You are not going to read the entire 2000 page Omnibus Budget Bill, but you donât have to. The thing that you need to know is that despite years of preaching budget austerity, and preaching that expenses must be paid for, the GOP-controlled House passed nearly $700 billion in unpaid-for tax cuts, none of which were paid for by budget cuts or other tax offsets.
Now, get it out of your head the GOP is fiscally responsible. Remember that Reagan quadrupled the Debt. Bush cut taxes while we went to war. Obama has run up the debt as well, but if ANYONE tells you the Republicans are fiscally responsible, laugh in their face.
In other news, the GOP really needs Santaâs help:
Terror is driving the season:
Terror is driving the season Part II:
And Grinches are multiplying:
Star Wars franchise wants to sell merchandise:
And the Fed raised interest rates for the first time in seven years:
Todayâs wake-up call is for the Eurozone. Despite Wrongoâs generally pessimistic worldview, it was hard to imagine that weâd arrive at the insane juncture we have now reached, that of a Grexit (Greek withdrawal from the Eurozone), but it is all but certain. As this column is written, the Guardian is reporting that a four-page proposal is now circulating in Brussels that indicates that Greece could be offered a âtemporaryâ exit from the Eurozone if it doesnât agree to a deal with its creditors.
If a Grexit comes to pass, it would be catastrophic, most of all for the Greek 99%. But it should blacken the names of everyone involved, most of all German Prime Minister Merkel. This sorry trajectory is occurring despite the Greek government prostrating itself, offering to meet much more stringent conditions than its voters overwhelmingly rejected in a referendum less than a week ago. Krugman writes that Greek PM Tsipras allowed himself to be convinced, some time ago, that euro exit was impossible. It appears that Syriza (the leading Greek political party) didnât do any contingency planning for a parallel currency. This has left PM Tsipras in a hopeless bargaining position.
But surrender isnât enough. Thereâs a substantial faction of the other Eurozone leaders that want to push Greece out. Germany seems willing to welcome them as the most Southern province of the new German Empire. They are asking for control of $50 billion of pledged Greek assets. This really means control of Greece.
It gives the Eurozone leaders a failed state as an object lesson for the rest of Europeâs near-deadbeats.
Since there are only terrible alternatives at this point, here is a wake up tune for the Eurozone leaders. Perhaps it will help Merkel find a way to offer a less destructive plan to Greece. Perhaps she can remember the debt relief and credit support given to post-Nazi Germany by the Allies, who wrote off 93% of the Nazi era debt in the early 1950s and stretched out the pre-Nazi debt incurred during World War I and the Weimar period well into the 21st century.
Here is our 2nd song of summer, Sheryl Crowâs âSoak Up the Sunâ:
https://www.youtube.com/watch?v=ecW0nSrMEY4
Those who read the Wrongologist in email can see the video here.
Sample Lyrics: My friend the communist Holds meetings in his RV I can’t afford his gas So I’m stuck here watching TV I don’t have digital I don’t have diddly squat…
Your Monday Hot Links:
NASA’s New Horizons spacecraft took the first detailed photos of Pluto. The image below was taken on July 9, 2015 from 3.3 million miles away, with a resolution of 17 miles per pixel. It took nine and a half years to get this close, but at this range, Pluto is beginning to reveal the first signs of discrete geologic features:
London has become the money-laundering center of the worldâs drug trade. According to an internationally acclaimed crime expert, UK banks and financial services have ignored so-called âknow your customerâ rules designed to curb criminalsâ abilities to launder the proceeds of crime. The National Crime Agency (NCA) states:
We assess that hundreds of billions of US dollars of criminal money almost certainly continue to be laundered through UK banks, including their subsidiaries, each year.
Googleâs algorithm shows prestigious job ads to men, but not to women. Researchers from Carnegie Mellon University built an app that found that when Google presumed users to be male job seekers, they were much more likely to be shown ads for high-paying executive jobs. Google showed the ads 1,852 times to the male group, but just 318 times to the female group. Well, you know Googleâs use of its corporate motto âDonât Be Evilâ, ended in 2012 so this is probably OK.
