Hi Gail,

Personally I think the pension/social security issue is in overshoot and cannot be solved except by cutting the promised benefits-perhaps only moderately, perhaps severely, depending on the course of the economy.My guess is that severe cuts will necessarily be implemented, as I expect the economy to"stagger along" at best for the forseeable future.

(Now being by American standards a person of very modest means and no significant expectations, I have near zero sympathy for the rich, except for one argument-they are able to fund research and development of new science, technology, and industry which in the short to medium term, and so far in the long term, has raised living standards.)

But I wonder a lot about the true mechanics/economics of extracting REAL wealth in large quantities from the rich in actual physical terms.It seems to me that thier wealth is more virtual than real, like the wealth of the home owning public before the housing crash.

If you owned a house in a gone crazy market, and were either lucky or smart, you cashed out before the crash.But in terms of the overall market for houses, it was impossible for everybody, or even most owners , to cash out.And even if by some undefined means, the money or credit had been made available to support the sale of the nation's housing stock, or a large portion of it, WHAT COULD ALL THOSE NEWLY VERY financially COMFORTABLE homeowners bought with the money?

I don't think the rest of the economy would have been capable of supplying real goods and services to the tune of several hundred thousand dollars each to all those new rich people.

And of course a grat deal of the money would have necessarily found its way right back into real estate anyway-not everybody could downsize, the housing stock required for that doesn't exist.

I guess what I am struggling to say is that the wealth supposedly represented by the housing bubble-and other bubbles for that matter-didn't really exist, except as lines on a ponzi balance sheet-I believe some people use the term virtual wealth to describe what I am trying to express.

Now a rich person can have a very large carbon foot print, and own two hundred pairs of shoes and so forth, but they eat only about the same total amount as I do-less probably.They have only one set of teeth to pay to have maintained by a dentist.Thier huge houses undoubtedly contain enough materials to build several ordinary houses each, and they have lots of servants-either directly hired or serving them as the employees of resorts and restaurants and so forth.

What I am asking is this-if we try to really put the tax screws to them , can it work?Will it work?Or will we find that thier wealth is mostly virtual if somebody tries to actually manages to sieze it and tries to buy something real-such as food and medical services - with it?

The rich are few in number, and can launder out a small portion of thier wealth easily and spend it on consumption-just like the homeowner who got out ahead of the bubble.But I question whether the fortunes possessed by the rich can be converted to purchasing power on the grand scale.

As a Darwinist and an older person of modest means I have no objections if it can be done-I stand to gain, more likely than not.We certainly have not had a level playing field over the expanse of my life time, although there is no doubt imo regulated capitalism works far better than sicialism-at least up until a time arrives when resource constraints begin to bite.That time has arrived.

But as a respecter of property rights and initiative and self reliance, I must question what the eventual consequences of a major taking of property thru raising taxes to possibly confiscatory levels on the rich might be.Such tax increases might have away of working down to the near rich, and then the merely comfortable members of society,with the ultimate result being to stifle investment of any and all sorts.

Otoh, if we don't bring the increasing concentration of wealth into a few hands to a stop, we are probably headed towards a modern day version of fuedal society.In some reespects we are already there of course.

I foresee a tremendous power struggle within the next decade-the repugs are going to mop up next week, and the dems and maybe a few newly home grown socialists are probably going to get it all back in the next couple of election cycles.Things will oscillate out of bounds due to positive political feedbacks if I am right-if we are lucky, at some point we will wind up with a stable govt based on resdistribution/rationing/ forced investment that will enable us to get thru peal oil without going mad max.

Who the winners in such an environment might be I couldn't say , but if I had kids I would try to make sure they learned to keep a pragmatic finger in the political winds and go with the flow-which promises to be extremely turbulent.

Mandate under Federal Law that for any Corporation - public or private - that the total compensation for the highest paid employee of the corporation may not exceed 10 times the total compensation for the lowest paid employee of the corporation.
That would eliminate the current excessive level of upper management greed and over-compensation.

"income distribution problem"

Or to put it in street terms, the plunder of the treasury of the citizenry.

In any event, it's always the upper middle classes that are punitively taxed based on income. In addition, the upper classes usually have all sorts of tax evasion methods.

