Nobody likes to hear a bleak diagnosis. But without a proper diagnosis, if you have a serious illness, your chances of survival become vanishingly small.
Enter Guy McPherson, conservation biologist, climate scientist and blogger, who despite his gloomy outlook about the prospects for industrial civilization--he thinks it could disappear within his lifetime--regards himself as an optimist. Why? Because back in 2002 after he finished editing a book on global climate change, he concluded that "we had set events in motion that would cause our own extinction, probably by 2030."
But, then he discovered the concept of peak oil and realized that "its consequences might bring the industrial economy to an overdue close, just in time." That development would make it possible for humans to persist on the planet for a considerably longer time by saving the life support systems of the Earth essential to both humans and the other species which humans rely on. Peak oil became a cause for optimism rather than pessimism.
I asked McPherson, who gave a talk this weekend near where I live, what would change his mind about the trajectory of industrial civilization. He answered that the discovery of a miraculous, cheap, easily scalable new energy source would probably allow our current arrangements to persist for a while longer. But such a development would be a death sentence for the human race since it would lead to the total destruction of the life support systems we rely on, systems which are only seriously crippled now. It would result in further population overshoot, resource depletion including that of soil and water, and further destruction of species we rely on for our well-being.
He likened what we are doing now to constructing an extra floor on the top of a 30-story brick structure using bricks pulled from the lower floors. We are engaging in the "world's largest game of Jenga" with the building blocks of our existence.
He says the emerging collapse of our modern living arrangements is not a recent phenomenon, but actually an ongoing process. He traces it back to the oil crises of the 1970s which were the beginning of the end. The key metric in his view is a peak in per capita oil consumption in 1979. McPherson says he would not be surprised if the endgame for industrial civilization plays out very quickly given the long period of stress both human society and the biosphere have been under for the last generation.
As a response he suggests focusing on four things: water, food, maintaining proper body temperature, and community. Water and food are obvious needs, but many of us don't think about whether the climate we live in will allow us to maintain proper body temperature. We have central heating and air conditioning to help us with that. But when such amenities are not available, the climate where we live will become crucial to our well-being and comfort.
By community he means building ties of mutual support with one's neighbors. "There ain't no lone rangers in collapse," McPherson explained. "If you look for ways to serve your community, you've got a good life ahead." His model is Monticello (minus the slaves) where "agriculture was the center of commerce and therefore the center of life."
As part of his own preparations he lives on land at moderate elevation with deep soils and easily accessible water. He grows food and raises goats for milk. The area is already populated by what he calls "life-loving economic doomers" who do not need to be convinced that industrial civilization is coming to an end. Mutual assistance is a way of life. Practical concerns trump philosophical and religious differences.
To do all this McPherson left his position as a tenured professor. He says at the beginning he knew practically nothing about how to provide the necessities for himself. "I could barely distinguish between a zucchini and a screwdriver," he explained. Now, he's milking goats, making cheese, growing vegetables and performing myriad our tasks necessary to a more localized existence, one that does not rely so heavily on the far-flung logistical networks of the globalized economy.
He doesn't call what he's doing "sustainable," a term which, he said, has even been co-opted by Wal-Mart. Instead, he refers to it as "durable," meaning he is trying to build a way of life that will outlive industrial civilization. He said his cosseted existence as an academic did little to prepare him for what he is doing now. But precisely because of this he is convinced that "if I can do this, anyone can do this."
And, in the manner of a principled prophet on a lonely mission, he soldiers on each day trying to help others build a durable way of life before it's too late.
Sunday, September 26, 2010
Wednesday, September 22, 2010
Schedule and Discounts for ASPO Conference, Oct 7-9
A detailed schedule is now available for the ASPO-USA World Oil Conference in Washington, D.C., October 7 through 9. I am now told starting today that for the next 50 individual attendees or persons representing nonprofits or educational institutions, using the discount code "peakoi12010" will allow registration for as little as $175.
I will be attending the entire conference. Please look me up if you are there.
I will be attending the entire conference. Please look me up if you are there.
Sunday, September 19, 2010
Your grandmother (but without the milk and cookies)
Nicole Foss looks like she might be your grandmother coming to reassure you about something. But instead of milk and cookies you are served a cold dose of reality. According to Foss, one of the writers on the popular finance-oriented blog The Automatic Earth, the global economy is locked into an inexorable deflationary decline that cannot be stopped by governments or central banks. And, the world is headed for a depression worse than that of the 1930s.
Believe it or not, that's the good news. The bad news is that the problems we face in the emerging depression will be aggravated by fossil fuel depletion, in particular, the onset of world peak oil production. When one questioner asked Foss when she thought we might return to even the tepid economic activity we see today, she had a one-word answer: "Never."
Her explanation is that the interaction between the ongoing collapse of contemporary finance and the development of new oil and gas fields will leave us desperately short of these critical fuels over time. The weakness in the economy will lead to low investment in exploration for new oil and gas reservoirs which will, in turn, lead ultimately to a supply collapse. The supply collapse will lead to high prices which will depress economic activity and lead to recurrent economic contractions. When the new Great Depression is done, Foss claims that the world will be a completely different place with our current institutions swept into the dustbin of history.
Foss is remarkably good at delivering her message. She delivered it in person recently in a high school auditorium near where I live. Steady and clear, she methodically lays out her case for the scenario above with such logical precision and compelling analogies that you wonder just how one would go about making even the slightest dent in it. Of course, no one knows the future. Some people make lucky guesses--sometimes called "informed" predictions. But in the end it's never clear how to tell ahead of time whom to believe during the next round of predictions.
Nicole Foss does, however, seem remarkably informed. She is at ease talking about the necessity of acquiring your own tools and growing own your food. In the next breathe she's just as much at ease explaining with stunning clarity and brevity why the current chairman of the U. S. Federal Reserve Board is an even bigger fool that you thought he was. But she does this without any sign of personal animus. Ben Bernanke isn't a bad person. He's just confused and misinformed.
And, that leads us directly to Foss's mission: To inform people so that they will have the understanding and tools to weather the coming storm and to build a community that can survive and thrive through it. She also demystifies the world of finance with unusual pithiness. The most recent financial bubble was not the result of some impenetrable, new-fangled financial instruments. Rather its roots were the same as all financial bubbles: the rediscovery of leverage. Translation: If you borrow money from someone else and speculate with it, you can make a lot more money than if you just use your own. It's a tactic that works until it doesn't. And, when it stops working, the economy goes crash.