In 2012, the Wrongologist reported on the bankruptcy of Hostess, the iconic bakery behind Ding Dongs, Ho Hos and Twinkies. Hostessâ closing was something of a national moment, with people mourning the Twinkie, and possibly, something lost from a better, more optimistic time.
It was also a symbol of the dire state of American manufacturing. Hostess died after a decade of failing health that saw two bankruptcies and five different CEOs. It left behind 36 factories, 5,600 delivery routes and 19,000 jobs.
Then, a partnership between private-equity giant Apollo Global Management and C. Dean Metropoulos, a billionaire turnaround artist known as “Mr. Shelf Space” for his revival of retail brands like Vlasic, Hungry-Man and Chef Boyardee, bought the assets of the defunct Hostess. Now, two years into the comeback of Hostess, we are learning what the cost of putting Ho-Hos and Ding Dongs back on shelves really means: The new Hostess Brands has automated more than 90% of the company’s bakery jobs.
How did they do it? Cherry picking the best assets, modernizing manufacturing and distribution, doubling the shelf life of products and capitalizing on the rare place in pop culture that Hostess products enjoyed:
⢠The new, smaller Hostess kept just five of the 14 original bakery plants: Of those five, one was sold, and another bakery with 400 employees closed in October.
⢠They invested in automation: One 500-worker Kansas bakery outfitted with a $20 million Auto-Bake system, now spits out more than a million Twinkies a day, doing 80% of the work once done by 9,000 workers across 14 plants.
⢠They spent on chemical research, trying to create a longer Twinkie shelf life, and succeeded in extending it to 65 days.
⢠The longer shelf life enabled a change in distribution. The old Hostess relied on more than 5,000 delivery routes to drop off product to individual stores. It was incredibly expensive (each route required a driver, a truck, gas and insurance), eating up 36% of revenue each year. Even with a great delivery route planner that’s a big chunk of revenue.
What kind of “cream filling” has a shelf life of 65 days?
Now, the company has arisen from the ashes to find a new place on Americaâs shelves, and they are thinking of an IPO at Hostess. From 9,000 bakery employees at 14 plants to 500 at one plant in Kansas. That’s just the bakery division. Thousands of more supporting jobs were lost when the plants closed for good. This may be an extreme example of automation in the 21st century, but more of it is coming, and it’s going to put a lot of people out of work very quickly.
It used to be that layoffs were a sign of bad management, now they are a sign of good management. Back in the day, bankruptcy was the last thing management wanted. Today, it is a strategic choice.
Destroying jobs is now a badge of honor.
But, no one should blame Metropoulos or Apollo for a winning strategy when, in the prior decade, five different CEOs failed at the task of saving Hostess. They have created a huge turnaround, from Chapter 11 to an IPO in two years. But, it cost thousands of jobs. Automation, layoffs or not, made sense for this business.
We all know that technology creates fewer jobs than it destroys. By some estimates technology could cost half of all current jobs in the next 20 years. So, we can expect an ever-greater number of unemployed chasing the ever-shrinking number of jobs that canât be eliminated or simplified by technology. Thus, the prognosis for many medium and some higher-skilled workers appears grim. In fact, a good question to ask today is how much can we attribute the fact that the US labor force participation rate is the lowest in 50 years to automation?
The issue is not technology, or robots, or restoring our manufacturing base. Nor is the issue better skills, or technology or outsourcing. We have too many people chasing too few good jobs.
If we forecast continuing technology breakthroughs (and we should), and combine that with the 3 billion people currently looking for work globally, we have to conclude that the planet is overpopulated if the goal is a growing global middle class.
This is why the quest for better technology has become the enemy of sustaining middle class growth in America and the rest of the developed world.
Enjoy that Twinkie while you can still pay for it.
