“The idea that the median American has so much more income than the middle class in all other parts of the world is not true these days,” said Lawrence Katz, a Harvard economist who is not associated with LIS. “In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer.”

That is no longer the case, Professor Katz added.

Median per capita income was $18,700 in the United States in 2010 (which translates to about $75,000 for a family of four after taxes), up 20 percent since 1980 but virtually unchanged since 2000, after adjusting for inflation. The same measure, by comparison, rose about 20 percent in Britain between 2000 and 2010 and 14 percent in the Netherlands. Median income also rose 20 percent in Canada between 2000 and 2010, to the equivalent of $18,700.

The most recent year in the LIS analysis is 2010. But other income surveys, conducted by government agencies, suggest that since 2010 pay in Canada has risen faster than pay in the United States and is now most likely higher. Pay in several European countries has also risen faster since 2010 than it has in the United States.

Three broad factors appear to be driving much of the weak income performance in the United States. First, educational attainment in the United States has risen far more slowly than in much of the industrialized world over the last three decades, making it harder for the American economy to maintain its share of highly skilled, well-paying jobs.

beginning of the end? oil companies cut back on spending...,

ourfiniteworld | Steve Kopits recently gave a presentation explaining our current predicament: the cost of oil extraction has been rising rapidly (10.9% per year) but oil prices have been flat. Major oil companies are finding their profits squeezed, and have recently announced plans to sell off part of their assets in order to have funds to pay their dividends. Such an approach is likely to lead to an eventual drop in oil production. I have talked about similar points previously (here and here), but Kopits adds some additional perspectives which he has given me permission to share with my readers. I encourage readers to watch the original hour-long presentation at Columbia University, if they have the time.

Controversy: Does Oil Extraction Depend on “Supply Growth” or “Demand Growth”?

The first section of the presentation is devoted the connection of GDP Growth to Oil Supply Growth vs Oil Demand Growth. I omit a considerable part of this discussion in this write-up. Economists and oil companies, when making their projections, nearly always make their projections depend on “Demand Growth”–the amount people and businesses want. This demand growth is seen to be rising indefinitely in the future. It has nothing to do with affordability or with whether the potential consumers actually have jobs to purchase the oil products.

energy accounts for 33% of S&P 500 capex spending?!?!

BI | There's a lingering hope out there that America's corporations will unleash their cash hoards and replace their aging equipment.

"The whole debate about the S&P is about when this turns back up again," said Deutsche Bank's David Bianco back in November.

"We forecast capital spending by S&P 500 companies will rise by 9% in 2014 to $700 billion following a modest 2% growth in 2013," said Goldman Sachs' David Kostin in a new note to clients.

Based on Kostin's reading of the recent earnings season conference calls, growth expectations are currently trending a bit below that 9% rate.

"S&P 500 companies that provided guidance plan to boost capex by 7% in 2014, [are] slightly below our forecast," added Kostin. "171 S&P 500 companies provided capex guidance during recent quarterly earnings conference calls. These firms account for 50% of aggregate capex spending by the S&P 500. All sectors plan to increase capex in 2014 with the exception of Telecom Services, which guided flat."

For some context, Kostin provided this chart that breaks down how much each industry contributes to the capex story.

unless WW-III jumps off, that younger brother's SOL...,

NYTimes | We take as our text today the parable of the prodigal son. As I hope you know, the story is about a father with two sons. The younger son took his share of the inheritance early and blew it on prostitutes and riotous living. When the money was gone, he returned home.

His father ran out and embraced him. The delighted father offered the boy his finest robe and threw a feast in his honor. The older son, the responsible one, was appalled. He stood outside the feast, crying in effect, “Look! All these years I’ve been working hard and obeying you faithfully, and you never gave me special treatment such as this!”

The father responded, “You are always with me, and everything I have is yours.” But he had to celebrate the younger one’s return. The boy was lost and now is found. 

Did the father do the right thing? Is the father the right model for authority today?

The father’s critics say he was unjust. People who play by the rules should see the rewards. Those who abandon the community, live according to their own reckless desires should not get to come back and automatically reap the bounty of others’ hard work. If you reward the younger brother, you signal that self-indulgence pays, while hard work gets slighted. 