The post-Depression generation had learned that too much borrowing leads to tears, and so they were very careful not to take on too much debt. Eventually, the people who experienced these tears died, and others took their place in the economy. The success of those who took on debt for speculative purposes attracted more people who took on debt to do the same in every field of investment. Eventually, too many people borrowed too much, and many of them were unable even to meet their interest payments. That is where we are today. According to Foss, it will be years until that excess debt is either paid or defaulted on. And, that means deflation for several years to come at least.
Is she right? No one can know until we travel some years hence. But so far, I'm having a hard time cracking her logic.
Believe it or not, that's the good news. The bad news is that the problems we face in the emerging depression will be aggravated by fossil fuel depletion, in particular, the onset of world peak oil production. When one questioner asked Foss when she thought we might return to even the tepid economic activity we see today, she had a one-word answer: "Never."
Her explanation is that the interaction between the ongoing collapse of contemporary finance and the development of new oil and gas fields will leave us desperately short of these critical fuels over time. The weakness in the economy will lead to low investment in exploration for new oil and gas reservoirs which will, in turn, lead ultimately to a supply collapse. The supply collapse will lead to high prices which will depress economic activity and lead to recurrent economic contractions. When the new Great Depression is done, Foss claims that the world will be a completely different place with our current institutions swept into the dustbin of history.
Foss is remarkably good at delivering her message. She delivered it in person recently in a high school auditorium near where I live. Steady and clear, she methodically lays out her case for the scenario above with such logical precision and compelling analogies that you wonder just how one would go about making even the slightest dent in it. Of course, no one knows the future. Some people make lucky guesses--sometimes called "informed" predictions. But in the end it's never clear how to tell ahead of time whom to believe during the next round of predictions.
Nicole Foss does, however, seem remarkably informed. She is at ease talking about the necessity of acquiring your own tools and growing own your food. In the next breathe she's just as much at ease explaining with stunning clarity and brevity why the current chairman of the U. S. Federal Reserve Board is an even bigger fool that you thought he was. But she does this without any sign of personal animus. Ben Bernanke isn't a bad person. He's just confused and misinformed.
And, that leads us directly to Foss's mission: To inform people so that they will have the understanding and tools to weather the coming storm and to build a community that can survive and thrive through it. She also demystifies the world of finance with unusual pithiness. The most recent financial bubble was not the result of some impenetrable, new-fangled financial instruments. Rather its roots were the same as all financial bubbles: the rediscovery of leverage. Translation: If you borrow money from someone else and speculate with it, you can make a lot more money than if you just use your own. It's a tactic that works until it doesn't. And, when it stops working, the economy goes crash.
The post-Depression generation had learned that too much borrowing leads to tears, and so they were very careful not to take on too much debt. Eventually, the people who experienced these tears died, and others took their place in the economy. The success of those who took on debt for speculative purposes attracted more people who took on debt to do the same in every field of investment. Eventually, too many people borrowed too much, and many of them were unable even to meet their interest payments. That is where we are today. According to Foss, it will be years until that excess debt is either paid or defaulted on. And, that means deflation for several years to come at least.
Is she right? No one can know until we travel some years hence. But so far, I'm having a hard time cracking her logic.
Sunday, September 12, 2010
Class interests and the future of inflation
It is a frequent conceit among hard money advocates that central banks and especially the U. S. Federal Reserve Bank are out to debase their currencies in order to save debtors. Below I will show why this statement--although seemingly borne out by observation--can result in misleading conclusions about the motives of central banks. But first, let me lay out more thoroughly the hard money advocates' explanation of how the world works.
Central banks debase currency by printing excess currency or by enabling the rapid expansion of credit, both of which put more money in circulation. When the amount of money in circulation rises with no corresponding rise in the production of actual goods and services, then more money is chasing after the same amount of goods and services. That creates an inflation, that is, a general rise in prices, which usually leads to a rise in wages and in asset values in such areas as housing and the stock market. If you are in debt and your wages are rising, this naturally makes it easier to pay back your loans which are, of course, for a fixed number of dollars or euros or other currency. In other words, the loan amounts are not adjusted for inflation even as wages and the price of assets rise.
Naturally, those who've been prudent and saved and therefore have money to lend are penalized since when their loans are repaid, the money they receive back, even with interest, often buys less than it did when they lent it. This is the standard explanation of how savers get gypped and profligates get rewarded under what is called a fiat money system, that is, a system of currency which is merely decreed by a national government. In the United States the U. S. dollar is legal tender because the government says it is. There is no formal backing with precious metals or anything else.
Why do central banks supposedly cater to debtors? It's because they make up the majority of the electorate who have any combination of home mortgages, car loans, credit card debt, and installment credit. The political pressure on the banks is thought to be so great to bailout the masses who are in debt that these banks cannot carry out their primary mandate to maintain the purchasing power of the currency.
Maintaining the value of currency would, however, favor savers, and the majority of savings are held by the very wealthy. In the United States the wealthiest 10 percent of the population hold a whopping 70 percent of all wealth. In Switzerland the numbers are almost the same. In Denmark the wealthiest 10 percent hold 65 percent of the total wealth. In Germany the amount is 44 percent.
But is it true that inflation is never good for the wealthy who are the world's chief lenders? It depends on what the wealthy own and what type of inflation one is talking about. If they own real estate, and the wealthy own a substantial amount of it, inflation can make these prices rise. If they own stocks, and the wealthiest 10 percent in the United States own more than 80 percent of all equities, inflation can make them rise either by stimulating economic activity or by encouraging people to enter the stock market to preserve their wealth thus bidding up stock prices.
Naturally, the wealthy have bank deposits which are lent out. And, they own bonds, government, municipal and corporate. In fact, they buy lots of them. Now, inflation hurts the value of these investments, but bank deposits and bonds are by no means the principal investments of the wealthy.
Now, let's return to the role and purpose of central banks. The purpose of any central bank is to ensure the stability of a country's banking system. And, the banking system in most democratic countries is in private hands, and that means in the hands of the wealthiest, either through stock and bond ownership or through direct investment in banks. So, indirectly, at least, the purpose of central banks is to insure a major repository of wealth for the world's very richest people. So far, in this task, the central banks have performed miracles. Many of the world's largest banks are, in fact, insolvent, and yet they have continued to function after the 2008 financial meltdown through a combination of regulatory forbearance, massive liquidity injections from central banks, and government guarantees and direct investment.
