Why is debt breaking the world economy?

Even the most complex problems have simplicity at their heart.

The world economy looks as if it is about to collapse under its weight of debt.

193 out of 198 countries are in debt.  (Source - CIA)
Here is the same list on Wikipedia, kindly arranged so you can play around with the list per capita and as % of GDP.
Here is a cool graphic where you can watch countries' debt move up and down with time. Mainly up.

From all this, we learn that the debt is not owed by one country to another (otherwise it would be 50/50, wouldn't it?). The debt is owed by 193/198 countries to the banksters.

This is all down to the way money is created. Make no mistake, money is being created. World money supply is increasing. It had a doubling time of 10 years in the last decade of the 20th century. Which means that someone is creating new money. That someone is the banks, who make the vast majority of new money. (Governments get to make a tiny amount of new money as notes and coins: in the UK that is 3% of the total).
Banks create money by issuing loans, in the following way:

1. It issues money to the borrower's account, and sets up an equal and opposite sum in its own accounts.
2. The borrower goes away and earns (in the real economy) money to pay off first the interest on her loan, and then the original capital sum. 
3. When the capital sum is finally paid off, the two accounts cancel each other out.
4. In this process, the bank has acquired an extra amount of money, the interest, which varies with the terms of the loan. For example, a straight loan of $10,000 at 5% over 10 years will earn interest of $2,728.
5. That $2,728 has gone from the real economy into the bank.
6. Either the real economy has lost $2,728 to the bank, or other people have borrowed it from banks, creating more debt. 
7. If it had been withdrawn from the economy, it would be deflating, which it isn't (generall). Therefore it is being borrowed, repeating the process.
8. Therefore all money in the economy has its origins in debt - the capital sums borrowed (which will be annihilated when repaid) and the interest, which represents other monies borrowed into existence.
9. Therefore debt increases inexorably in the system, until a critical point is reached when it is realised that debt becomes unpayable.

The whole economic system is based on debt. We are in a vicious circle, working to pay off debt. If money is growing, debt must grow. Money has grown, debt has grown, and now it is crunch time.

Clearly, this is a vast oversimplification. There are a multitude of other factors at work, but this is the logical and necessary core of the problem, despite all the obfuscation that will no doubt ensue in the comments below.

I hope that helps. 

My advice: dig up your lawn and plant vegetables. 

My first post on HuffPost UK blogs. On Climate Sensitivity

Wahey. Today is my first day as a HuffPost UK blogger.  It is a happy day for me.  My first blog on HuffPost UK is over here, but for all those who cannot tear yourself away from the Mabinogogiblog, here it is:

Can Popper Resolve the Global Warming Debate?

While about 97% of climate scientists accept that man-made global warming (AGW) is a real threat to humanity, the public is in two minds as to whether climate change is a real threat. This is the result of a highly effective campaign by the climate change "sceptics", who use mainstream and social media to attack each and every point made by climate scientists. This has caused journalists and broadcasters to bracket climate change as "controversial", and therefore to feel obliged to balance any climate scientist with a speaker for the sceptics. This in turn confuses Joe Public, who tends to think, "Well, the truth must be somewhere in between".

Democratic politicians are nervous of introducing radical measures when there is no overwhelming public enthusiasm, and so the uncertainty in the mind of the public translates into inadequate action from politicians in matters like energy conservation and transition to renewable energy.

This journalistic balancing act struck between science and sceptics would be right and proper if there were an equal balance of scientific evidence for either point of view, but it is not right to balance science with ideologically driven attacks from a point of view which lacks any real scientific basis. Journalists do not feel the need to balance every scientific statement about evolution by giving equal airtime or column inches to creationists.

Are climate sceptics in the same category as creationists? They could be. We are going to have to get technical here - but the only alternative is to take the scientists at their word, and this the sceptics are unwilling to do. Therefore we have to understand the science, starting with what we know.

There is a common misconception that science "proves" things. It does not. The great philosopher of science, Karl Popper, showed that the best status that any scientific statement can achieve is not "proven", but "not yet disproven". Refutation is central to science. If a statement is not capable of refutation, it cannot be a scientific statement.