The father’s example is especially pernicious now, the critics continue. Jesus preached it at the time of the Pharisees, in an overly rigid and rule-bound society. In those circumstances, a story of radical forgiveness was a useful antidote to the prevailing legalism.

But we don’t live in that kind of society. We live in a society in which moral standards are already fuzzy, in which people are already encouraged to do their own thing. We live in a society with advanced social decay — with teens dropping out of high school, financiers plundering companies and kids being raised without fathers. The father’s example in the parable reinforces loose self-indulgence at a time when we need more rule-following, more social discipline and more accountability, not less.

It’s a valid critique, but I’d defend the father’s example, and, informed by a reading of Timothy Keller’s outstanding book “The Prodigal God,” I’d even apply the father’s wisdom to social policy-making today. 

We live in a divided society in which many of us in the middle- and upper-middle classes are like the older brother and many of the people who drop out of school, commit crimes and abandon their children are like the younger brother. In many cases, we have a governing class of elder brothers legislating programs on behalf of the younger brothers. The great danger in this situation is that we in the elder brother class will end up self-righteously lecturing the poor: “You need to be more like us: graduate from school, practice a little sexual discipline, work harder.”

But the father in this parable exposes the truth that people in the elder brother class are stained, too. The elder brother is self-righteous, smug, cold and shrewd. The elder brother wasn’t really working to honor his father; he was working for material reward and out of a fear-based moralism. The father reminds us of the old truth that the line between good and evil doesn’t run between people or classes; it runs straight through every human heart.

retail giants are dying and with them the malls they anchor...,

cnbc | Get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores. 

On Tuesday, Sears said that it will shutter its flagship store in downtown Chicago in April. It's the latest of about 300 store closures in the U.S. that Sears has made since 2010. The news follows announcements earlier this month of multiple store closings from major department stores J.C. Penney and Macy's.

Further signs of cuts in the industry came Wednesday, when Target said that it will eliminate 475 jobs worldwide, including some at its Minnesota headquarters, and not fill 700 empty positions.
Experts said these headlines are only the tip of the iceberg for the industry, which is set to undergo a multiyear period of shuttering stores and trimming square footage.

Shoppers will likely see an average decrease in overall retail square footage of between one-third and one-half within the next five to 10 years, as a shift to e-commerce brings with it fewer mall visits and a lesser need to keep inventory stocked in-store, said Michael Burden, a principal with Excess Space Retail Services.

baltic dry index: shipping of major raw materials sees worst slide since start of the financial crisis

 

zerohedge | Despite 'blaming' the drop in the cost of dry bulk shipping on Colombian coal restrictions, it seems increasingly clear that the 40% collapse in the Baltic Dry Index since the start of the year is more than just that. While this is the worst start to a year in over 30 years, the scale of this meltdown is only matched by the total devastation that occurred in Q3 2008. Of course, the mainstream media will continue to ignore this dour index until it decides to rise once again, but for now, 9 days in a row of plunging prices is yet another canary in the global trade coalmine and suggests what inventory stacking that occurred in Q3/4 2013 is anything but sustained. Baltic Dry costs are the lowest in 4 months, down 40% for the start of the year, and the worst start to a year in over 30 years... Fist tap Dale.

