I've created a series of images and posts for my webpage that are designed to promote my book, Fortress Beverly Hills. I've also redesigned KyleDane.com in a major way. Hope you like it!

My sci fi novel Fortress Beverly Hills is popular among survivalists. Its theme of The end of the world as we know it (TEOTWAWKI) rings true with Preppers and Zombie Apocalypse followers. Fortress Beverly Hills is available on Kindle through Amazon.com. This electronic book is only $2.99. It is also available in paperback either at Amazon.com

Occupy Wall Street Response #GBE2

This is partially a response to Beth's post here about the Occupy Wall Street protests: http://www.word-nerd-speaks.com/2011/10/occupy-wall-street-restoring-balance.html

But it's also a collection of my recent thoughts about the subjects that these protests have brought up. Just for background, I was brought up in a fairly strongly liberal household, and I share those liberal views for the most part, particularly when it comes to social issues. When it comes to government and economics, though, I am ambivalent. I have several years of schooling in Economics, which leaves me largely conflicted about the positives and negatives of both government and free market capitalism. One thing I can say is that I strongly disdain anyone who believes that a simplistic, one-answer-fits-all approach is the correct way to view either. For example, those that believe that the government should just "get out of the way" and let the free market provide all the answers to our society's problems. I am equally disdainful, however, of those that believe that having government solve all of our problems and direct the way our entire economy and society should function.

I tend not to be a protester, instead I always find myself taking on the role of the analyst. It's something I'm good at and something I enjoy. When I analyze the current situation, one factor jumps immediately to the forefront: leverage. Whenever we've had struggles between the rich and powerful and the masses, the best weapon the masses have ever had is leverage. For example, in the post war era there was a boom in factory and engineering jobs. The factories needed tons of reliable workers. The Unions were able to leverage this need into a negotiating structure that provided higher wages, better benefits and better working conditions for millions of workers. Today's unions have some remaining leverage, but the corporations have recently gained an extremely important advantage - geographic flexibility in placing their factories and thus their workers. The engineers had a different type of leverage - the rarity of their skill sets. They were the only ones who knew how to design and build all that stuff that needed to be built. Again, today's engineers have a problem of geographic competition - the millions of skilled college graduates being churned out of Indian, Chinese and other worldwide universities. Individuals and organized groups attempting to regain their power against the power of corporations and the wealthy no longer have anywhere near the leverage that they had fifty years ago.

If this protest movement has any one unifying theme that I can discern, it is that the rich and powerful, particularly corporations, have too much power and too much money. The protesters have a list of abuses a mile long that they want rectified. Again, I come back to leverage. Why are they able to get away with all the transgressions listed? Why bail out the corporations and not the individual homeowners? Why are the regulatory agencies for every industry dominated by CEO's and lobbyists from the corporations they're supposed to rein in? Why does it seem like regulations always make the job hardest on the smallest businesses and individuals, while leaving the largest corporations with an easy path to legality? Leverage. It's like a legal case where only one side is making an argument. The other side (the average person and average small business) doesn't even get to present their side, or if they do, no one is listening or no one cares.

So, how does the average man and average business regain leverage? Well, this blog is about ideas, and here's my idea: a demand union. This new type of union would have very specific demands and the numerical clout to make them known and to enforce whatever backlash remedy will be required to ensure that the corporations, the powerful, the government, whoever clearly get the message and are forced to take immediate and decisive action. I don't know that anything like that can come out of this movement, but it's possible.

I mentioned to a friend earlier this year that I thought it was interesting to watch the Republican Party tear itself in two thanks to the Tea Party movement, which I think is a natural reaction to the Republican tendency to campaign on small government and then, once in power, to rely upon big government spending and debt financing. I have also felt that the Democrats were likely to go through a similar restructuring because there is a growing realization that the New Deal programs and the Labor Unions that dominate the politics of the Party are anachronisms. I suspect that this movement, if it coalesces around anything, will begin that process. One can only hope.