Not to mention the fact that taxes, no matter how high, rarely disadvantage upper class people, and rarely help lower class people. So the government taxes a rich person, who goes from making 10 million net to 5 million net, and spends the money on welfare, warfare, and subsidies for corn? Good grief, I say.

Political ideology cannot solve the problem of income inequality. The only thing that can is sound money. If we had sound money, the productive and those who save would be rewarded, and it would be quite difficult to amass great fortunes, limiting the size and influence of the upper classes.

This question or issue of "coal running the economy" looks as if it would be worth a lead post all its own.

(raise taxes, reduce payroll or pensions), there will be a hugely recessionary impact.

Money has been actively moving from the middle class to the upper 2% during times of "prosperity" (up slope), surging along with the wars accordingly (See these Graphs and WSJ article quotes).

On the "downslope" it is less likely that the middle class will weather it as well as the upper 2%, who can move to another country where they have extra mansions (e.g. Halliburton moved to Dubai) when it suits their fancy.

Even the states are in very serious trouble, and are not likely to recover to their former strength.

"Leverage was sky-high"

My understanding is that the "instruments", the packages of mortgages, were insured.
That they were insured for ten times their value, or that ten times their value is involved because of their sale and resale.

"house prices fell 5.9% in the last two months. This data will be reflected in Case Shiller and S&P shortly. Again, see Mish (google Mish)".

You are looking at an index that is much more volatile than the Case-Shiller. It bounced higher than C-S, and has now come back down to the trend line with the 5.95 drop.
As for unemployment, I don't know how to cut and paste charts to this type of forum, but go back and look at the last 2 recessions, the last was 2002. clearly the downturn in unemployment is 2-3 years after the official end of the recession.
Greece's situation looks like the "double dip recession" of July/aug.
Your glass is 1/2 empty, mine is 1/2 full. We are bound to see the same things differently, and might as well leave it at that.

Safety suffering as opposed to coal power plants ? oil ? Natural Gas ? Biofuel ? Hydro in China ?

China CPR1000 reactor is an upgrade of the French EPR900. The French reactors built in the 1970s and 1980s. The french built 34 of them and they have a good safety record.

China will also build a lot AP1000s. Modular reactors with the latest designs in passive safety.

I think those reactors will be safer than the old fleet of US reactors and way more safe than the Pinto of reactors the old Russian reactors.

Energy Source              Death Rate (deaths per TWh)

Coal – world average               161 (26% of world energy, 50% of electricity)
Coal – China                       278
Coal – USA                         15
Oil                                36  (36% of world energy)
Natural Gas                         4  (21% of world energy)
Biofuel/Biomass                    12
Peat                               12
Solar (rooftop)                     0.44 (less than 0.1% of world energy)
Wind                                0.15 (less than 1% of world energy)
Hydro                               0.10 (europe death rate, 2.2% of world energy)
Hydro - world including Banqiao)    1.4 (about 2500 TWh/yr and 171,000 Banqiao dead)
Nuclear                             0.04 (5.9% of world energy)

Hi Gail,

pity that there was little time to chat.

anyway just adding three interesting news items about Japan and India
concerning nuclear energy and the "safety" issue even in advanced countries like Japan

``Workers have concluded that a piece of equipment dropped into the reactor vessel of the Monju fast-breeder reactor here is stuck, possibly severely delaying plans to restart the reactor.

A 12-meter-long internal relay cylinder, 46 centimeters in diameter and weighing 3.3 metric tons, fell during work on the reactor in August this year. It deformed on impact, and is lodged in an opening in the reactor vessel."

http://mdn.mainichi.jp/mdnnews/news/20101014p2a00m0na011000c.html

as well as:

http://www.yomiuri.co.jp/dy/editorial/T101016001479.htm

The nuclear fuel cycle, a pillar of Japan's energy policy, has again run into trouble.

The completion of a reprocessing plant to recover plutonium and uranium--which can be reused as fuel--from spent nuclear fuel from nuclear power plants has been delayed for two years until 2012. This is the 18th time this project has been postponed.