The Wrongologist often writes about privatizing profits and socializing losses, a system where businesses and individuals can benefit from the profits earned by their business, while the public gets stuck with the consequences, the long-term bill. Governments all over America play into this, from doing deals to bring or keep jobs in the state, to underwriting the costs of sports areas, to building infrastructure when a new business comes to town.
Here is another object lesson in socializing the losses. Some towns in North Dakota (ND) are beginning to worry about the debt that they have incurred to build infrastructure to support the boom in shale oil production.
Oil Price reports that oil production in ND exploded in the past five years to well over a million barrels/day, making North Dakota the second largest oil producing state in the country. The likely fallout from the recent fall in oil prices may have serious financial side effects for NDâs towns.
Consider Williston, ND, a town in the center of the shale oil patch that finds itself planning for the worst. The town is deciding how to cope with $300 million in debt, money it borrowed to build infrastructure to meet the rapid growth of people and equipment working in the oil patch. That meant building new roads, schools, and a water-treatment plant, all of which were paid for by the city. The debt was expected to be repaid from increased sales and real estate taxes that suddenly may not be flowing into local and state coffers.
Williams County Commissioner Dan Kalil told NPR that he fears the town has overreached and wonât recover quickly, as global demand for oil is expected to grow slowly over the next few years, and shale oil prices may not bounce back to the mid-2014 levels. He may be correct. Production is down about 5% from its all-time high of 1.2 million barrels per day in December 2014. But more declines are expected with drillers pulling rigs and crews from the field. Rig counts in ND have fallen to 76, far below the 130 that state officials believe is needed to keep production flat.
And ND is experiencing the negative side effects of an oil boom. The huge increase in drilling brought a wave of cash and people to once sleepy towns, fueling a boom not only in oil, but also in crime, prostitution, and drug trafficking. Consider that Williston went from a population of 14,000 in the 2010 census to an estimated 24,000 in 2014.
On June 3rd, the US DOJ, in conjunction with NDâs Attorney General, announced the creation of a âstrike forceâ that would target organized crime in the state. The effort is a direct response to the rise in crime in the shale oil field towns in ND and Montana, which has been fueled by:
Dramatic influxes in the population as well as serious crimes, including the importation of pure methamphetamine from Mexico and multi-million dollar fraud and environmental crimes.
Too many people, too much money, too little economic security in the local economy. The weak oil players pull out, and the debt, crime and now unemployment, remain. And the towns and state government have to sweep up after the companies go.
Thatâs not all. The boom/bust cycle makes estimating the future population of Williston difficult. How many kids and spouses of oil field workers will settle permanently in the area? Does the school district build, or stand pat? Will more classrooms be paid for by more taxes, or will they be a money loser? In a boom, most oil field workers are temporary; towns need permanent residents in order to build schools.
Even if a semblance of the oil boom returns, and Williston attracts more workers who come to stay, Dan Kalil fears another boom would mean even more people, traffic and crime.
So, who pays? The taxpayers. The people who donât pull out when the companies leave. The people who stay have to cover the hole in the budget, and tolerate fewer services when the money guys hit the road. Williston isnât Detroit, but in both cases, the little people are left holding the bag.
Once again, a town makes a long-term investment, hoping for a return down the road in the form of increased sales taxes and property tax revenues. They sacrifice quality of life, looking for a return in the form of more and better jobs, and better house values. They pay higher prices for most things.
Todayâs Wake up is for the Republican Chicken Hawks who think that Iran is the Greatest Threat To Americaâ˘. They are denouncing the possible nuclear Iranian deal because Bibi says, or because they think it takes the military option off the table, or they think that Iran got too good a deal, or all of the above.
Here, from the Atlantic, are some specific details from Harvardâs Belfer Center for Science and International Affairs. The table below summarizes the new framework accord and analyzes differences between where Iran stood before negotiations, and where it will be, if, or when, the accord becomes reality:
By eliminating 12,000 centrifuges and five bombsâ worth of low-enriched uranium, the accord extends the breakout timeline for Iran to produce enough highly enriched uranium for a bomb to one year. By requiring the reconfiguration of Iranâs planned plutonium-producing reactor at Arak, the accord essentially closes the door to a plutonium-based Iran bomb. And by agreeing to establish a new mechanism that will allow unprecedented access for the International Atomic Energy Agency (IAEA) to suspicious nuclear sites anywhere in Iran, the accord makes it much more difficult for Iran to cheat.