What's coming next in the Economy

As many of you know, I have both a Bachelor's and a Master's Degree in Economics. That certainly doesn't make me an expert on the subject, but it does mean there are certain concepts that I can explain and extrapolate with pretty well. And it means I pay attention to the numbers. Here's one thing I'm pretty sure about: the fact that mortgage lending, and consumer lending as well, has gone through a significant and long-lasting contraction in this country has contributed directly to the disappointing performance of our US macroeconomy over the past four years. The fact that fewer dollars are being pumped into the economy than before means that economic activity is less than it was before. The relationship isn't one to one, as I will discuss, but it is obvious to me that it is a major contributor to our recession.

One concept that I'm well-versed in is the money multiplier concept. What this concept says is that if one dollar is spent in the economy, it leads to several more dollars of economic activity. An example is that one dollar spent by a company on a box of pencils goes in part to the company that sells the pencils, part to the employee that sells the pencils. Then that company has to buy the pencil and part goes to the owner(s) and the employee spends his paycheck, let's say on lunch. The pencil producer spends the money again, as does the company owner, as does the restaurant, and so on. This leads to several more dollars of activity in the economy than the original dollar spent.

This concept applies equally well in reverse. If you remove one dollar from the economy, that leads to several dollars fewer in economic activity as those dollars are no longer spent. This is what has happened with the massive reduction in lending. Billions of dollars have been removed from the economy that otherwise would have been spent. And the economy has suffered from the loss.

You can say that this reduction in lending was a long time coming and that it couldn't be avoided. I happen not to agree, I think we reduced lending too much, but that's not important now. Things are as they are. But let's use this as a lesson of what is likely to happen when you remove dollars from the economy. It's not good for the economy as a whole and activity will be reduced. There may be long term benefits to making our system more rational and responsible, but in the short term, reducing dollars going into the economy causes less economic activity.

And thus we come to the subject of massive government budget cuts. Yes, the Feds are contemplating some $60 billion in cuts (with more to come when we discuss entitlements). California is considering $14 billion in cuts. Other states and localities are similarly cutting. Everyone is cutting. And yes, as much as Republicans would claim that you should differentiate the public and private sectors, the government is still part of the overall economy. So if you cut $100 billion a year (more?) out of the spending that is pumped into the economy, what do you think is going to happen given the money multiplier? It's not hard to figure: several hundred billion dollars in reduced economic activity.

So what is the proposal to replace this activity? Just like the mortgage and consumer lending crisis, there is no such proposal. The idea is that somehow businesses will step into the void with their newly improved incentives and increase their activity. But as we've seen with the banks and other corporations over the past four years, that is not guaranteed. If anything, my expectation is that the corporations, many of whom employ their own economists, will come to the same conclusion I have and will project that the reduction in government spending will further reduce the US consumer market for their products and will continue to be very wary about hiring and investing in our economy. And whatever funds are taken out of our economy by these government cuts will not be replaced, leading to further exacerbation of the unemployment problem we've been suffering through for years now.
Share on Facebook

Today's Idea: The Economy as a River

In school, they trained us to think of the Economy in terms of mathematical models. But in my own mind, I have an analogy for the economy that I think works really well. My analogy is that economies global, national and local can all be thought of as rivers (or one giant river). They're rivers of economic activity flowing past all of us individuals and companies.

Our job, as far as making a living anyway, is to divert some of that economic activity our way. The more of the activity you can divert your way, whether it be products, services or even just money itself, the more of the flow you can draw off for your own use.

Now, most of us, frankly, are content to sit by the shore or in the flow itself and take whatever activity comes our way and let the river determine our financial fate. Others take actions to divert some of the activity past them and/or their companies. Some people have talents or skills that place them in parts of the river where the flow is very large. Others work very hard and still never get much activity flowing their way. Others find themselves in economies where the flow is just a trickle. There's not much they can do as individuals but survive off the trickle.

There's not much you can say about the merit of what one person earns over what another earns. You can say that some do a much better job than others at diverting the river toward themselves than others. You can also say that some take a certain talent or skill and make the most of what the river passes through that ability. There's no one formula that works, and the scary part is that the river is ever-changing. So what worked in one era and made tons of money won't work at all even a decade later (or even less!). That goes for both companies and individuals (employees). It's a little scary. But it also means that there's no long term sentence that says you can't find a way to divert the flow to yourself in the future, whether you have before or not. Good luck!
Kyle
Share on Facebook

The Hourglass Model of Energy Economics

As I’ve started to connect with the community of people who are interested in topics regarding the “end of the world as we know it,” I have consistently encountered a fear that the system that we currently live within is unsustainable. This same fear is mirrored in a variety of other discussions I’ve encountered over the years as well. Whether the threat comes from the government and/or politicians, corporations, the media, the culture, etc. a lot of people think the path we’re on can’t continue and we’re headed for a crisis of global proportions.