Construction of the plant in Rokkashomura, Aomori Prefecture, started in 1993. It is being built by Japan Nuclear Fuel Ltd., whose stockholders include electric power companies. Initially, construction was due to be completed in 1997. However, the latest delay means the plant will start operating 15 years behind schedule.

there is more in this article

but in any case the influential people in India seem not to ``know"

Two, Japan is seen as the world leader in many nuclear technologies. The reactors that the US is trying to sell to India represent, in their core areas, Japanese knowhow. India’s Department of Atomic Energy sees Japan’s Rokassho nuclear reprocessing centre and its Monju fast breeder reactor as technological exemplars. Singh alludes to this by saying India wants Japan as its “partner” in its civil nuclear ambitions.

http://www.hindustantimes.com/N-deal-to-take-time-with-Japan/Article1-61...

"40 or 50 years from now"

And for 40,000 to 500,000 years from now for the ever toxic waste.

OFM - To paraphrase, you said, "those who are resource depletion aware and don't want to embrace nuclear electricity generation display an alarming degree of faith in near term renewables"

I agree. I would rather have reliable nuclear power generating capacity than relying on the sun shinning in Arizona or the wind blowing in South Dakota. The only problem with mixing nuclear, wind and solar is the intermittent nature of the renewable sources and the long start up time needed to get a nuclear reactor going. From my understanding, it takes several hours to bring a reactor up to full output (or 80 to 90%). Do you know if this is accurate information?

I also agree that the perceived short term costs (the $2 billion in Fed funny money to build a reactor) would be considered well worth the cost when it means all the hospitals and (electrified) railroads within one hundred miles continue to operate. I would imagine that people living in Italy and France appreciated the aqueducts long after the Roman empire stopped functioning....

I understand that oil and gas do all these wonderful things for us, and I do wish that we did not burn it for it's energy content.

My nagging doubt is over causality.

Could it not be the case that we discover wonderful things to do with oil and this increases demand for oil, so that the oil curve would faithfully follow the economic activity curve.

Until now, when oil supply begins to control the economy.
This establishes a desirable negative feedback loop creating the beautifully rounded curve that we see in the price of oil since the spike and plunge.
The spike and plunge was the transition phenomenon, when the dog began to wag the tail.

It is the energy content of the oil that will have to be substituted.
And what finer substitute than nuclear?
Not the 1950's nuclear technology, nor the failing centralist power structures, but the promise of LENR/CANR.

I do the Lords work, and lead the people out of the shadow of death.

Or not.

I don't think a strong case can be made that [oil availability] causes economic growth, but it surely does much to enable it.

I'm not convinved there is much of a distinction between causing and enabling here.

Second Law of Thermodynamics May Explain Economic Evolution (PhysOrg)

While economic activities are traditionally viewed as being motivated by profit, Annila and Salthe argue that the ultimate motivation of economic activities is not to maximize profit or productivity, but rather to disperse energy. From this perspective, a growing economy consists of entities (e.g. products, labor, etc.) that are assigned an energy density resulting from their individual production processes. These density differences are the forces that direct energy flows (e.g. manufacturing processes) to equalize energy density differences within the system and with respect to its surroundings.

The scientists argue that this tendency to disperse the maximum amount of energy (that is, to consume free energy in the least time) is what gives rise to economic laws and regularities. Further, economies organize themselves in hierarchical systems within systems to improve on energy dispersal and to access new sources of energy. For instance, the global economy is comprised of national economies, each housing economic zones that in turn accommodate districts, firms, households and so on, organized so that global resources are produced and consumed most effectively in terms of energy dispersal.

From this thermodynamic perspective, decision making is ultimately about choosing the action that causes energy to flow along the most steeply descending energy gradient. For example, when faced with two identical products where one is cheaper than the other, a consumer will likely choose the cheaper product.

“When investing on the cheaper but equally good product, more energy (in one’s assets) is left to be dispersed by buying other goods,” Annila explained to PhysOrg.com. “Also, when the cheaper product sells better, the energy used in its production gets consumed faster.”

(The original paper is linked from the article).

My take is that unless you somehow manage to nullify (Darwinian) selection effects, increased energy availability will cause economic growth.

You could argue that government regulation of economic activity dampens these selection effects. This, then, would be why laissez-faire seems to produce the most rapid economic growth: It lets Darwinian selection run free, which is the most rapid way to let a hierarchy arise that can dissipate that pesky energy surplus.