Itâs time to ask critics of the proposed deal, particularly those running for president in 2016, exactly where they stand, and what they would do if an agreement is reached.
Wouldnât you think after Iraq, the American people would want to debate this, and emphatically say that war with Iran is such a stupid idea that no one advocating it should get within a mile of the White House, the State Department, or the Pentagon? Everyone, (Republican chicken hawks included) should want to negotiate peace as our default position.
But, it has been a whole twelve years since we started a war, and given the history of the last few decades, we’re past due. So who’s the big, brave Republican running on an Iran war platform? Everybody.
Wake up Chicken Hawks. Here to help rouse you from your neo-con wet dream, a song by The Lone Bellow, a Brooklyn NY-based group with three-part harmonies and great melodies. This is âThen Came the Morningâ from their 2nd Album of the same name. Here they are on WFUV, Fordham University radio:
Sample Lyrics: Take my words, breathe them out like smoke Burn every single letter that I wrote Let the pages turn to ash, I donât want them back Everything you always said to me
PALO ALTO, Calif., April 1, 2015 â Tesla today announced a whole new product line called the Model W. As many in the media predicted, it’s a watch. That’s what the “W” stands for.
In the following minute, the stock jumped $1.50. Nearly 400,000 shares traded in that time, and it was the heaviest one minute of trading volume in the stock since the first minute after the IPO on Feb 12. Sadly, there is no watch. People bought the stock because they were introducing a thing called the Model W. They didn’t read beyond the headline, and thought whatever it was, would be big. Invest wisely, grasshopper.
The next two links contrast a big business solution to a big problem, with an open-source solution to a big problem. The big business solution is elegant, expensive and patented. The entrepreneurial solution is elegant, cheap and free:
The latest technology for removing salt from seawater, is developed by Lockheed Martin, and will be a game-changer. Desalination technology is all over the world, but it is inefficient, using lots of energy to force salt water through a filtration system. That makes it expensive. Lockheed has developed a special filter that doesn’t need as much energy to push water through the filter. Its made out of Graphene. If this scales up, where do we put the excess salt? Or, if you really are thinking, If Lockheed can strain salt ions out of water, then why not gold ions? Invest at your own risk.
Ever hear of Liter of Light? They are a charity that makes a skylight-type light using a used liter plastic bottle, filled with water and a little bleach that is placed through tin roofs in the 3rd world. They then added an LED light and a 1 watt solar collector, for light at night. All of this started in the Philippines. Liter of Lights now has chapters in 53 countries, and has installed 350,000 daytime lights and around 15,000 night lights. Watch a video here. Please, you won’t regret it.
According to UNESCO, more than 1.5 billion people around the world currently have no access to electric light, and around 1.3 billion of them must spend up to half their income to light their homes at night. The fact that the technology is not patented, or owned by a large, multinational corporation, like Lockheed, who owns the Graphene filter, makes this a sweet place to send some of your excess money, Wrongsters. Do not expect a financial return.
The lands surrounding the Mansion of Wrong remain deeply snow-covered, and we picked up another 6â of snow last night. Where is Spring? In other weather-related news, February 2015 was officially the coldest February on record here in the Nutmeg State. So, letâs turn to Pete Seeger for a lovely Wake Up song about snow, with a gentle political message buried inside. Here is âSnow, Snowâ:
Sample Lyrics: Snow, snow, falling down; Covering up my dirty old town.
Covers the garbage dump, covers the holes, Covers the rich homes, and the poor souls, Covers the station, covers the tracks, Covers the footsteps of those who’ll not be back.