The central claim of the climate sceptic is that CO2 does not seriously affect the global climate. In scientific terms, this translates into the hypothesis that climate sensitivity is low - that is, the global temperature does not rise significantly when more heat is put into the system.
Let's start from what we know:
· We know from textbook physics that CO2 is a greenhouse gas - that is, it retains heat within the atmosphere.
· We know from measurement that since the industrial revolution (taken as 1750), the levels of CO2 in the atmosphere have increased from 280ppm to 394 ppm.
· We know from radioisotope studies that it is our fossil fuels that are responsible for this increase.
· We know from basic textbook physics that this increase in CO2 alone is sufficient to push up temperatures by about 1ºC.

OK? All straightforward, uncontroversial physics so far - albeit intensely simplified.
Now we come to Climate Sensitivity (CS).

CS is the amount by which the average temperature of the atmosphere will eventually increase from a doubling of CO2. The extra warming comes from positive feedbacks - factors that are affected by the initial warming, which in response will produce further changes.

· Warmer air holds more water vapour, which itself is a greenhouse gas, so further warming takes place. That is a positive feedback.
· Cloudiness will increase, which has a complex effect. High clouds produce cooling, by reflecting incoming solar heat, while lower clouds hold heat in by a blanket effect. The net result is a small net warming.
· Further down the line, as warming takes place, melting ice loss means less reflected heat, another positive feedback.
· Methane, another greenhouse gas that is far more potent than CO2, will escape from unfrozen tundra, which is a long term positive feedback.

All of these factors - and more - have to be entered into computer models to find how they interact.

Climate science has applied a great deal of effort to the question of CS. Multiple lines of evidence - from models, observations of known temperature changes, and proxy records from ice cores - show remarkable convergence towards a value of 3ºC (+/- 1.5º) C for a doubling of CO2 in the atmosphere. In particular, it looks as if a value less than 1.5ºC is very unlikely.

In science, when there is this kind of convergence onto a value from disparate lines of enquiry, the value should be accepted unless very strong evidence is brought against it.

There are a small number of papers by sceptics which claim a low value around 0.5ºC. These have been comprehensively criticised on various grounds by the climate science community - indeed, they would say "refuted" - but because of the technical nature of the argument, and the media-shy nature of scientists generally, this part of the debate rarely emerges into the public domain.

It is time for the CS debate to be brought out into the open in order to show journalists, commentators and opinion formers that the position of the sceptics lacks any scientific credibility. Instead of defending their position against an endless series of attacks by the sceptics, the scientists should take the fight to the sceptics, and will be able to show that their case is disproven.

That way, we will be able to move on from the debate, and will be able to make the changes necessary to ensure that our grandchildren can live secure lives.

MP letter re Nuclear Third Party Insurance

John Penrose MP
House of Commons
London SW1A 0AA


Dear John

Nuclear Third-party Liability

Thank you for your letter of 14th July.  The £140 million cap on operators’ liability has, remarkably, been unchanged since 1996, so it is timely that the Paris and Brussels conventions should be reviewed later this year.

The fact is that £140 million would amount to a small fraction of the full costs of a major release of radiation, including such factors as health costs, lifetime upkeep of damaged foetuses, loss of livelihood, ground denial &c.

A recent study by Versicherungsforen Leipzig GmbH, summarised here , arrives at the conclusion that full third party liability insurance would increase the cost of nuclear generated electricity by (net) 0.14 €/kWh up to € 2.36/kWh (100 year premium accumulation period). In sterling, that is £0.12 – £2.04.

The latest cost assessment for HMG by Mott McDonald (June 2010) gives nuclear electricity a cost of about £0.10 /kWh. Therefore the cost of nuclear electricity would increase by a factor of between 2 and 20.

Despite this significant impact on the price, the nuclear industry can no longer be bailed out of its responsibilities at taxpayers' expense. It has received, and continues to receive a number of hidden subsidies which I will not go into now, but I very much hope that you will agree that irrespective of any other merits or demerits of the case for nuclear power, it is only right and just that nuclear power station operators should carry full third party insurance cover.

I do not need to remind you that our constituency lies only 20 miles from Hinkley NPS, and therefore this is not an abstract matter of interest only to actuaries, but a matter that could make a significant economic difference to all your constituents in the event (which God forbid) of a major release from Hinkley.
I am very grateful, as ever, for your trouble in answering this letter giving your personal views, and also, if you would, for forwarding it to the relevant Minister.

