What do fireflies have to do with the economy?

I love the summer time. Especially, I love fireflies. They are nature’s little fireworks. When it starts to get dark, you see these little flashes of light dispersed throughout the night air. It brings out the child in all of us. My children love collecting these insects, studying them and then releasing them. Ironically, this spectacle of lights signifies more adult like activity then child’s play. The fireflies have a mission. These lights are the equivalent to a man at the bar sending a drink over to a female to get her attention. And like any male in this natural bar scene, they are competing with hundreds of other males trying to do the same thing. The night sky is not some natural landscape. It is an insect singles scene.

Unfortunately, the attendance of nature’s singles night is dwindling. There has been a considerable drop in the firefly population. It is not due to the firefly population finding marital bliss and coming off the singles market. There are variety of reasons cited, such as pesticides, light pollution and change in the weather patterns. No one is truly certain for this decrease and scientist continue to study the causes. In fact, you can go to the following website to read more about it and assist in the research: https://www.mos.org/fireflywatch/.

So what does this have to do with the economy? Most likely, you did not realize there is this firefly population decrease and you only would have become aware of the problem when there were no more fireflies. This is similar to the economic crisis.

Many of us did not realize that we were in a recession until a year after it officially began. More importantly, almost all of us did not realize the problems we were creating with sub prime loans, credit default swaps, and collateralized mortgage obligations until the crisis hit last year. The problem existed before that; however, everyone ignored it.

They say history never repeats itself; however, that is not true for human behavior. As my wife reminds me, I need to pay better attention. Perhaps, we all need to be more aware of our surroundings. Go out and enjoy the natural beauty of the summer. Watch that natural firework show. Maybe if we pay a little more attention to our surroundings, we can prevent the next crisis from happening as opposed to dealing with it when it happens.

The Godfather

One of my favorite movies of all time is the Godfather. There are multiple scenes I love in that movie; however, one scene that stands out is at the wedding of Don Corleone's daughter. Don Corleone is in his office and people are visiting him asking for a favor. As he grants a favor, he reminds that person that someday he will return the favor to him.

I am afraid America is the person approaching the Godfather and the Godfather is China. Over a $2 trillion of US government bonds have been purchased by Chinese government. The money provided by China is allowing us to float our current deficit. Without that country's assistance, the majority of the free spending the US government is doing would not be possible.

Unfortunately, this relationship may be fine for now; however, this may be different in the future. We may not have the leverage that we had in the past when dealing with China. This shift in the balance of power may impact our ability to influence China in the many areas, including fighting global warming.

It is projected that China and India will pass the US in the leaders in carbon emissions. Both countries have robust economies, which require a lot of energy to fuel their expansion. The cheapest form of energy to maintain this pace of growth is coal. Coal emits the largest of amount of CO2 emissions. According to the New York Times, China currently uses more coal than the US, Europe and Japan combined. In many cases, China is using new energy efficient technology in burning its coal; however, coal is still a dirty energy that emits a large amount of CO2.

So when the US approaches China this December in Copenhagen or in the future and asks China to reduce its Co2 emissions, China will remind the US on how much it benefited from using these large Co2 emitters to expand its economy and now China has the right to do the same. What leverage do we really have if China is providing a debt service to our economy. Not much. That is why we need to reduce our debt with China or any other nation because we will have no leverage for forcing these developing countries to forgo immediate growth to reduce the level of CO2 emissions. If we still have more than $2 trillion of US bonds owed by China, that will be a short conversation. In the end, we might have a better chance in asking Don Corleone to give up the mob business and retire to Sicily than we will have with China forgoing its growing use of coal.

That's alot of money we can save

Here are some interesting statistics from the Union of Concerned Scientists.

If Congress passed legislation consistent with the Union of Concerned Scientists recommendations, we can save the following amount of money:

$900- The net amount of money the average US household would save in 2030 on their energy bills.

$255 billion- The amount of money business and consumers could save in 2030 on electricity, natural gas, home heating oil, and transportation costs.