In news of the stupid, a branch of the Republican Party in Idaho voted to take up a measure to declare the state is Christian. The Idea was to bolster what supporters called the Judeo-Christian underpinnings of the US. The proposal was that Idaho be “formally and specifically declared a Christian state,” guided by a Judeo-Christian faith as reflected in the US Declaration of Independence. Jeff Tyler, a member of the committee and backer of the draft resolution, said:
We’re a Christian community in a Christian state and the Republican Party is a Christian Party.
Well, when the news got out of Kootenai County, the countyâs Republican Central Committee decided to shelve the measure, Now, Republicans will tell you it was just a small splinter group, and the resolution was going nowhere, so the US Constitution was never in danger from Republican religious extremists. Perhaps the more realistic way to look at it is that the Constitution is safe for the moment, until another, larger Republican extremist group comes along.
Here are your Monday hot links:
A study of frozen ice cores from the Tibetan Himalayas shows that international agreements on phasing out the use of toxic organic pollutants are working. Itâs cheaper to take an ice core sample than it is to place air quality sensors everywhere and monitor them.
In the US, just three out of ten workers produce and deliver all of the goods we consume. Everything we extract, grow, design, build, make, engineer, and transport â down to brewing a cup of coffee in a restaurant kitchen â is done by roughly 30% of the country’s workforce. Another 30% of us spend our time planning what to make, deciding where to install the things we have made, performing personal services, talking to each other, and keeping track of what is being done, so that we can figure out what needs to be done next. The rest are kids, elderly and out of work. Which 30% are you in?
You Tube makes no money. The Wall Street Journal reports that while YouTube accounted for about 6% of Googleâs overall sales last year ($4 billion), it didnât contribute to earnings. After paying for content, and the equipment to deliver speedy videos, YouTubeâs bottom line is âroughly break-evenâ. You Tube has 1 billion users per month. By comparison, Facebook generated more than $12 billion in revenue, and nearly $3 billion in profit, from its 1.3 billion users per year.
America used to have smart, effective Republicans, but alas, not recently, and not in the lifetimes of younger voters. In line with this de-evolution of Republicans, consider Paul Krugmanâs take down of what he labels the Charlatan Caucus, a group of supply-side voodoo economists that Scott Walker had to court this week: (brackets by the Wrongologist)
On Wednesday…[Walker] did what, these days, any ambitious Republican must, and pledged allegiance to charlatans and cranks.
Krugman reminded us that the phrase, âcharlatans and cranksâ was originally coined by Republican economist Gregory Mankiew, who served as George W. Bushâs chief economic adviser. Krugman is speaking about Gov. Scott Walker’s appearance at a New York dinner featuring supply-sidersâ Arthur Laffer (of the Laffer curve), CNBC’s Larry Kudlow, and Stephen Moore, chief economist of the Heritage Foundation. More from Krugman: (emphasis by the Wrongologist)
Bowing obeisance before the high priests of bunk â like questioning climate change, evolution, and the current president’s American bona fides â has become a “right” of passage for Republican presidential contenders. Clearly, to be a Republican contender, you have to court the powerful charlatan caucus.
In Krugmanâs view, with these economists, reality always takes a holiday. Ideology takes precedence. He cites:
⢠Mr. Moore published a 2004 book titled âBullish on Bush,â asserting that the Bush agenda was creating a permanently stronger economy.
⢠Mr. Kudlow sneered at the âbubbleheadsâ who asserted that inflated home prices were due for a crash.
⢠Mr. Laffer wrote in the WSJ in 2009, âGet ready for inflation and higher interest ratesâ. What followed were the lowest inflation in two generations and the lowest interest rates in history.
⢠Mr. Moore publishes articles with lots of bad numbers. According to Krugman, Mooreâs numbers are consistently wrong; theyâre for the wrong years, or just plain not what the original sources say. And not surprisingly, his errors always make the case he wants.