Sincerely

Richard

Writing to MP on an amnesty for phone hacking journalists

To John Penrose MP, Weston super Mare (Con)

Dear John

Many thanks for your email (below) regarding the actions the Government has taken over the phone hacking scandal.

I would like to put to you the suggestion that journalists throughout the UK newspaper amnesty should be offered a time-limited amnesty from criminal prosecution in return for sharing all their knowlege about illegal surveillance practices. The aim is to facilitate the working of the varous inquiries that you have mentioned.

After the amnesty window is closed, any journalist who has not taken advantage of it will be liable to the full penalty of law. It would be open to the newsroom journalists, not to managers and executives who presided over the hacking culture.

The aim is of course to get the full truth, without having to drag reluctant witnesses to the inquiries that have already been set up, and once there, to find that they obscure what they know for fear of incriminating themselves. Without it, many journalists might insist that they have their solicitor in attendance to advise them what questions not to answer.

This would make the process of getting information quicker and therefore less expensive - an important matter in these times of fiscal austerity.

It is clear that there is a widespread culture in our press of phone hacking. Operation Motorman found that the Mail, Mirror and the People were all ahead of the NoTW in the hacking stakes. Even Women's Own does it. (p9 of the What Price Privacy document).

This amnesty proposal is inspired by Mandela's Truth and Reconciliation Commission.

In debating this proposal, the main objection that I have encountered is the punitive response - the desire for them all to go to jail. However, some reports have suggested that more than 300 journalists have been involved in some form of illegal surveillance. The costs of police, court, and prison for this cohort are clearly very substantial, quite apart from the problem of jailing a large section of a highly influential group of workers who will retain the sympathies of many of their colleagues.

Another objection is that it will not address the problem of journalists not wanting to speak out because of the effect on their careers. This is true, but given the regrettable view in the media industry that the practice was "normal", it is unlikely to be seen as a major hurdle to re-employment in and of itself.  The stick-and-carrot nature of the amnesty will override career worries.

I would be grateful to have your own view of the merits of this proposal, and if you feel appropriate, will also be grateful if you would forward it to the minister responsible.

With, as ever, thanks for your work

Richard Lawson

Islamophobes and Islamists locked in an embrace of mutual hatred

Islamophobes  and Islamist jihadists are locked together in an embrace of mutual self-sustaining hatred.

Melanie Phillips, Pamela Geller, and the mad mullahs with whom they are obsessed are in a state of mutual paranoia, based on absolutist ideology.

The Tao te Ching says (chapter 60):


Governing a large country
is like frying a small fish.
You spoil it with too much poking.

Center your country in the Tao
and evil will have no power.
Not that it isn't there,
but you'll be able to step out of its way.

Give evil nothing to oppose
and it will disappear by itself.

Mrs Thatcher quoted the first lines as support for her Conservative doctrine of small government, but clearly had no understanding of the last lines. Fundamentalist religion thrives on  persecution - it confirms their world view, that they alone have the Truth, and the world (which is going to hell) is Out to Get Them.

Clearly we have to defend ourselves against terrorism (Defined as the use of violence against civilians in order to achieve political gains). To do that we need intelligent intelligence and police work. Military action against Islamic countries (perceived to be) badly infected with Islamist extremists is counter-productive. Our wars in Iraq and Afghanistan have arguably pushed vulnerable Muslims towards the extremist mentality.

Give evil nothing to oppose
and it will disappear by itself.


This sounds too good to be true, but I can tell you from personal childhood experience, being a fundamentalist is very boring. Left to themselves in an open society, the young will drift away from routine prayers and oppressive, pointless restrictions. Bomb their co-religionists, and they will find the motivation to join what they perceive to be the resistance.