harpex: shipping of finished goods appears to be heading toward flatline...,

										1. Weekly Rate Assessments We shall publish on a weekly basis, charter rate levels in US Dollars for the following different size / specification of container ships. These assessments are basis 6-12 month fixtures and are based on actual fixtures reported or heard fixed in the container market each week.   700 teu gearless abt   700 teu abt   400@14t gearless abt     8400 dwt abt 100 reefer abt 17kn 1100 teu geared abt 1100 teu abt   700@14t geared abt   14000 dwt abt 200 reefer abt 19kn 1700 teu geared abt 1700 teu abt 1100@14t geared abt   22000 dwt abt 200 reefer abt 19kn 2500 teu geared abt 2500 teu abt 1850@14t geared abt   34000 dwt abt 300 reefer abt 22kn 2700 teu gearless abt 2700 teu abt 2100@14t gearless abt   37000 dwt abt 300 reefer abt 22kn 3500 teu gearless abt 3500 teu abt 2400@14t gearless abt   42000 dwt abt 300 reefer abt 22kn 4250 teu gearless abt 4250 teu abt 2800@14t gearless abt   50000 dwt abt 400 reefer abt 23kn 6500 teu gearless abt 6500 teu abt 4900@14t gearless abt   82000 dwt abt 500 reefer abt 24kn 8500 teu gearless abt 8500 teu abt 6350@14t gearless abt 100000 dwt abt 700 reefer abt 25kn We believe these newly published rates will create a powerful research tool for our clients and readers who can now do the following: Track the actual time charter rates for a particular size of ship over various time frames within the last 10 years. Compare the market fluctuations in the charter rates of different ship sizes, for example, compare the rates for 1700 teu ships against the rates for 2500 teu ships over the last 5 years to see whether there is a correlation between rate changes over such a period. Track the actual time charter rates for various sizes of ship and also show their respective moving averages. 2. Harpex Index Given the changes above, we have decided to amend the methodology used to calculate our index. Our Harpex index was originally developed in 2004 and we feel now is the right time to update and improve the method of calculation in order to better represent the current container charter market. Based on the new methodology we shall be providing an index figure each calendar week, as we did previously. The index will now be based on rate assessments taken from following seven classes of ship, rather than the previous eight classes of ship.   700 teu gearless abt   700 teu abt   400@14t gearless abt   8400 dwt abt 100 reefer abt 17kn 1100 teu geared abt 1100 teu abt   700@14t geared abt 14000 dwt abt 200 reefer abt 19kn 1700 teu geared abt 1700 teu abt 1100@14t geared abt 22000 dwt abt 200 reefer abt 19kn 2500 teu geared abt 2500 teu abt 1850@14t geared abt 34000 dwt abt 300 reefer abt 22kn 2700 teu geared abt 2700 teu abt 2100@14t gearless abt 37000 dwt abt 300 reefer abt 22kn 3500 teu gearless abt 3500 teu abt 2400@14t gearless abt 42000 dwt abt 300 reefer abt 22kn 4250 teu gearless abt 4250 teu abt 2800@14t gearless abt 50000 dwt abt 400 reefer abt 23kn We have also retroactively calculated the index for the last ten years based on this new methodology and figures for the last three years are available on the website. We hope everyone finds this useful and should anyone have any questions please do not hesitate to ask.

 

rising energy costs lead to recession and eventual collapse...,

thebull | How does the world reach limits? This is a question that few dare to examine. My analysis suggests that these limits will come in a very different way than most have expected–through financial stress that ultimately relates to rising unit energy costs, plus the need to use increasing amounts of energy for additional purposes:

- To extract oil and other minerals from locations where extraction is very difficult, such as in shale formations, or very deep under the sea;

    - To mitigate water shortages and pollution issues, using processes such as desalination and long distance transport of food; and
    - To attempt to reduce future fossil fuel use, by building devices such as solar panels and electric cars that increase fossil fuel energy use now in the hope of reducing energy use later.

We have long known that the world is likely to eventually reach limits. In 1972, the book The Limits to Growth by Donella Meadows and others modeled the likely impact of growing population, limited resources, and rising pollution in a finite world. They considered a number of scenarios under a range of different assumptions. These models strongly suggested the world economy would begin to hit limits in the first half of the 21st century and would eventually collapse.

The indications of the 1972 analysis were considered nonsense by most. Clearly, the world would work its way around limits of the type suggested. The world would find additional resources in short supply. It would become more efficient at using resources and would tackle the problem of rising pollution. The free market would handle any problems that might arise.

The Limits to Growth analysis modeled the world economy in terms of flows; it did not try to model the financial system. In recent years, I have been looking at the situation and have discovered that as we hit limits in a finite world, the financial system is the most vulnerable part because of the system because it ties everything else together. Debt in particular is vulnerable because the time-shifting aspect of debt “works” much better in a rapidly growing economy than in an economy that is barely growing or shrinking.