I don't think there's anything magical about oil; it's just that it's a large part of our energy supply. It can be substituted, albeit at a significant energy penalty.

I think Tainter et al. sees the same effect from a ecological/anthropological perspective:

Resource Transitions and Energy Gain: Contexts of Organization (Ecology and Society)

Hypothesis 1. High-gain systems by definition use a steep energy gradient (Fig. 1) in which there is a great difference between the original state of the resource and its state after use. This difference is less pronounced in a low-gain system. A steep gradient in a useful resource yields a high EROI.

Hypothesis 2. The use of a high-gain resource in a human system is likely to initiate a high-gain phase, exemplified by the role of coal in stimulating the Industrial Revolution (Wilkinson 1973). Where a thermodynamic gradient is shallow, i.e., low gain, the system is less driven and so less constrained. Thus, as seen in Fig. 1, in a low-gain system the direction of flow and system behavior are less predictable (Allen et al. 1999:408, 410, Allen et al. 2001:482). As a result, chance plays more of a role in organizational change. For example, the superiority of the automobile, which has a high gain as long as petroleum is inexpensive, made the demise of the horse and buggy inevitable in wealthy societies. At the same time, the distinctions between makes of automobile are so small that the decision to choose one make over another yields only a small gain, even if one has chosen well. Such choices are less constrained by their gradients and so more subject to chance.

[...]

Hypothesis 12. High-gain systems are perturbed only by the most extreme environmental disruptions. If disturbed in the context of a steep gradient (Fig. 1), they will self-repair or a similar system will emerge to use the high-quality resource. For example, the beaver discussed below will attempt to repair and recolonize high-quality sites if they are removed. In the so-called war on drugs, it does not matter how many Colombian producers are imprisoned. The gradient of illicit drug sales is so steep, i.e., profitable, that new producers will always emerge. In a low-gain system, control can be exerted by manipulating critical parts. Automobile sales, as suggested above, are low gain compared to the initial development of the automobile. Although little can affect the gradient of drug distribution from Colombia to the United States, small changes in pollution regulations can reduce the incentive for overseas automobile producers to remain in the U.S. market.

but don't be hard on Ugo, kites are fun.

Don't worry, that was just another of my sarcastic digs directed at the pro BAU anti renewable, nay saying crowd and not a Ugo, or at what he is doing!

I happen to like what Ugo is trying to do and even though I don't know him personally, I suspect he is the kind of person I would very much enjoy sitting down with for some good wine and conversation!

Cheers!

No, not necessarily. I don't have the link handy but I have posted it here in the past. If we compare consumption based on ecological foot print and impact, the 1.5 billion or so people living in the OECD countries are living way beyond their ecological means the rest of the inhabitants live below the sustainability minimum.

Very nicely put. As a fellow OECDer I have been trying to put together my own much more long winded versions since I became aware 3 years ago that the ff use per capita in Bangladesh is something like 1/50th that in USA. Contraction and Convergence?
phil

"If we compare consumption based on ecological foot print and impact, the 1.5 billion or so people living in the OECD countries are living way beyond their ecological means the rest of the inhabitants live below the sustainability minimum."

No it doesn't. If you were to look at numbers like how much arable land there is for person, or how much fresh water per person many of these densely populated third world countries only have a very small fraction of the resources available that OECD countries do. So if your usage is a fifth that of that of the OECD, but your natural resources are a fifth that of the OECD--you are equally unsustainable.

Hi Fred,

it is only a matter of time before the rest of the world is no longer going to accept our profligate consumption of resources

but, but... George told us that those terrorist over there hate us because of our Freedom

Seriously, I often wonder about this. For many years, the vision of "America" was considered the life-style gold standard for many people in many parts of the world. It seems that lots of folks around the world still feel that way. However, it is also obvious that many people around the world resent or dislike the way we conduct our affairs. I have no idea what kind of percentages would result from a global poll.

But, the Internet and satellite TV have fostered new perceptions (right or wrong) about life in the US. One has to wonder how long before some clever slogan captures the essence of this consumption imbalance in terms of resource depletion, GW, species extinction, etc. And, how long then before this leads to a far more widespread, intense, organized and coordinated contempt for our hubris.