The hard money advocates warned that this bailout of the banking system would make so much money available for loans that the world would experience a bout of high inflation if not hyperinflation. Credit would once again flow so freely that money would flood the economy without a corresponding increase in goods and service. As people realized the inflationary effects of this new credit bubble, they would rapidly flee paper claims on wealth such as bonds and bank accounts and move their money into real goods such as commodities, particularly precious metals, and claims on real productive assets such as stocks.
But this has not happened. Instead, the banks, at least in the United States, have chosen to park their massive liquidity injections at the Federal Reserve or in government bonds where they earn essentially risk-free returns. This has turned out to be a backdoor method for transferring public funds to ailing banks through government expenditures on bond interest. And so, by any reasonable measure, private credit continues to shrink worldwide as public credit (i.e. government borrowing) expands. So far this has enabled a more orderly deleveraging on the part of companies and households than would otherwise have been the case. This is because you can deleverage in two ways; either you can pay back your loans or you can simply default on them. So far defaults have been kept in check. But government support of the economy has resulted in neither a substantial economic recovery nor an inflationary spiral. In fact, the biggest fear among central bankers is that the world could once again fall into the maw of deflation as it did in 2008.
The new and as yet untested prediction made by those who say we are heading for a bout of intense inflation is that as the economy once again weakens, the Federal Reserve will take the extraordinary step of creating fresh money to buy stocks and to buy real estate directly from homeowners. This would supposedly put money into the hands of "the public." But is this actually what would happen?
By "public" we can assume that the commentator cited above is talking about people who make considerably less money than he does. And yet, we already know that more than 80 percent of all equities in the United States are owned by people in the top 10 percent measured by assets. These people are unlikely to spend on consumer goods a substantial portion of the proceeds from any stock sale since their basic needs have already been met. They are much more likely to reinvest the money they receive in something else. As for the other 20 percent of equities which are held by "the public," many of those are held in pension funds, 401K plans, and IRAs, hardly sources of ready spending money. There's not much fodder for an unstoppable inflationary spiral here.
But what about direct real estate investments? Here the Federal Reserve would have to distinguish between rich homeowners trying to dump mansions or second homes and middle or working class homeowners who might spend more freely the money which they'd receive from any sales of their homes. But typically people of average means who must sell their homes are selling them because they can no longer pay the mortgage. This means that much of the money the Federal Reserve might pay for such homes would simply go to the bank holding the mortgage where, if current conditions continue to prevail, the bank will simply invest the money in low-risk government bonds.
So, even in the very unlikely circumstance that the Federal Reserve embarks on such a program, I am doubtful it would do much good. Instead, I regard the most likely course for the world economy as continued deleveraging by businesses and households for some time. And, I expect governments and central banks to continue to attempt to stimulate the economy. But all they will accomplish is to partially offset the contraction of credit which must proceed to its conclusion, that is, down to a point where debt service is manageable and prices for assets such as homes and stocks are compelling based on long-term historical trends, not compared to recent bubble-induced pricing.
Where does this leave us? While central banks seem incapable of preserving the absolute wealth of the rich, they are supremely accomplished at working in concert with central governments to preserve and even enhance the relative position of the wealthy. That is, wealth is now even more concentrated in fewer hands than it was before the 2008 crash despite the large percentage losses that the wealthy suffered along with everyone else. This is, of course, the result of failures of banks and other businesses outside the world's main financial centers, failures which have have reduced competition for the businesses and banks controlled by the superwealthy. These people may not be quite as wealthy as they were before the crash. But relatively speaking they have gained against the rest of the population in their wealth and power.
However, the wealth of the rich depends on other people, usually middle class people and the governments they fund, paying back their loans. Much of the government bailout effort has been focused on shoring up the value of the bonds of government and government-sponsored entities such as Fannie Mae and Freddie Mac, the home mortgage giants. Far from being concerned about the needs of feckless American homeowners or the Greek government, the bailouts of Fannie Mae, Freddie Mac, and Greece, to name three examples, are really about securing the investments of the banks and wealthy individuals who hold the bonds of these entities.
Of course, central bankers are right to worry about systemic financial collapse. But they always seem to think that the response to such a threat should be to guarantee the investments of the rich using the public's money. Central bankers and financial regulators often come from investment houses and banks which are, of course, controlled by the rich, and so are infected with an idea that infects so many of those who are rich or who cavort with the rich, namely, that what is good for the wealthy is more or less identical with the public interest.
The threat of inflation then comes not from any conscious policy on the part of central bankers or even most central governments who have already made their iron-clad allegiance to the wealthy classes abundantly clear. Rather the threat of inflation comes from the eventual exhaustion of government credit in the face of an intractable and unstoppable deflation brought on by continuous deleveraging of companies and households. When the governments of the world can no longer entice lenders to give them money, they will be forced to print their own. (This is usually done through the sale of bonds to central banks which then create deposits out of thin air for governments to spend.) At that point the inflation worriers may turn out to be right, in spades. Private deleveraging will have halted, but, of necessity, government credit will continue to grow at a frightening pace, probably just in order to pay the interest on and roll over the debt previously shouldered to fight deflation through government spending.
If inflation does arrive in this way, it won't be because the central banks and the government meant for it to happen. They have shown themselves to be faithful guardians of the rich. No, such a result will be pure and simple--if anything related to central banks and governments can be said to be pure and simple--a gargantuan policy mistake borne of a misunderstanding of the financial predicament we face.
When households and/or companies as a group take on more debt than they can service, then they are obliged to shed it, either by paying it down or defaulting. When this happens on a grand scale, it takes the entire economy into a deflationary depression which in turn makes it even more difficult for households and companies to pay their debts as incomes and profits tend to fall relentlessly with each new round of deflationary pressures. Every player in the economy is acting rationally by saving and by holding back on investments because they cannot be justified by consumer spending or on purchases because prices are likely to be cheaper in the months ahead. This rational behavior leads to worsening results for everyone until the deflationary spiral comes to its natural end.
No doubt there are many unforeseen events which might halt the world's slide into the deflationary mire--perhaps a large-scale war or central bank policies that essentially print paper money and hand it out to the populace. But barring such extraordinary events, inflation is likely to show up only as a latecomer to the global economy's wake. What course inflation will take and whether governments and central banks will once again be capable of stemming the losses of the wealthy is impossible to know. That they will try to stem the losses of the wealthy is beyond question.