The problem that now looks like it has the potential to push the world into financial collapse is something no one would have thought of—high oil prices that take a slice out of the economy, without anything to show in return. Consumers find that their own salaries do not rise as oil prices rise. They find that they need to cut back on discretionary spending if they are to have adequate funds to pay for necessities produced using oil. Food is one such necessity; oil is used to run farm equipment, make herbicides and pesticides, and transport finished food products. The result of a cutback in discretionary spending is recession or near recession, and less job availability. Governments find themselves in  financial distress from trying to mitigate the recession-like impacts without adequate tax revenue.

One of our big problems now is a lack of cheap substitutes for oil. Highly touted renewable energy sources such as wind and solar PV are not cheap. They also do not substitute directly for oil, and they increase near-term fossil fuel consumption. Ethanol can act as an “oil extender,” but it is not cheap. Battery powered cars are also not cheap.

The issue of rising oil prices is really a two-sided issue. The least expensive sources of oil tend to be extracted first. Thus, the cost of producing oil tends to rise over time. As a result, oil producers tend to require ever-rising oil prices to cover their costs. It is the interaction of these two forces that leads to the likelihood of financial collapse in the near term:

- Need for ever-rising oil prices by oil producers.
- The adverse impact of high-energy prices on consumers.

If a cheap substitute for oil had already come along in adequate quantity, there would be no problem. The issue is that no suitable substitute has been found, and financial problems are here already. In fact, collapse may very well come from oil prices not rising high enough to satisfy the needs of those extracting the oil, because of worldwide recession.

initial food stamp cuts went into effect last week...,

WaPo | The region’s most vulnerable residents will find themselves reshuffling their budgets Friday when a temporary boost to the federal food stamps program expires, resulting in the loss of millions of dollars used by families to keep food on the table.

Nationally, the food stamp program, known as the Supplemental Nutrition Assistance Program, or SNAP, will be reduced by $5 billion after a vast expansion over the past five years. In the District, about 61 percent more residents use food stamps than did in 2007, according to data from NeighborhoodInfo DC. That amounts to more than 144,000 residents, or nearly one in every four.

The increases were also stark in the suburbs. In Montgomery County, for example, there was a 183 percent increase in residents using food stamps, from about 25,000 to 71,000 today. Similar increases were seen in Prince George’s and Fairfax counties.

The impact of the cut on individuals will vary widely, but experts estimate that those on food stamps will receive between 5 and 8 percent less. For example, a family of three with no income will see monthly benefits reduced by $29, to $497 from $526.

“That could be lunch for a week,’’ said Deborah Carroll, administrator of the District’s Economic Security Administration. “It will definitely have an effect on how people access food.”

States have largely declared that little can be done on their part to help augment the program. In Maryland, which has a goal of ending hunger by 2015, officials are still working to get more families whatever SNAP benefits they can, according to Brian Schleter, the state’s spokesman for the Department of Human Services. In Virginia, in which one in every 10 residents receive food stamps, officials are encouraging people to seek help from local charities and churches.

A number of those organizations have said they are already stretched thin because of increasing demand, fewer donations and sequestration-related cuts.

skewing emphasis to obscure a key index for measuring global contraction (search the blog for "baltic dry index")

stratfor | The global shipping industry is oversupplied. Because supply far exceeds demand, shipping rates have plummeted, as have the prices of ships. Some shipping companies have sought to capitalize on this trend by purchasing newer, larger ships at lower prices so that they can remain price competitive. But unless demand rebounds by the time these ships become operational, the industry's oversupply problem will only worsen.