But the supply-side economists charlatans continue to have a big influence on Republican politicians. The NYT also reports that the University of North Carolinaâs Republican-appointed Board of Governors is closing several academic centers on its campuses dedicated to studying poverty, climate, and social change. That couldn’t also be about ideology, could it? More from The Times:
Itâs clearly not about cost-saving; itâs about political philosophy and the right-wing takeover of North Carolina state government…said Chris Fitzsimon, director of NC Policy Watch, a liberal group…And this is one of the biggest remaining pieces that theyâre trying to exert their control over.
OK, 29 of the 32 university board members were appointed by the Republican Legislature since 2010, but that doesnât make the decision about politics?
Itâs similar to Scott Walkerâs Wisconsin, where our friend of educationis cutting the University of Wisconsinâs budget by $300 million. Mr. Walker saw Mr. Lafferâs curve, and bought it. It hasnât worked out so well for him, since he now has to refinance a $108 million debt payment, increasing the stateâs borrowing costs by $19 million over the next two years. The re-fi is a result of Walkerâs $600 million tax cut in 2014, which will ultimately lead to a $648 million deficit over the next two years. But, in the big Republican wet dream, he will be president by then, and blame his successor for Wisconsinâs fiscal debacle.
And there is Gov. Sam Brownback (R-KS), whose aggressive tax cuts were heartily cheered on by Republican economists, but which have driven his state into a deep fiscal crisis. North Carolina’s Republican Gov. Pat McCrory has also tasted the charlatan Kool-Aid, but isn’t quite there yet, although he’s working on it.
Back to Krugman. He concludes:
So what does it say about the current state of the GOP that discussion of economic policy is now monopolized by people who have been wrong about everything, have learned nothing from the experience, and canât even get their numbers straight?
Current-day Republicans seem to have abandoned the idea that there is an objective reality. What are you going to believe, Right-Wing doctrine, or your lying eyes? These days, Right Wing doctrine wins.
In America, there has been a steady drumbeat by conservatives against education. Conservatives really believe in education…but only if itâs the privatized, de-evolved kind.
You can’t have a bunch of people looking too closely at facts, because as is well-known, reality has a liberal bias.
(Galt’s Gulch was the sanctuary in Atlas Shrugged where Ayn Rand’s Real Men of Genius spurned American socialism for their own libertarian paradise.)
Welcome to the economy that has just turned the page. But not that page.
The World Economic Forum ended in Davos Switzerland. This is their 45th annual meeting at Davos. Who attends? 2,500 business leaders, politicians, diplomats and a few celebrities take part in the meeting. As in the past, 73% of the delegates are men, and almost 800 of the attendees are from the US.
According to CNN, most of the 1% flew in to Davos on private jets. Roughly 1,700 private flights landed in Switzerland, 5% more than last year. The Guardian reported that, for Davos insiders, the big story was the world economy, but this year, they werenât concerned all that much about income inequality. From The Guardianâs live blogging at Davos: (emphasis by the Wrongologist)
A year ago, Davos attendees said income disparity was the top threat to world stability, as years of lobbying by the likes of Occupy Wall Street hit home. Today, though, the issue doesnât appear in the top 10. The Ukraine conflict, and the turmoil in the Middle East, have elbowed it out.
However, another Guardian article described that many of the global oligarchs attending Davos are already planning their escape. These people know full well that the current game wonât last forever. Their response is to take as much money as possible, and flee before the pitchforks emerge. At a packed session in Davos, former hedge fund director Robert Johnson revealed that worried hedge fund managers were going to create an oasis of uber-wealth and then lock the doors:
I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway.
They want to leave to live in a Galt’s Gulch of their own creation. And Hedge fund managers are just a small part of the Plutocracy. The concentration of wealth and ownership in very few hands is growing, and that process has reached epidemic proportions.
In fact, according to the anti-poverty charity Oxfam, the wealthiest 1% will soon own more than the rest of the world’s population. Oxfamâs research shows that the share of the world’s wealth owned by the richest 1% increased from 44% in 2009 to 48% last year. Based on the current trend, Oxfam says it expects the wealthiest 1% to own more than 50% of the world’s wealth by 2016.