Central banks debase currency by printing excess currency or by enabling the rapid expansion of credit, both of which put more money in circulation. When the amount of money in circulation rises with no corresponding rise in the production of actual goods and services, then more money is chasing after the same amount of goods and services. That creates an inflation, that is, a general rise in prices, which usually leads to a rise in wages and in asset values in such areas as housing and the stock market. If you are in debt and your wages are rising, this naturally makes it easier to pay back your loans which are, of course, for a fixed number of dollars or euros or other currency. In other words, the loan amounts are not adjusted for inflation even as wages and the price of assets rise.
Naturally, those who've been prudent and saved and therefore have money to lend are penalized since when their loans are repaid, the money they receive back, even with interest, often buys less than it did when they lent it. This is the standard explanation of how savers get gypped and profligates get rewarded under what is called a fiat money system, that is, a system of currency which is merely decreed by a national government. In the United States the U. S. dollar is legal tender because the government says it is. There is no formal backing with precious metals or anything else.
Why do central banks supposedly cater to debtors? It's because they make up the majority of the electorate who have any combination of home mortgages, car loans, credit card debt, and installment credit. The political pressure on the banks is thought to be so great to bailout the masses who are in debt that these banks cannot carry out their primary mandate to maintain the purchasing power of the currency.
Maintaining the value of currency would, however, favor savers, and the majority of savings are held by the very wealthy. In the United States the wealthiest 10 percent of the population hold a whopping 70 percent of all wealth. In Switzerland the numbers are almost the same. In Denmark the wealthiest 10 percent hold 65 percent of the total wealth. In Germany the amount is 44 percent.
But is it true that inflation is never good for the wealthy who are the world's chief lenders? It depends on what the wealthy own and what type of inflation one is talking about. If they own real estate, and the wealthy own a substantial amount of it, inflation can make these prices rise. If they own stocks, and the wealthiest 10 percent in the United States own more than 80 percent of all equities, inflation can make them rise either by stimulating economic activity or by encouraging people to enter the stock market to preserve their wealth thus bidding up stock prices.
Naturally, the wealthy have bank deposits which are lent out. And, they own bonds, government, municipal and corporate. In fact, they buy lots of them. Now, inflation hurts the value of these investments, but bank deposits and bonds are by no means the principal investments of the wealthy.
Now, let's return to the role and purpose of central banks. The purpose of any central bank is to ensure the stability of a country's banking system. And, the banking system in most democratic countries is in private hands, and that means in the hands of the wealthiest, either through stock and bond ownership or through direct investment in banks. So, indirectly, at least, the purpose of central banks is to insure a major repository of wealth for the world's very richest people. So far, in this task, the central banks have performed miracles. Many of the world's largest banks are, in fact, insolvent, and yet they have continued to function after the 2008 financial meltdown through a combination of regulatory forbearance, massive liquidity injections from central banks, and government guarantees and direct investment.
The hard money advocates warned that this bailout of the banking system would make so much money available for loans that the world would experience a bout of high inflation if not hyperinflation. Credit would once again flow so freely that money would flood the economy without a corresponding increase in goods and service. As people realized the inflationary effects of this new credit bubble, they would rapidly flee paper claims on wealth such as bonds and bank accounts and move their money into real goods such as commodities, particularly precious metals, and claims on real productive assets such as stocks.
But this has not happened. Instead, the banks, at least in the United States, have chosen to park their massive liquidity injections at the Federal Reserve or in government bonds where they earn essentially risk-free returns. This has turned out to be a backdoor method for transferring public funds to ailing banks through government expenditures on bond interest. And so, by any reasonable measure, private credit continues to shrink worldwide as public credit (i.e. government borrowing) expands. So far this has enabled a more orderly deleveraging on the part of companies and households than would otherwise have been the case. This is because you can deleverage in two ways; either you can pay back your loans or you can simply default on them. So far defaults have been kept in check. But government support of the economy has resulted in neither a substantial economic recovery nor an inflationary spiral. In fact, the biggest fear among central bankers is that the world could once again fall into the maw of deflation as it did in 2008.
The new and as yet untested prediction made by those who say we are heading for a bout of intense inflation is that as the economy once again weakens, the Federal Reserve will take the extraordinary step of creating fresh money to buy stocks and to buy real estate directly from homeowners. This would supposedly put money into the hands of "the public." But is this actually what would happen?
By "public" we can assume that the commentator cited above is talking about people who make considerably less money than he does. And yet, we already know that more than 80 percent of all equities in the United States are owned by people in the top 10 percent measured by assets. These people are unlikely to spend on consumer goods a substantial portion of the proceeds from any stock sale since their basic needs have already been met. They are much more likely to reinvest the money they receive in something else. As for the other 20 percent of equities which are held by "the public," many of those are held in pension funds, 401K plans, and IRAs, hardly sources of ready spending money. There's not much fodder for an unstoppable inflationary spiral here.
But what about direct real estate investments? Here the Federal Reserve would have to distinguish between rich homeowners trying to dump mansions or second homes and middle or working class homeowners who might spend more freely the money which they'd receive from any sales of their homes. But typically people of average means who must sell their homes are selling them because they can no longer pay the mortgage. This means that much of the money the Federal Reserve might pay for such homes would simply go to the bank holding the mortgage where, if current conditions continue to prevail, the bank will simply invest the money in low-risk government bonds.
So, even in the very unlikely circumstance that the Federal Reserve embarks on such a program, I am doubtful it would do much good. Instead, I regard the most likely course for the world economy as continued deleveraging by businesses and households for some time. And, I expect governments and central banks to continue to attempt to stimulate the economy. But all they will accomplish is to partially offset the contraction of credit which must proceed to its conclusion, that is, down to a point where debt service is manageable and prices for assets such as homes and stocks are compelling based on long-term historical trends, not compared to recent bubble-induced pricing.
Where does this leave us? While central banks seem incapable of preserving the absolute wealth of the rich, they are supremely accomplished at working in concert with central governments to preserve and even enhance the relative position of the wealthy. That is, wealth is now even more concentrated in fewer hands than it was before the 2008 crash despite the large percentage losses that the wealthy suffered along with everyone else. This is, of course, the result of failures of banks and other businesses outside the world's main financial centers, failures which have have reduced competition for the businesses and banks controlled by the superwealthy. These people may not be quite as wealthy as they were before the crash. But relatively speaking they have gained against the rest of the population in their wealth and power.