Breivik, Phillips and Geller are obsessed with the Islamic threat to our Western democratic culture. Theirs is an overvalued idea:

Figures compiled by Europol, the European police agency, suggest that the threat of Islamist terrorism is minimal compared with “ethno-nationalist” and “separatist” terrorism – terrorism committed by white people, in other words. According to Europol, in 2006, one out of 498 documented terrorist attacks across Europe could be classed as “Islamist”; in 2007, the figure rose to just four out of 583 – that’s less than 1 per cent of the total. By contrast, 517 attacks across the continent were claimed by or attributed to nationalist or separatist terrorist groups, such as ETA in Spain. (Source)

Even granting, for the sake of argument, that the influx of Muslims into Europe, (and more to the point their irrational birth control policies, shared with Catholics) is a problem, it is one problem among many, and anti-jihadists (their own term for Islamophobes)  demonstrate their lack of balance by ignoring and sometimes denying other, more important, problems.

W B Yates had it in a nutshell:

The best lack all conviction, while the worst 

Are full of passionate intensity.

The "best" need to get their act together. We need to realise that the major problem that we face is ecological collapse, and that in addressing that problem, all the other problems we face will both pale into insignificance and be lost in the cooperative effort of making the transition to a sustainable society and economy.

[update] Just found that Breivik is a climate change denier. 

Have Spencer and Braswell blown a hole in someone's credibility?

I have been arguing  that controversy over climate change can be resolved by focusing on climate sensitivity,
which is a measure of the degree that the global climate changes in response to any change in its energy balance. I have mentioned Roy Spencer already.

The scientific evidence points to a figure of around 3*C -  that is, when the CO2 in the atmosphere is doubled, the world will heat up by 3*C, plus or minus 1.5*C. Maybe more.

Against the consensus are a handful of sceptic scientists, who claim that sensitivity is low. Chief among these is Roy Spencer, who recently published a paper claiming that climate models overestimate sensitivity.

His paper is naturally seized on by the denial blogosphere trumpeting it as the "Death Blow to  Global Warming", (e.g. Forbes) and links to various re-pastings of the Forbes article were treated to a large number of retweets on Twitter last week.

In fact, the Forbes headline distorts Spencer's claim in his paper. He simply concludes "atmospheric feedback diagnosis of the climate system remains an unsolved problem, due primarily to the inability to distinguish between radiative forcing and radiative feedback in satellite radiative budget observations”

The graph shows Spencer's claim. The green line shows the satellite observations of heat losses at the top of the atmosphere, and the red and blue line shows the predictions of the climate models. A significant disparity is shown. Spencer claims that more heat is being lost than the models assume.

Death blow, yes?
No.

First and foremost, Spencer opposes the general view that changes in ocean temperatures cause changes in the clouds. He believes that the clouds cause the ocean temperature changes. However, he has no evidence for his view. It is just his assumption: he believes clouds vary randomly. Maybe it is a direct intervention by God in planetary affairs, because Spencer is a creationist. Given that science is all about investigating causes, and there is an established causal chain between warmer oceans and more clouds, his assumption is very weak.

Second, there is the matter of the model that Spencer uses. Yes, the climate sceptic is using a model, despite the intense criticism that the sceptics direct at modelling. But his model "has no realistic ocean, no El Niño, (ocean current cycle) and no hydrological cycle, and it was tuned to give the result it gave." (Trenberth) In using simple models, Spencer & Braswell is using the central sceptic technique of cherrypicking - taking a partial, not complete, view of the data.

Trenberth and Fasallo have a critique of Spencer's paper on Real Climate.

First, Spencer and Braswell (SB11 from now on) do not supply error margins on their figures. This is an astonishing fundamental error of method.

When the data is re-worked using more relevant timescales and error margins, there is a better fit between the observations and the models, particularly the model that factors in the ocean current changes.

The conclusion is that Spencer has not blown a hole in AGW. If anything he has blown another hole in his own credibility. Climate sensitivity to a doubling of CO2 remains in the 1.5-4.5*C range, which means that we have to decarbonise the global economy.

-----------------
If you don't believe, or think I am glossing over the details, read this:
Barry Bickmore on Spencer's simple models.
[Update 3Sept] the Editor of Remote Sensing has resigned, because he failed to pick up that the 3 reviewers (climate skeptics) ignored the fact that SB11 arguments had already been refuted, and that SB11 did not address this argument in their paper. In short, it was a defective paper.

As usual, there was a big splash in the MSM and blogsphere claiming that Spencer had sunk AGW, but no comparable splash for the retraction.