But, hasnât our economy turned the page? Apparently, the Davos 1% types are way ahead of the Obama administration. From Mondayâs NYT: (Brackets by the Wrongologist)
The middle class has shrunk consistently over the past half-century. Until 2000, the reason was primarily because more Americans moved up the income ladder. But since then, the reason has shifted: [Now] there is a greater share of households on the lower rungs of the economic ladder.
The Times uses yearly income of $35,000 to $100,000 to define middle class. The $35k amount is about 50% higher than the official poverty level for a family of four.
Here is the NYTâs graph of the current breakdown by income: (All numbers on the solid black lines in the chart are percentages of the US population and do not add to 100% due to rounding)
From the NYT:
Even as the American middle class has shrunk, it has gone through a transformation. The 53 million households that remain in the middle class â about 43% of all households â look considerably different from their middle-class predecessors of a previous generation…
Recently, the fastest-growing component of the middle class has been households headed by people 65 and older. Todayâs seniors have better retirement benefits than previous generations. Also, older Americans are increasingly working past traditional retirement age. More than eight million were in the labor force in 2013, nearly twice as many as in 2000.
A December New York Times poll showed that 60% of people who self-identify as middle class think that if they work hard, they will get rich. But the income and census data suggest that goal is moving increasingly out of reach.
If 60% of the middle class still think they can get rich, despite clear evidence to the contrary, the Plutocrats and lobbyists have successfully brainwashed the American public. They are unable to see just how systematically and catastrophically they have been played.
We may be able to take back control from the Plutocrats and the Oligarchs. But they now have control of our militarized police, they control cyber spying programs aimed at American citizens, and they control a byzantine political system completely removed from the average person’s day-to-day.
Gone are the days when we could storm the castle with torches and pitchforks, demanding change, and win.
If we succeed in bringing about real change, and not the faux change marketed by politicians, it will not be a pretty affair. They will fight. And they have the means to do so.
Letâs start the first Monday of the New Year with this photo of a hermaphrodite Northern Cardinal:
The half-red, half-white plumage of this northern cardinal is caused by its sex chromosomes not segregating properly after fertilization, so the bird is half-male, half-female. You can read more in New Scientist magazine here.
Last night, Wrongo watched Martin Scorseseâs film, The Last Waltz, which documents the last concert by the roots-rock group, The Band. Late in the movie, Robbie Robertson recounts jamming with the great harmonica player, Sonny Boy Williamson in the early 1960s, and making (never-realized) plans to work together. Obviously, Robertson, Helm, et al. went on to be the band that backed Bob Dylan in the 1970s.
Here is your Monday musical wake-up: Sonny Boy Williamson playing and singing â99â, in which he canât come up with that last dollar to make the $100 his girlfriend wants:
https://www.youtube.com/watch?v=KP668KiaY7E
Here are links that you may have missed:
Drone etiquette is one of several issues covered in the WSJâs â21 Tech Doâs and Donâts for 2015.â Really, drone etiquette is gonna be a thing in 2015?
The latest ISIS offensive in Iraqâs Anbar Province may have reversed weeks of progress by Iraqâs government forces. And it only took a few hours. No airstrikes were launched by US coalition forces in time to support the ground troops.
When OPEC announced on Thanksgiving Day that it would maintain oil production at 30 million barrels per day, a volume above the worldâs current supply/demand equilibrium, the global price of oil dropped precipitously. Today, you can pay more for a gallon of milk than a gallon of gas.
After the meetings ended, the Saudi oil minister was smiling victoriously, while representatives of several other OPEC nations were steaming. That group included Venezuela, Algeria, and Iran. From Reuters:
Saudi Arabia’s oil minister told fellow OPEC members they must combat the US shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers. Ali al-Naimi won the argument at Thursday’s meeting, against the wishes of ministers from OPEC’s poorer members such as Venezuela, Iran and Algeria which had wanted to cut production to reverse a rapid fall in oil prices.