However, the wealth of the rich depends on other people, usually middle class people and the governments they fund, paying back their loans. Much of the government bailout effort has been focused on shoring up the value of the bonds of government and government-sponsored entities such as Fannie Mae and Freddie Mac, the home mortgage giants. Far from being concerned about the needs of feckless American homeowners or the Greek government, the bailouts of Fannie Mae, Freddie Mac, and Greece, to name three examples, are really about securing the investments of the banks and wealthy individuals who hold the bonds of these entities.
Of course, central bankers are right to worry about systemic financial collapse. But they always seem to think that the response to such a threat should be to guarantee the investments of the rich using the public's money. Central bankers and financial regulators often come from investment houses and banks which are, of course, controlled by the rich, and so are infected with an idea that infects so many of those who are rich or who cavort with the rich, namely, that what is good for the wealthy is more or less identical with the public interest.
The threat of inflation then comes not from any conscious policy on the part of central bankers or even most central governments who have already made their iron-clad allegiance to the wealthy classes abundantly clear. Rather the threat of inflation comes from the eventual exhaustion of government credit in the face of an intractable and unstoppable deflation brought on by continuous deleveraging of companies and households. When the governments of the world can no longer entice lenders to give them money, they will be forced to print their own. (This is usually done through the sale of bonds to central banks which then create deposits out of thin air for governments to spend.) At that point the inflation worriers may turn out to be right, in spades. Private deleveraging will have halted, but, of necessity, government credit will continue to grow at a frightening pace, probably just in order to pay the interest on and roll over the debt previously shouldered to fight deflation through government spending.
If inflation does arrive in this way, it won't be because the central banks and the government meant for it to happen. They have shown themselves to be faithful guardians of the rich. No, such a result will be pure and simple--if anything related to central banks and governments can be said to be pure and simple--a gargantuan policy mistake borne of a misunderstanding of the financial predicament we face.
When households and/or companies as a group take on more debt than they can service, then they are obliged to shed it, either by paying it down or defaulting. When this happens on a grand scale, it takes the entire economy into a deflationary depression which in turn makes it even more difficult for households and companies to pay their debts as incomes and profits tend to fall relentlessly with each new round of deflationary pressures. Every player in the economy is acting rationally by saving and by holding back on investments because they cannot be justified by consumer spending or on purchases because prices are likely to be cheaper in the months ahead. This rational behavior leads to worsening results for everyone until the deflationary spiral comes to its natural end.
No doubt there are many unforeseen events which might halt the world's slide into the deflationary mire--perhaps a large-scale war or central bank policies that essentially print paper money and hand it out to the populace. But barring such extraordinary events, inflation is likely to show up only as a latecomer to the global economy's wake. What course inflation will take and whether governments and central banks will once again be capable of stemming the losses of the wealthy is impossible to know. That they will try to stem the losses of the wealthy is beyond question.
Sunday, September 05, 2010
Labor Day Break--No post this week
I am taking a holiday break and expect to post again on Sunday, September 12. In the meantime, I hope you'll take a look at my latest column on Scitizen entitled "Fossil Fuels vs. The Public Interest." You may also find of interest the many comments on the The Oil Drum under a recent piece of mine, "Personality Profile: Do you 'go with the flow' or 'stock up' just in case?" that was reposted in the campfire section of the site.
Thursday, September 02, 2010
Fossil fuels vs. the public interest
My latest column on Scitizen entitled "Fossil Fuels vs. The Public Interest" has now been posted. Here is the teaser:
The fossil fuel industry often pretends to have the public's best interests in mind. The operative word is "pretends"....Read more.
Sunday, August 29, 2010
Personality profile: Do you "go with the flow" or do you "stock up" just in case?
A frequent critique of those who claim we still have enormous stocks of resources left to exploit is that the flow or rate of extraction is far more important to the health of the world economy than the size of the stocks. If we can't get it out of the ground at the rate we'd like to, then that is the key restraint. Hence the concern about peak production of resources such as oil, natural gas, coal, phosphorus, and even gold.
It occurred to me that this argument might be due in part to differences in personality, but also to flaws in one's understanding of how the world actually works. Let's think for a moment about how the world actually works. All life on Earth (except that of certain deep-sea creatures living off the heat of the Earth's core) ultimately depends on the daily flow of sunlight. The sunlight enables plants to create food for themselves and for animals. There are storage mechanisms for when the light is gone at night or when it's seasonally weak and short-lived in winter. But, generally nothing could survive long without the Sun.
So too, our entire civilization lives on flows of energy, food, water and other resources. While it has the capacity to store resources, the end of the needed flows would mean the end of our civilization in short order.
Given all this, why is it that some people believe they can really store up much of anything? Yes, it is wise to have emergency supplies in case of a power outage or other disruption that might make it difficult to get food, heat and even water. But can one really stock up for a lifetime?
The illusion that we can is given to us by money. We are told that if we save enough, we can have a comfortable old age. But what is money other than a claim on the current flow of goods and services? It's not really a stockpile of anything. So, its value depends entirely on the smooth flow of energy and resources through the economy.
And yet, there are people who believe that money will somehow make them immune to the breakdown of this flow. Yes, enough money might make it easier for someone to get scarce goods during such a breakdown. But, ultimately a community that fails to function won't be able to provide you with anything no matter how much money you have.
This is the fear behind the thinking of the lone survivalist. And yet, even stockpiles of food and other goods will eventually run out. Without a functioning community capable of defending itself and with continuing access to a flow of energy and goods, no one can survive in the long run.
Today, however, it is far too easy to just "go with the flow," rather than prepare for possible disruptions. This is the philosophy behind the just-in-time inventory religion which is still so dominant. Prudent stockpiles of essential materials including food have been the hallmark of civilization. Without such surpluses and the ability to store them, what we call civilization could never have arisen. Civilization depends on the ability to store surpluses.
Today's cornucopians provide a useful cheering section for the just-in-time religion since they are the ultimate "go with the flow" crowd. They like to cite the principle of substitution as their defense against running low on critical resources. No need to worry about using up nonrenewable resources, they say. But, what they always seem to leave out is that substitution takes time. What if we don't have enough time for a smooth transition from one resource to another? Won't happen, the cornucopians say. You see, the marketplace is just like magic. Things show up the instant they are needed! (This is true until it isn't.)