$1.7 trillion- The net amount of money the US would save from 2010 to 2030.

Go to www.ucsusa.org for more information.

Clearly, taking such action to achieve these cost savings will have an initial impact on our own budgets and livelihoods. As a result, because of the current recession, this is not the best time to ask Americans to support such legislation. However, like many other difficult issues, we cannot continue to hold off taking action until some indefinite period of time in the future. In the end, that future may never arrive.

If we are reevaluating the health care system and the financial markets during this economic crisis, why not reevaluate how we impact our environment. One could argue that without a sustainable environment, there would be not health care system or financial markets. Also, many of us have spent extra money initially to receive significant savings in the future. Therefore, this is concept of spending now to receive future savings is not a novel approach. Previous generations have made sacrifices for the future generations. It is our time to do the same. Winston Churchill once said, "Americans will always do the right thing, after they have exhausted all the alternatives." Let's prove Winston Churchill wrong by taking action now.

ECO INDICATOR

There are a variety of economic indicators out there that people are using to help them determine when the global economy will crawl out the recession crater. One indicator I would look at is the Baltic Dry Index. This index provides an assessment of the price of moving major raw materials by sea. It takes into account 26 shipping routes that are measured on a time charter and voyage basis and the index covers certain dry bulk carriers carrying a range of commodities including coal, iron ore and grain. Every working day, the Baltic surveys the brokers around the globe and inquires about the cost to book various cargoes of raw materials on various routes.

This is an important economic indicator because the dry bulk consists of raw materials that are used in production of intermediate and finished goods, i.e. concrete, steel and food. It is a very good indicator to determine future economic growth and production. As you see this index increase, it could be a foreshadowing that the economy is starting to turn around. For example. in May 20, 2008, the index was 11,793 points, which was its record high level since its introduction. By the end December 5, 2008, the index dropped by 94% to 663 points. So keep an eye on this indicator rising.

Ironically, this increase in the index could also be an indicator of an increase in carbon dioxide emission levels. An increase in the index means more ships transporting goods, which release Co2 particles into the atmosphere, to factories to build products, which will require more electricity. This electricity in many places is fueled by coal, which releases an extensive amount Co2. In fact, burning coal is the largest contributor of Co2 emissions. Therefore, an economic down turn may not be good for our pocketbook, but it is good for the environment.

Risk Management

In the financial world, risk management is a major component that a financial institution uses in determining how it operates its business. Unfortunately, the recent financial meltdown has demonstrated that there were major failures in firms correctly determining and mitigating risk. The link below is to a video that provides an excellent risk analysis on whether we should take action or not to fight global warming, aka global climate destabilization. There is a debate on whether we should fight global warming with carbon caps, carbon taxes and other emission restrictions because such government intervention will slow down our economic growth. Alternatively, if we do nothing and those cataclysmic events forecasted by leading scientists do occur, we will have bigger problems than a stagnant economy. We will have:

1) Economic losses that could equate up to 20% of the world GDP;

2) mass migration of people;

3) destruction of thousands of species;

4) flooding of major cities such as New York, Hong Kong, Shanghai and Tokyo;

5) destabilization of governments;

6) increased conflict of countries fighting over water rights and other resources;

7) mass starvation;

8) droughts; and

9) the end of humanity.

Perhaps, not all of these events will occur; however, if at least a quarter of them occur, I would say that I would be willing to accept a slow down in econonic growth over the end of the world as we know it.

By acting now, we will be able to mitigate the above events and hopefully prevent them from occuring at all. In addition, such action will be an investment for a better future for our children and generations to follow. Of course, this will require us to change our habits. Consider it similar to any other bad habits that we have to change to avoid a negative result, such as eating fried food or smoking. Of course, there is a level of adjustment and some growing pains; however, in the end we do it because we know it is good for us and, ultimately, it becomes second nature. Like eating heathier and quiting smoking, we need to break those bad habits to have a future. This will be a painful process for all of us on an economic and personal level; however, we are resourceful people. We have survived two world wars, a depression, epidemics and reality TV shows. We will survive here too. Alternatively, if we do not do anything, we will not survive. Of course, I may be completely wrong here; however the empirical data and the first hand evidence that I see on a daily basis tells me otherwise. In the end, not acting an hoping that I am wrong here is not a risk I am willing to take.