The question before the house is who gets hurt by lower priced oil?
⢠Iran, Venezuela, Algeria, Mexico, Iraq, Nigeria, and Ecuador have built their domestic budgets based on oil prices that exceed $100/barrel of oil. But, yesterday’s price was $70.54. Venezuela already borrowed $4 Billion from the Chinese, and then spent $1 Billion in a week to cover domestic needs.
⢠Russiaâs break-even budget price of oil is over $100/barrel.
⢠Canada has managed to increase its production of oil by a million barrels a day over the last decade. But almost all of that increase has come from oil sands that are unprofitable at today’s price.
⢠Mexicoâs oil was selling for $63.72/ barrel on Monday, its lowest point since July 2009. Mexico cannot survive for long at this price, especially considering that oil revenues account for roughly one-third of government finances.
⢠Keystone Pipeline: The Fiscal Times reports today that it may never be completed. Lower oil prices may make Canadian oil sands output (it is supposed to travel via Keystone to Louisiana) too costly to ship. Also, Saudi is taking aim at Canada, since the Saudi crude competes directly with Canadaâs tar sands oil, which is the highest cost oil being produced today.
⢠The Koch Brothers may now have to produce oil at a loss from their vast holdings of tar sands. But, their party is the Saudis’ best friend, so in a way, this may cause some Republicans to recalibrate their love of Saudi Arabia.
We should be happy with lower oil prices, right?
⢠Gas prices at the pump are down dramatically. Lower gas prices are an increase in take-home pay for Americans who drive.
⢠Iran’s foreign policy is very expensive, since it supports Syria, Hamas and Iraq. They may soon have to make difficult choices that entail scaling back their regional commitments. They may have trouble maintaining those commitments and their nuclear program.
⢠Russiaâs currency has fallen steeply along with the price of oil, meaning that it may have to restrict imports of key goods. Russia imports a lot of basic products, including beef, cheese, shoes, TVâs, cosmetics and pharmaceuticals. According to Bloomberg, Finance Minister Anton Siluanov estimates that Russia would also lose about $100 billion in revenue next year because of falling oil prices.
We live in a complex world:
1. Our major ally, the Dark Ages Kingdom of Saudi Arabia, perhaps the worldâs largest funder of terrorism in the ME, is attempting to prevent our move towards energy independence. As long as the Saudis control much of our energy supply, we will remain involved in these ME wars. Many people think that our State Dept. may have encouraged the Saudis in order to punish Russia for blocking our takeover in the Ukraine.
2. Oil is not used to generate much electricity in the US. Cheaper oil does nothing to effect the economic viability of solar or wind, whose main competitors are coal and natural gas. The primary effect here in the US is twofold:
⢠Reduce the economic attractiveness of fracking (a good percentage of fracking is for natural gas, and will not be effected by cheaper oil).
⢠Reduce the demand for electric cars to the extent that their sales are a function of lower gas prices.
Low oil prices over a long enough period will burst the US fracking bubble. We could react to cheap oil by ending fracking and never starting it up again. We could plug the wells, clean the soil, repair the damage from earthquakes, pay the medical bills of the innocent folks forced to live near these sites. And, in a time of water scarcity, save the billions of gallons of water that are used to frack today.
Finally, the economic pressure lower priced oil puts on our so-called “enemies” brings with it the real cost of confirming the neo-con view that the US can still muscle its way around in the world. So, will our relations with Iran, Syria, and Russia will remain intractable? Or, can it lead to a nuclear deal with Iran and a political accommodation with Russia? That has to be the underlying bet by Saudi Arabia and the US.
The âoil weaponâ was used in 1973 against the US. We hated OPECâs war on our economy back then. We of course, used that very same old oil weapon when we embargoed oil sales by Saddam Husseinâs Iraq. Skip ahead a couple of decades, and it is now smart policy, itâs effective, and itâs now the American way.
Oil, as always, remains the centerpiece of our Middle East strategy.