What I'm getting at is that the balanced personality would recognize that all of us live on flows of energy and resources and that our cooperation to keep those flows moving is critical. But that same balanced personality would also recognize the potential for serious problems should those flows be curtailed. Therefore, the balanced personality would want three things: 1) That we have a reasonably large stockpile of critical goods in case of a temporary disruption of flows, 2) that what we rely on for our survival be by and large renewable, and 3) that our demand for renewable resources would come into balance with the supply we can reasonably expect--considerably less than fossil fuels have provided us.
It's hard to find such balanced thinking in the world we now live in. But that balance is precisely what we will need most in the years to come.
It occurred to me that this argument might be due in part to differences in personality, but also to flaws in one's understanding of how the world actually works. Let's think for a moment about how the world actually works. All life on Earth (except that of certain deep-sea creatures living off the heat of the Earth's core) ultimately depends on the daily flow of sunlight. The sunlight enables plants to create food for themselves and for animals. There are storage mechanisms for when the light is gone at night or when it's seasonally weak and short-lived in winter. But, generally nothing could survive long without the Sun.
So too, our entire civilization lives on flows of energy, food, water and other resources. While it has the capacity to store resources, the end of the needed flows would mean the end of our civilization in short order.
Given all this, why is it that some people believe they can really store up much of anything? Yes, it is wise to have emergency supplies in case of a power outage or other disruption that might make it difficult to get food, heat and even water. But can one really stock up for a lifetime?
The illusion that we can is given to us by money. We are told that if we save enough, we can have a comfortable old age. But what is money other than a claim on the current flow of goods and services? It's not really a stockpile of anything. So, its value depends entirely on the smooth flow of energy and resources through the economy.
And yet, there are people who believe that money will somehow make them immune to the breakdown of this flow. Yes, enough money might make it easier for someone to get scarce goods during such a breakdown. But, ultimately a community that fails to function won't be able to provide you with anything no matter how much money you have.
This is the fear behind the thinking of the lone survivalist. And yet, even stockpiles of food and other goods will eventually run out. Without a functioning community capable of defending itself and with continuing access to a flow of energy and goods, no one can survive in the long run.
Today, however, it is far too easy to just "go with the flow," rather than prepare for possible disruptions. This is the philosophy behind the just-in-time inventory religion which is still so dominant. Prudent stockpiles of essential materials including food have been the hallmark of civilization. Without such surpluses and the ability to store them, what we call civilization could never have arisen. Civilization depends on the ability to store surpluses.
Today's cornucopians provide a useful cheering section for the just-in-time religion since they are the ultimate "go with the flow" crowd. They like to cite the principle of substitution as their defense against running low on critical resources. No need to worry about using up nonrenewable resources, they say. But, what they always seem to leave out is that substitution takes time. What if we don't have enough time for a smooth transition from one resource to another? Won't happen, the cornucopians say. You see, the marketplace is just like magic. Things show up the instant they are needed! (This is true until it isn't.)
What I'm getting at is that the balanced personality would recognize that all of us live on flows of energy and resources and that our cooperation to keep those flows moving is critical. But that same balanced personality would also recognize the potential for serious problems should those flows be curtailed. Therefore, the balanced personality would want three things: 1) That we have a reasonably large stockpile of critical goods in case of a temporary disruption of flows, 2) that what we rely on for our survival be by and large renewable, and 3) that our demand for renewable resources would come into balance with the supply we can reasonably expect--considerably less than fossil fuels have provided us.
It's hard to find such balanced thinking in the world we now live in. But that balance is precisely what we will need most in the years to come.
Sunday, August 22, 2010
The illusion of individual risk
Every society attempts to determine which risks will be borne by the individual and which will be borne by the community. It is certainly not an exact science, and there are many situations in which risk is presumably blended, some being shouldered by the individual and some by the group, either the community in general or a specified group such as a pool of policyholders. An example would be deductibles or co-pays for various kinds of insurance. The policyholder is at risk up to a certain amount. After that, the insurance company, which really means the policyholders in the group, bear the risk.
But my task is to convince you that the idea of individual risk is flawed, and that to the extent we organize our society around it we are being hoodwinked by a false libertarian ideology, one that tells us there are choices available to the individual the consequences of which will fall only to that individual. I am going to discuss this in the context of energy and resources later, but first let me offer another kind of illustration.
Controversy continues to rage over mandatory helmet laws for motorcycles, scooters, and bicycles. Two states require no helmet for any of the three. (They are Illinois and Iowa.) Many states require helmets only for those under a certain age--ranging from 17 to 20 for motorcycles and 14 to 17 for bicycles. No state requires adult bicycle riders to wear helmets.
I am not trying to argue here for or against specific helmet requirements. You can certainly find many sites on the Internet that will argue that wearing a helmet ought to be an individual choice. But do the consequences of not wearing one fall merely on the individual?
Long ago during two separate time periods, I did marketing work for two rehabilitation hospitals, the kind that treat head injuries from motorcycle and other accidents. Yes, these hospitals compete for the very lucrative task of treating traumatic head injuries as well as other types of injuries requiring extensive rehabilitative stays in a hospital. So, now you have at least one clue about how the consequences of such injuries are actually distributed.
If you are insured, your insurance picks up much of the tab which means other policyholders are picking up your bill; that's how insurance is designed. But, if traumatic head injuries are more numerous than the insurance company anticipates, look for a rate increase to pay for the very costly treatment.
Okay, so what happens if you aren't insured? Well, in my state the state government picks up your bill, and that, of course, means all taxpayers do. What is the logic behind this? The state figures that without rehabilitation a trauma victim with severe injuries will become a long-term burden on the state and the local community through other programs that serve low-income citizens in the areas of housing, employment, home health care and transportation. It's much cheaper to bring the injured person back to his or her fullest capabilities than to treat ongoing disabilities resulting from an accident. It's also the right thing to do for that person.
But there are all sorts of other consequences of a traumatic head injury that can affect the individual and his or her family and community for years afterwards. For those who never fully recovery there can be a lifetime of follow-up services, not all of them covered by insurance and many paid for with tax dollars. Some patients who appear to have a full recovery develop subtle deficits in higher reasoning functions and find that the speed with which they formerly thought through problems, say, simple calculations, is not there. These ongoing deficits take a toll on those around the injured person even though he or she appears healed.
I've used this illustration because I am so familiar with it. But I want to apply the same logic to the way in which we use resources, particularly energy. Most Americans feel that they have a right to use as much energy as they choose so long as they can pay for it. The perceived risk is that you may not be able to pay for it, not that its supply could become scarce, something that would affect myriad systems in society, not just the individual.