You decide. To help you in your decision making, watch the video and then make your own table with two columns. On one column make a list of the events that would occur if we would take action to fight global climate destabilization and in the other column put down the worse case scenario of events that would occur if we did not act. Then you decide which side you want to be on. Here is the link to the video.

http://www.youtube.com/watch?v=mF_anaVcCXg

Hey Kids! Get off my lawn!

Everyone during there childhood had the neighbor who despised kids treading on his perfectly manicured lawn. We would dare each other to run on the lawn to see if we would get caught. The last two years I have slowly transitioned off of the steroid induced lawn to a more organically fed lawn. What I have realized in this process is that the neighbor's perfectly manicured lawn that has that perfect shade of green throughout the entire summer is a lawn that I would tell my children to stay off. Not because the person will run out and yell at my kids tarnishing the family name. It is because that lawn has a variety of lawn chemicals that could harm my children's health. Of the 30 commonly used pesticides on lawns, 19 are linked with cancer and carcinogenicity, 13 are linked with birth defects, 21 with reproductive effects, 26 with liver and kidney damage, 15 with neurotoxicity, and 11 with disruption of endocrine (hormonal) system. See http://www.beyondpesticides.org/lawn/factsheets/30health.pdf. The concern is that these chemicals that we treat our lawns can seep into the groundwater and contaminate our streams and rivers. And in many instances, it is popping up in our drinking water. This does not mean that our population is going to be wiped off the planet by lawn fertilizer; however, it is changing the environment we live in by polluting our streams and rivers, which in turn is impacting the wild life of these waterways. Therefore, we should all stop and think when we pick up that bag of fertilizer in an effort to obtain the perfect lawn and consider whether our pursuit of the our own suburban oasis is destroying the real oasis, Earth.

Who will stop the rain?

I am looking to purchase a rain barrel. Fortunately, I do not live in Colorado. Colorado's water laws require that precipitation from the sky fall to the ground, run off and into the river of the watershed. Therefore, an individual can not purchase a rain barrel to capture such rain fall without breaking the law. Technically, an individual can go to jail for the collection of rain water. Of course, there are not many police officers patroling suburban neighbors arresting weekend gardeners or busting up garden clubs for capturing rain water to water their vegetable gardens and landscape. Nevertheless, it is a criminal offense where you could end up in jail with other nefarious characters because you violated a law that dates back to the 1800s. Colorado has an appropriation method with respect to water collection where there is a seniority system based on first come first serve claims staked as far back as the 1850s. Under its water law, every drop of water falling from the sky must divided amongst those that have such "water rights" claims. This includes Nestle, Exxon Mobil and many farmers throughout the area. There is a debate in Colorado on whether this law needs to be changed to allow its residents to collect rain water for its own personal use. There is growing pressure on both sides because of the ever growing drought occurring in Colorado. In fact, many parts of the western US have been in a drought for almost a decade.

As our climates changes, there is going to be a clash between (i) those individuals that do things on there own, such as capturing rain water in a barrel, to improve their personal environment and to save some money and what the private and public sector needs, which is to make money. In general, we need to put everything on the table and reevaluate it. A law that established rights 150 years ago might not make sense in the 21st century. I am not saying that we should rescind this law outright. We have seen where that draconion philosophy has led us when we removed Glass Steagal Act in where the financial and banking industry became less regulated. In the end, when we look on how to save this planet and maintain a certain quality of life, we need to fully reevaluate what laws make sense and what works in the 21st century. For now, I can say that I am glad that I live in Pennsylvania. I just hope I get a lot of rain this spring.