Yesterday Nader Elhefnawy explored in “Diversifying our planetary portfolio” what technologies would enable a space settlement to be self sufficient. This is an ill-posed question as he partly sees:

What’s surprising about this is the source: Rolling Stone.

The cover story inThe Economist this week predicts that population will peak this century:

Last year the United Nations said it thought the world’s average fertility would fall below replacement by 2025. Demographers expect the global population to peak at around 10 billion (it is now 6.5 billion) by mid-century.

This peak is only temporary. Fertility plotted vs. money income is U-shaped. Poor can’t afford family planning, but the rich want to have kids.

They further opine:

States should not be in the business of pushing people to have babies.

Yes they should. A baby will become a taxpayer and a useful citizen. Zero population growth did far more to hold back development of China and India than Reagan’s (anti-) family planning policies.

We can grow food indoors, reuse our water and get the energy to do it from carbon free sources. The carrying capacity of the Earth is easily one trillion people. At the current rate of waste heat per person, we would be generating only 2% of what we get from the Sun. We could site 72 billion at the density of the Netherlands, 3.8 trillion at the density of Manhattan with the current land area.

Continue reading Max Population Predicted →

I don’t think so, despite Derb’s hand wringing. He relies on this overwrought analysis, which doesn’t have that figure anywhere in it that I can see.

The analyst is mixing up oil prices and gas prices in that scare story. But he also completely ignores alternate sources, such as shale and tar sands, which are in huge supply (larger than crude oil reserves) in places like Colorado and Wyoming, and Alberta, and profitable at thirty bucks a barrel. This effectively puts a ceiling on oil prices in the long term, and the longer prices stay where they currently are, the more and faster those sources will be expanding capacity.

I not only don’t think we’ll have a hundred dollars a barrel next November–I don’t think that we’ll ever do so, in inflation-adjusted terms, at least not for any significant (a few weeks at most, in panicked response to some event) period of time.

Is it the end of the Phillips Curve? If so, I won’t miss it.

China is doing some major tinkering with fiscal policy according to today’s Wall Street Journal. To try to moderate the flow out of bank savings into their stock market, they are decreasing the tax rate on savings from 20% to 10% and increasing the savings interest rate.

This will indeed get people to save more in the banks. But it will also give them more future cash from the lower taxes and higher returns. This may make them more confident about speculating in the stock market. This means that China’s mountain of cash will continue to grow. Here’s a report that China’s savings rate is 55%.

If you think about the combination of pension products (6% to get all the 401k matching seems typical), Social Security (12.4%) and Medicare (2.9%) we are doing a good bit of forced savings. If you add in home equity, most US workers in their prime are socking away 30% if you don’t deduct the debt they’re taking on.

Our population doesn’t have a huge demographic bulge brought about by a one-child policy, industrialization and massive improvements in life expectancy. The upshot is China will have very high savings until the inverted pyramid kids (one kid who is the only kid of two parents who are each the only kids of two grand parents) get to the workforce. They can expect bequests, a healthy mortgage loan market and modern employee benefits. In the mean time, no amount of cajoling from Chinese or American treasury and central banking officials is going to curb the Chinese savings rate much.

The impact means cheap money across the board for another 20 years. According to the CIA World Factbook $180 billion of their savings is going abroad net. Since they get about $65 billion in foreign direct investment, they get to invest almost $250 billion a year abroad.

They have $1 trillion in bank reserves and gold compared to US’s $70 billion. They have about $300 billion in government debt or $1.2 trillion at purchasing power parity (PPP), compared to $10 trillion US. China has a vastly undervalued currency with gross domestic product (GDP) PPP estimated at $10 trillion at about 4 times the official exchange rate which puts their GDP at current fixed exchange rates at $2.5 trillion.

In short, with a floating exchange rate, China would have the world’s second biggest economy. And that is without the benefit of substantial deficit spending, a stock market, consumer credit, a public pension system up to western standards, a health care finance system up to western standards or any of a number of multipliers that the US already has.

In the next few years, we can look forward to China becoming an economic super power and not slowing its growth (10.7%) until it rises from $7700 per capita PPP GDP to that of Poland ($14k, 5.8%) or France ($27k, 2.1%). That is respectively twice and three and a half times what it is today. With four times as many people that’s 2-3 times as big an economy as ours in the next 40 years.

Can the US manage a peaceful decline and start playing the role of junior partner in defense alliances?

The Bear Stearns bailout and failure respectively of two hedge funds with hundreds of millions (formerly) of equity and $10 billion+ of debt is causing some new soul searching among risk managers about the continuing sub prime overlending. The credit card issuer risk managers are taking the opportunity to tighten consumer credit for credit cards and probably soon other kinds of consumer credit.

By tightening credit card terms and mortgage terms, banks exacerbate the difficulty that sub prime borrowers may have making their house payment and refinancing their loans when teaser rates end. As lenders tighten terms, there will be a knock on effect of more sour loans. This is a game with a distinct first-mover advantage. Many consumers even in the sub prime market have more than one credit card. If Barclays credit cards (e.g., Juniper, US Air, Barnes&Noble, etc.) tighten their credit standards, Chase and Bank of America tighten their balance transfer requirements, banks that keep their offers open longest may be the ones that suffer in the event of a rise in consumer bankruptcy. Oddly, all of the acquisitions by Chase, Bank of America and others of competing credit card issuers means that they have internalized a higher share of the pain than in the last recession, but they are still fighting the last war.

The credit card and mortgage defaults may, in turn, dry up some sources of liquidity for hedge funds that buy credit card and mortgage backed securities and other consumer debt. There is still plenty of money gushing into the global financial system (China’s government and consumers are socking away a lot of money in anticipation of a labor shortage when they retire and no trillion dollar social security program to help them and expect India, Pakistan and Indonesia to join them as their demographic bulge matures coincident with speedy growth). So unwinding the sub prime fiasco will just increase the appetite for return and dollar denominated assets in other sectors of the world economy. But that’s small consolation for the millions of people caught in a credit crunch. A politician cleaning up bad credit is going to lose votes when voters find out the alternative is no credit.

My proposal is for there to be a federal car loan program and a federal health care loan program.

Continue reading Last One Out is a Rotten Egg →

On Intrade, here’s the standings for the 2008 election (security pays 100 if individual is elected):

1. 32.7 Clinton
2. 17.4 Obama
3. 16.0 Thompson
4. 13.2 Giuliani
5. 9.5 Romney
6. 7.6 Gore
7. 4.7 McCain
8. 3.1 Edwards
9. 1.2 Bloomberg

Adds up to 105. Could some partisans be trying to raise their favorite’s numbers?

On Intrade, here’s the standings for the 2008 election (security pays 100 if individual is elected):

1. 32.7 Clinton
2. 17.4 Obama
3. 16.0 Thompson
4. 13.2 Giuliani
5. 9.5 Romney
6. 7.6 Gore
7. 4.7 McCain
8. 3.1 Edwards
9. 1.2 Bloomberg

Adds up to 105. Could some partisans be trying to raise their favorite’s numbers?

On Intrade, here’s the standings for the 2008 election (security pays 100 if individual is elected):

1. 32.7 Clinton
2. 17.4 Obama
3. 16.0 Thompson
4. 13.2 Giuliani
5. 9.5 Romney
6. 7.6 Gore
7. 4.7 McCain
8. 3.1 Edwards
9. 1.2 Bloomberg

Adds up to 105. Could some partisans be trying to raise their favorite’s numbers?