In an era of rising supplies of just about everything including energy, the marketplace solution to allocating resources functioned reasonably well with occasional shortages and disruptions and, of course, with the attendant steep inequality of distribution. But, running low permanently was not considered a risk. The marketplace would always magically bring on new supply or at least substitutes.
As we face a future of constrained resources, the risks are increasingly shifting from the individual person or company to society as a whole. My resource use no longer simply drives up prices which will then cause mining companies and oil and gas companies to produce whatever society might need at ever higher rates. Instead, my profligate use of resources threatens to destabilize the very social, economic and governmental systems I depend on. Should I merely be entitled to all that I can pay for?
So much of the freedom of action we take for granted today is, in fact, a product of the availability of huge amounts of energy. Of course, not to allow the individual some range of action to take risks would indeed make our lives exceedingly frustrating and dull and our societies stagnant. But as we head down the slope of energy and resource constraints, we as a society are going to have to rethink the idea that the risks associated with access to resources are an individual risk. They are increasingly going to become a societal risk to which we will need to apply some restraints regardless of the ability to pay in order to insure the stability and integrity of society as a whole.
But my task is to convince you that the idea of individual risk is flawed, and that to the extent we organize our society around it we are being hoodwinked by a false libertarian ideology, one that tells us there are choices available to the individual the consequences of which will fall only to that individual. I am going to discuss this in the context of energy and resources later, but first let me offer another kind of illustration.
Controversy continues to rage over mandatory helmet laws for motorcycles, scooters, and bicycles. Two states require no helmet for any of the three. (They are Illinois and Iowa.) Many states require helmets only for those under a certain age--ranging from 17 to 20 for motorcycles and 14 to 17 for bicycles. No state requires adult bicycle riders to wear helmets.
I am not trying to argue here for or against specific helmet requirements. You can certainly find many sites on the Internet that will argue that wearing a helmet ought to be an individual choice. But do the consequences of not wearing one fall merely on the individual?
Long ago during two separate time periods, I did marketing work for two rehabilitation hospitals, the kind that treat head injuries from motorcycle and other accidents. Yes, these hospitals compete for the very lucrative task of treating traumatic head injuries as well as other types of injuries requiring extensive rehabilitative stays in a hospital. So, now you have at least one clue about how the consequences of such injuries are actually distributed.
If you are insured, your insurance picks up much of the tab which means other policyholders are picking up your bill; that's how insurance is designed. But, if traumatic head injuries are more numerous than the insurance company anticipates, look for a rate increase to pay for the very costly treatment.
Okay, so what happens if you aren't insured? Well, in my state the state government picks up your bill, and that, of course, means all taxpayers do. What is the logic behind this? The state figures that without rehabilitation a trauma victim with severe injuries will become a long-term burden on the state and the local community through other programs that serve low-income citizens in the areas of housing, employment, home health care and transportation. It's much cheaper to bring the injured person back to his or her fullest capabilities than to treat ongoing disabilities resulting from an accident. It's also the right thing to do for that person.
But there are all sorts of other consequences of a traumatic head injury that can affect the individual and his or her family and community for years afterwards. For those who never fully recovery there can be a lifetime of follow-up services, not all of them covered by insurance and many paid for with tax dollars. Some patients who appear to have a full recovery develop subtle deficits in higher reasoning functions and find that the speed with which they formerly thought through problems, say, simple calculations, is not there. These ongoing deficits take a toll on those around the injured person even though he or she appears healed.
I've used this illustration because I am so familiar with it. But I want to apply the same logic to the way in which we use resources, particularly energy. Most Americans feel that they have a right to use as much energy as they choose so long as they can pay for it. The perceived risk is that you may not be able to pay for it, not that its supply could become scarce, something that would affect myriad systems in society, not just the individual.
In an era of rising supplies of just about everything including energy, the marketplace solution to allocating resources functioned reasonably well with occasional shortages and disruptions and, of course, with the attendant steep inequality of distribution. But, running low permanently was not considered a risk. The marketplace would always magically bring on new supply or at least substitutes.
As we face a future of constrained resources, the risks are increasingly shifting from the individual person or company to society as a whole. My resource use no longer simply drives up prices which will then cause mining companies and oil and gas companies to produce whatever society might need at ever higher rates. Instead, my profligate use of resources threatens to destabilize the very social, economic and governmental systems I depend on. Should I merely be entitled to all that I can pay for?
So much of the freedom of action we take for granted today is, in fact, a product of the availability of huge amounts of energy. Of course, not to allow the individual some range of action to take risks would indeed make our lives exceedingly frustrating and dull and our societies stagnant. But as we head down the slope of energy and resource constraints, we as a society are going to have to rethink the idea that the risks associated with access to resources are an individual risk. They are increasingly going to become a societal risk to which we will need to apply some restraints regardless of the ability to pay in order to insure the stability and integrity of society as a whole.
Thursday, August 19, 2010
Global coal supplies: It might be worse than anyone thinks
My latest column on Scitizen entitled "Global Coal Supplies: It Might Be Worse Than Anyone Thinks" has now been posted. Here is the teaser:
A new study on global coal supplies suggests a worldwide peak in production from existing fields in 2011.....Read more
Sunday, August 15, 2010
James McCommons' year-long train ride
Henry David Thoreau commented at length on the frequent interruptions of his day caused by the whistle, rumble, and hiss of steam-powered trains on the Fitchburg Railroad which passed not far from his house on Walden Pond. The railroad symbolized that commercial "getting and spending" world maligned by Wordsworth in his poem The World Is Too Much With Us.
How different the railroad seems to most of us 150 years hence! As I read James McCommons' compelling account of his year riding Amtrak, Waiting on a Train: The Embattled Future of Passenger Rail Service, the memories came streaming in. In the little burg where I grew up just two blocks from my house trains passed every evening around bedtime. The low roar of the diesel locomotives and the syncopated clatter of the railway cars on the track, far from disturbing me, lulled me to sleep.
As a young boy there were overnight trips in sleeper cars on the Denver Zephyr, one leg in the family's annual journey to Colorado for a skiing vacation in places like Vail and Aspen, long before they became exclusive celebrity playgrounds. The observation car provided a geography lesson as the Great Plains gradually gave way to the Rocky Mountains in the dusky twilight. The dining car seemed as exotic as a circus act: A formal dinner in a moving vehicle, who thought of something as neat as that? At night the gentle rocking of the train made me sleep, well, like a baby.