I share this fear, and I would like to share with you with the framework within which I conceptualize the crisis. At some point in the late 90’s, I came across a book called “Beyond Growth” by Economist Herman Daly. Within Daly’s book, I found a visual model that was simple, but so profound that I continue to think of the world economy, the human race and human society as existing within the model. It starts with an hourglass. The hourglass was actually developed by Daly’s mentor Georgescu-Roegen, and it represents the energy source upon which not just all human life, but all earth-bound life depends – the energy of the sun. Within the top half of the hourglass is what’s called “low entropy” energy emanating from the sun toward earth. It’s helpful for me to substitute the word “usable” for Daly’s term “low entropy” and also “used up” for his term “high entropy”, which is at the bottom of the hourglass (that substitution avoids a long discussion of physics). The energy passing through the very thin tube of the hourglass represents the limited flow of solar energy in our direction every day (or year, or decade, etc.). Through most of human history, we lived completely dependent upon and limited by the flow of solar energy that came through this tube and upon the plants and animals that convert this solar energy into a form we humans can consume.

We humans are a very clever species, however, and we have recently (on the scale of human history) figured out that there’s another form of energy that we can use. This energy is contained in deposits of fossil fuels, most importantly oil and natural gas. In Georgescu-Roegen’s model, these fossil fuel deposits are represented as a reservoir of “low entropy” energy that is stuck to the inside of the lower half of the hourglass and which has its own flow from “usable” to “used up”. We have been steadily but rapidly increasing this flow since we first identified fossil fuels as usable energy. The stored energy reservoir is far more limited in total than the energy from the sun. We humans do, however, have a much greater level of control of the flow of energy out of the reservoirs within which it is stored and into our economy to be used.

To the hourglass, I would add a couple of other energy sources that are relevant and usable (wind, geothermal, tidal), but adding them doesn’t detract from the usefulness of the model.
The implications of this model are clear and important:
1. In the short term, the size of the human population and its economy are limited absolutely by the flow of energy that is available to us as “low entropy” or usable (whether directly from the sun or from our fossil fuel reservoirs).
2. It is inevitable that in the not-so-distant future we will have to wean our society and economy off of the flow of fossil fuel energy and back onto the other flows of energy.
3. In the long term, the size of human population and economy are limited absolutely by the flow of energy available from the sun and the other more perpetual (non-depletable) sources. In my mind, the sooner we do this, the better it will be for all of our descendants, because it will allow us to gauge the point at which our population becomes too large.
4. Given that we also hope to allow for future generations of the human population, we will have to limit ourselves even further because of the “high entropy” component to the model – it’s called waste or garbage. At some scale, the earth’s capacity to process the sun’s energy into fuel for our economy is degraded by all that garbage. In my opinion, this is the problem we already have faced and are facing now. From air pollution to soil erosion to habitat destruction to climate change, human activities are affecting the way the world around us goes about its daily business. Have we hit a tipping point where the world has “had enough”? I don’t think so, but I am pretty sure there is such a point and we should be working very hard to avoid hitting it.

The reason I wrote my novel Fortress Beverly Hills was partly to help wake up our society as a whole to the notion that we cannot simply keep going on the path we’re on, which is to grow both our population and our flow of fossil fuel usage endlessly. I am convinced that if we stay on this path and continue to rely heavily on the flow of fossil fuels that some event or combination of events will come along and force us off the path, possibly violently. I wrote my protagonist as a solar engineer to represent the idea that there is a solution that comes from the sun. I don’t know that my particular conception of a photovoltaic array supplying food is realistic (probably not), but the idea was for Ed to be a placeholder for all technologies that shift us away from our reliance on fossil fuels. It’s going to take hard work and I’m afraid a lot more cooperation at the large-scale level (either government or corporate) to make it happen. But maybe not. We’ll see. Hope this model provides food for thought for folks trying to understand where we are and where we’re going.
Share on Facebook