It is unclear whether the global shipping industry will normalize before these new ships enter the market. Demand could rise as the global economy recovers, or the supply of ships could somehow fall. But the economy's recovery could just as well be slower than anticipated. Several factors could prevent the industry from righting itself, not the least of which are inaccurate forecasts of future market behavior. In fact, the current state of global shipping was caused in part by incorrect predictions of continued growth prior to the 2008 financial crisis. In any case, continued poor performance and a sluggish global economy could eventually force the shipping industry to restructure.

egypt still broke and hongry...,

stratfor | Underlying the question of what political structure will emerge from this week's crisis, the fundamental fact is that Egypt is running out of money. Dwindling foreign reserves point to a negative balance of payments that is sapping central bank resources. At the same time, Egypt's reliance on foreign supplies of fuel and wheat is only growing. Egyptian petroleum production peaked in 1996 and the country first became a net importer in 2007. Government fuel subsidies are an enormous burden on state finances and, throughout the past year, failures to pay suppliers and a shortage of foreign exchange available to importers have caused supply shortfalls and price spikes throughout the country.

The government has a few options, including backing off subsidies in hopes that higher prices will help reduce consumption and therefore cut down on the net drain on state finances. That route carries a high risk of a major political backlash, so it is more likely that the government will continue, if not increase, its commitment to using state funds to guarantee sufficient supply and low prices.

The second major challenge stems from Egypt's extreme vulnerability to international food markets. Though dire warnings of food shortages have been frequent in the media, they have not yet appeared with any significant frequency within Egypt. However, this is not to say that they will not eventually appear. Bread is a staple of the Egyptian diet, and Egypt relies on imports for more than half of its wheat consumption. Although farmland within Egypt is increasingly dedicated to growing wheat, there is simply not enough arable land for Egypt to feed its population.

In fact, although Egypt is a vast country geographically, most of it is uninhabitable desert. Population growth is accelerating in Egypt's densely packed urban centers, threatening to worsen these underlying challenges. Population growth in 2012 hit its highest levels since 1991, reaching 32 births per 1,000 people and bringing the country's population to 84 million, according to initial government estimates. This represents an increase of 50 percent from 1990, when the population was just 56 million. Egypt's fertility rate is currently 2.9 children per woman and is expected to remain above the replacement ratio of 2.1 for at least the next two decades. As a result, the United Nations projects the Egyptian population to exceed 100 million by 2030. This means that Egypt will have a growing pool of young people of working age in the coming decades, creating substantial challenges for the Egyptian state to provide them with economic opportunities, or at the least sufficient basic goods.

Ousted Egyptian leader Hosni Mubarak faced similar problems, and growing poverty and joblessness are arguably among the root causes of the uprising in 2011 that unseated him. The wave of protests that challenged Morsi, who became the first democratically elected president in the country's history, should be understood as a continuation of this swelling trend. While previous governments in Egypt have been able to leverage strategic rent from foreign countries interested in maintaining stability in Egypt, which is the linchpin between the Middle East and North Africa and the manager of the Suez Canal, the country has become increasingly peripheral to the strategic needs of major powers.

As a result, although Egypt has been able to secure some limited funding from regional players such as Qatar, Iraq, Saudi Arabia and Libya, it remains locked in negotiations with the International Monetary Fund over some broader, more sustainable financial relief. It is possible that the new government will find a level of stability that the increasingly isolated Muslim Brotherhood leadership was unable to sustain in the face of rising disputes with former coalition partners and a firmly obstructionist judiciary. However, the military's decision to unseat Morsi underlined the instability inherent in Egypt's political system and may make it even more difficult for Egypt to return to the good graces of financial markets or Western powers. In any case, mounting demographic and economic pressures mean that the job of managing Egypt's economic challenges will become incrementally more difficult with each passing year and for each faction that occupies the presidential palace.

a tale of two cities...,

zerohedge | New York City has a well-deserved reputation as the country’s financial and cultural center — and that’s great.

What is not so great is that, for a growing number of its residents, simply surviving in New York has become an increasingly difficult proposition.

As shown by a report issued last year by the city controller, the so-called “Capital of the World” is also the capital of income distribution inequality in the nation.

...

Even though the research precedes superstorm Sandy, this year’s NYC Hunger Experience report (below) reveals a tale of two cities, wherein the struggles of low-income and unemployed New Yorkers to keep food on the table have intensified even as the circumstances continue to improve for those who are better off.

“Now, we have the additional hardships brought about by Sandy,” Stampas said.