Passenger trains still seemed glamorous and contemporary then. Yet with only 5 percent of the passenger market, they were already lurching toward oblivion.
But McCommons' book is not about the past, but about the future of passenger rail, right? In fact, it is about both. He seamlessly weaves the history of passenger rail in with his artful travelogues as he describes the scenery he sees, the people he meets, and the problems and joys he encounters during a year of train travel that covers nearly every major Amtrak route. These travelogues are an absolute pleasure to read. And, they provide an excellent window on the current state of passenger rail in America today. Frequently, McCommons takes train trips to meet people who are actively shaping passenger rail in the United States. That's the part of the book about the future.
In reading this book it helps to have fond memories of train travel for this predisposes you to look carefully for clues about what might be done to improve and expand service. It helps even more if you have occasion to ride Amtrak today as I do to reach Chicago or visit friends in Minnesota via the Empire Builder. But herein lies part of the problem. McCommons tells us that an astoundingly low proportion of Americans have ever been on an intercity train, less than 2 percent! Only 3 percent use light rail or commuter lines. It's hard to build sympathy for a mode of travel that most Americans have never experienced and may know only from movies or television.
Still, it is indicative of the hold trains have on the popular imagination that many routes have Wikipedia entries. How many airline routes have that! It is this appeal which provides some hope. After all, many of the Amtrak routes which remain today exist only because people in the localities served by those routes fought hard to keep them. Some of the stories are detailed in the book. And, when the Bush administration tried to destroy Amtrak by zeroing out its budget, Congress simply passed Amtrak funding by veto-proof majorities. People want passenger rail.
Now, comes the sticky part. An economist acquaintance of mine has tried to drill into me that we as a society should tax the things we don't want, and let the market sort out what should take their place. If we do that, then the government doesn't need to pick winners by subsidizing anything. In fact, he insists, if the U. S. government would stop subsidizing highway travel, that is, if people were forced to pay the true cost of driving on highways, they would soon flock to rail and that rail would be privately financed because it would be profitable.
He may be right, but I am a realist. I don't think we will ever get a chance to find out if his system would work. Societies have always considered transportation as simply too important to be left to the marketplace--from the roads of the Roman Empire all the way to today's newest airports. And, so perhaps the critical point that McCommons' book makes is that if we want passenger rail to thrive in America, we as a society will have to pay for it. Passenger rail will never be profitable in the narrow sense that businesses are. But it will be vastly profitable to society by other measures: energy efficiency; national cohesion; private development associated with transit; and the comfort, aesthetic pleasure, and sociability that trains offer over other types of transport.
That means we need to focus on making passenger rail so attractive that people will abandon their cars because they think that taking the train is a better idea. And, to do that we will have to invest far more in passenger rail than we do today.
How different the railroad seems to most of us 150 years hence! As I read James McCommons' compelling account of his year riding Amtrak, Waiting on a Train: The Embattled Future of Passenger Rail Service, the memories came streaming in. In the little burg where I grew up just two blocks from my house trains passed every evening around bedtime. The low roar of the diesel locomotives and the syncopated clatter of the railway cars on the track, far from disturbing me, lulled me to sleep.
As a young boy there were overnight trips in sleeper cars on the Denver Zephyr, one leg in the family's annual journey to Colorado for a skiing vacation in places like Vail and Aspen, long before they became exclusive celebrity playgrounds. The observation car provided a geography lesson as the Great Plains gradually gave way to the Rocky Mountains in the dusky twilight. The dining car seemed as exotic as a circus act: A formal dinner in a moving vehicle, who thought of something as neat as that? At night the gentle rocking of the train made me sleep, well, like a baby.
Passenger trains still seemed glamorous and contemporary then. Yet with only 5 percent of the passenger market, they were already lurching toward oblivion.
But McCommons' book is not about the past, but about the future of passenger rail, right? In fact, it is about both. He seamlessly weaves the history of passenger rail in with his artful travelogues as he describes the scenery he sees, the people he meets, and the problems and joys he encounters during a year of train travel that covers nearly every major Amtrak route. These travelogues are an absolute pleasure to read. And, they provide an excellent window on the current state of passenger rail in America today. Frequently, McCommons takes train trips to meet people who are actively shaping passenger rail in the United States. That's the part of the book about the future.
In reading this book it helps to have fond memories of train travel for this predisposes you to look carefully for clues about what might be done to improve and expand service. It helps even more if you have occasion to ride Amtrak today as I do to reach Chicago or visit friends in Minnesota via the Empire Builder. But herein lies part of the problem. McCommons tells us that an astoundingly low proportion of Americans have ever been on an intercity train, less than 2 percent! Only 3 percent use light rail or commuter lines. It's hard to build sympathy for a mode of travel that most Americans have never experienced and may know only from movies or television.
Still, it is indicative of the hold trains have on the popular imagination that many routes have Wikipedia entries. How many airline routes have that! It is this appeal which provides some hope. After all, many of the Amtrak routes which remain today exist only because people in the localities served by those routes fought hard to keep them. Some of the stories are detailed in the book. And, when the Bush administration tried to destroy Amtrak by zeroing out its budget, Congress simply passed Amtrak funding by veto-proof majorities. People want passenger rail.
Now, comes the sticky part. An economist acquaintance of mine has tried to drill into me that we as a society should tax the things we don't want, and let the market sort out what should take their place. If we do that, then the government doesn't need to pick winners by subsidizing anything. In fact, he insists, if the U. S. government would stop subsidizing highway travel, that is, if people were forced to pay the true cost of driving on highways, they would soon flock to rail and that rail would be privately financed because it would be profitable.
He may be right, but I am a realist. I don't think we will ever get a chance to find out if his system would work. Societies have always considered transportation as simply too important to be left to the marketplace--from the roads of the Roman Empire all the way to today's newest airports. And, so perhaps the critical point that McCommons' book makes is that if we want passenger rail to thrive in America, we as a society will have to pay for it. Passenger rail will never be profitable in the narrow sense that businesses are. But it will be vastly profitable to society by other measures: energy efficiency; national cohesion; private development associated with transit; and the comfort, aesthetic pleasure, and sociability that trains offer over other types of transport.
That means we need to focus on making passenger rail so attractive that people will abandon their cars because they think that taking the train is a better idea. And, to do that we will have to invest far more in passenger rail than we do today.
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