Archive for August, 2011

Financial visibility in the US – who has the money, what are they up to?

Monday, August 1st, 2011

The Frank-Dodd act is with us (the US), and one day it will be good.

In a society where enormous funds are assembled in all sorts of ways society should have a right to know what is going on. What are the owners doing with their money and are they thinking of the wellbeing of society or just private profit. Are they milking us? Is there systemic risk here? Are they breaking the law? The amount of money available, the direction of their use should generally be known.

Things may get out of hand – society may be hurt. Greed is a dangerous associate. The many financial crises we have are caused by somebody and the taxpayer should not carry the can.

Mr Obama have made into law the Dodd-Frank Act as part of an overhaul of the US financial system, helping the citizens of the US – the common people.

A new era of bank standards is coming – the systemically significant companies shall be looked into – maybe even internationally. Strong capital standards in the financial system is the aim.

The action on financial reform now goes to the US Treasury and their regulatory agencies, which will have to decide which companies should be called  “systemically significant” and face higher standards of capital reserves and supervision.

There are complaints – The US loses out to the rest of the world, there will be kidnappings….

New functions are coming: A new liquidation authority that does not get the money from the taxpayer, a Consumer Financial Protection Bureau, strengthening of the fraud function, registering with the SEC if you are not a family office,

And worldwide – yes let us have the same rules everywhere – more insight, more public information.

They must then provide the regulator with details, with much of the information made public. Exemptions are made for family offices, about 5000, blood or marriage relations.

This is ongoing work – champions and critics are alive. But remember – no more systemic failures, please.

The Dodd-Frank Act recognizes the shadow banking system as a systemic risk, and that must be seen into.

More safety is good for everybody. Much good work must be done before it is all triple A.

Here we go – Obama and Geithner are the champions.

Murkyness – let us take it away – let the light shine in all the dark places.

Exponential growth is not sustainable – ever

Monday, August 1st, 2011

The world is finite. We can not take more than there is, we can not make another one. When all is gone we have emptyness, and we could disappear.

When we add a fixed percentage – growth –  to what we produce, consume, spend – every year – year after year – we will eventually run out of resources. The growth will be so big that it is no longer possible to go on, there will be so much produce that a stifling will come. At some point enough is enough.

The constant growth paradigm of the world economy  will come to an end at some time – if the world economy grows by 2% a year for a long time – it will double inn 35 years – and then double again in the next 35 years. If it grows by 4% the doubling time will be 17.5 years. After a while all the resources of the world will be spent.

The present world population of about 6.8 billion is now growing at a rate of 1.14 % per year, the doubling time – i.e. the time it takes to double the population to a population of 13.6 – will be  61.4 years, in another 61.4 years the population will be 27.2 billion. If this continues to about year 2185 the world population will be 54 billion – which is a huge number of people all of which need food and a place to stay, a job. After another dobling  - in year 2246 we will have 108 billion people here.

Oil consumption has been growing by about 7% for some time, i. e. doubling every 10 years. This is about to stop as oil production is peaking, and unless huge new fields are found we are heading for a change – this growth is not sustainable.

The growth in personal consumption in the rich world is not sustainable either, it is about 20 times higher than the per capita consumption in many countries. Fairness will come some day.

And if everybody in the world should consume the same amount and the same products as the western world, there just is not enough to go round. A change is coming – perforce.

An easy to understand example of the exponential function is money: If you earn interest of 4% a year on your money they will double in 17.5 years.

There are about 136 million cars in the US. A little arithmetic says that with the same car density in the rest of the world, there will be 2.7 billion cars on the Earth. This is not going to happen. And fuel for these cars – not a chance.

There is a huge fault showing itself in the way we run our societies – we don’t think about what we do. But surely we understand the exponential function? We are not daft, are we?

It is time to start planning as if we understand. Think man, think. And do.

The first law of sustainability is that we can not have exponential growth in a finite world – we must find the right level. And distribution should be fair and consumption equal.

The transition has already started – and it was inevitable.

See video with Albert Bartlett on YouTube

Wikipedia says: The exponential function describes a relationship where a constant change in the independent variable gives the same proportional change in the dependent variable – e raised to the power of x.