Many of the report’s findings are truly worrisome. For instance, between 2011 and 2012, the percentage of households with annual income below $25,000 that had trouble affording food increased a whopping 30%, though the total number of city residents who reported difficulty affording food in the same time period actually decreased by 9%.

No less serious is that, according to the Food Bank, “low income families are making the difficult decision to reduce the nutritional quality of their meals by purchasing less expensive and unhealthy foods in order to afford the mandatory expenses that would keep a roof over their heads.”

Not surprisingly, low-income residents — especially Latinos and African-Americans, women and the unemployed — are more likely to experience difficulty affording the basics than other groups.

The picture painted by the report is nothing short of alarming:

• The percentage of unemployed New Yorkers reporting difficulty soared from 41% in 2011 to 54% in 2012. To make matters worse, the city’s unemployment rate continues to trump the national average.
• As of last November, the city’s unemployment rate was 8.8% (approximately 351,000 people), compared to 7.8% (approximately 12.2 million people) in the country as a whole.
• In fact, the report adds, three years after economists declared the end of the Great Recession in 2009, unemployment rates in the city have yet to recede to pre-recession levels. Participation in government food assistance programs continues to rise, and demand for emergency food programs continues to intensify.

Again, not a pretty picture.

what the labor pool collapse means

businessinsider | “If today, the country had the same proportion of persons of working age employed as it did in 2000, the U.S. would have almost 14 million more people contributing to the economy. Even assuming that these additional workers would be 25% less productive on average than the existing labor force, U.S. gross domestic product would still be more than 5% higher ($800 billion, or about $2,600 more per person) than it actually is.”

Makes sense.

The larger question concerns how and why this happened. I have my own theories about this, but let’s first look at the evidence that Vedder himself comes up with to show that most of this can be explained by transfer programs like food stamps, disability insurance, student subsidies, and unemployment payments.

Let’s look at each.

Food stamps were a slightly goofy subsidy to the big agriculture lobby back in the 1960s, fobbed off on the public as somehow essential to ending hunger. Today, food is cheaper and more plentiful than ever, and American waistbands reveal this fact. People talk about the plight of the hungry, but it is mostly a myth. We are the most stuffed society in the history of the world.

Yet even now, 47.5 million people are receiving food stamps, with an average benefit of $125 per month. That’s 15% of the population. That’s some pretty serious grocery purchases there. Big Ag is very happy about this. Must be nice to a have a pool of guaranteed customers who live off others.

Vedder makes the point that a major reason people work is to eat. If the eating part is guaranteed, why bother working?

With disability benefits — the government program most famous for massive fraud and abuse — it’s the same story. Back in 1990, only 3 million people took checks. Today, that number is through the roof, so much that almost 8.6 million people get checks that provide the equivalent of a full-time income. And this has happened at a time when medical technology is better than ever at dealing with real disability.

Next comes the whole student racket. Back in 2000, not even 3.9 million young people received Pell Grant awards to go to college. Today, the number is approaching 10 million. Going to school is a great way to avoid having to work. Hey, but maybe all these desk sitters are absorbing fabulous information that they will soon spring on society in the form of dazzling innovations and productivity, and we will look back and say, wow, that was worth it after all.

OK, stop laughing.

Next comes unemployment. In the past, it was never possible to stay unemployed for a full year and still receive benefits. Now it is normal. Congress just keeps extending benefits, probably out of fear that if these people are pushed into the labor market, unemployment will go up and wages will fall and there will be a revolution. It’s literally the case that government is paying millions of people to shut up and stay at home.

What are we to make of Vedder’s picture of the workforce? One gains the image of many millions of people sitting at home drawing checks, pretending to be students, stuffing their faces with tax-funded potato chips, and otherwise just living it up. If that’s really true, that’s not really suffering, is it? The data reported above indicate no real disaster, except for those of us footing the bill.

I actually don’t think this is entirely the right way to look at it. The reality is that the labor market is broken today because it is not really a market in any normal sense. Many people are shut out due to more substantial problems. People are saddled with debt, terrified to lower their wage expectations, and completely shut out of a system that doesn’t seem to accommodate the old expectations.