Redefining the meaning of very healthy in the USA – someone with a chronic disease taking prescription drugs

You have probably heard people calling 40 the new 20.

Well the same thing is happening in health according to a new survey coming out of the USA from the Deloitte Center for Health Solutions.

Of the 4000 people polled,

* Most — 87.5 percent — describe themselves as being in “excellent” or “very good” health.

* But 54 percent have been diagnosed with one or more chronic conditions such as diabetes or high blood pressure.

* 31 percent take one prescription drug, 22 percent take two prescription drugs a day and 47 percent take three or more prescription medicines daily.

Ignorance and delusion its seems knows no bounds.

Update – June 2013

Just seen the latest update in the scientific blogging site – the 31% who were taking one prescription drug has increased to almost 70% in just 3 years. Now more than 50% are taking two (up from 22%). Are we measuring the same thing, is American health collapsing, has big pharma won the war.

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It is the cooking method stupid! – insights into energy usage and carbon dioxide production in the food production-consumption chain

By Alan McCrindle

The Take away – The most important variable in energy consumption and carbon dioxide production in food is in your hands – the way you cook your food is the major leverage point in the total food production-consumption system – are you cooking with the lid on the pot?

The Background – The Rise of Global food supply chains has people concerned that this is reducing sustainability and accelerating global warming by increasing carbon dioxide emissions and energy consumption

With the rise of globalisation it is no surprise that food production has been globalising too. Examples such as Salmon farmed in Canada and flown to China for processing before being flown to California have many people interested in sustainability and global warming up in arms.

One response to this concern, that globalisation of the food chain is contributing to a rise in energy consumption and carbon dioxide production, has led to the concept of food miles – the distance that food travels from where it was produced to where it was consumed. Local food production and local growers markets are also on the rise – in part driven by the desire to have fresher food that has lost less of its nutrients due to long travel times and cold storage.

The Reality - is that the majority of the energy consumed and carbon dioxide produced in the total food chain is produced by the consumer in cooking the food and driving to buy it

While one response is to feel relatively powerless against the perceived “monster of globalisation” for threatening our sustainability, it turns out that our intuitive analysis of the situation is in many cases simply wrong.

The fact is, that in the case of food that we buy and cook at home, we the people are responsible for the largest use of energy and production of carbon dioxide in the total food supply chain.

For some reason when most of us think about the energy used and carbon dioxide produced with food only think about it in terms of the food we buy in the shops – we forget about the energy that we use to get to and from the shops to buy the food, the energy we use when we cook the food (and wash the dishes) and the energy used in disposing the waste.

When we add these energy consuming stages into the equation to get a full “seed to waste life cycle analysis” it turns out that the major energy consuming steps in the chain are created by us driving to buy the food and cooking the food. And of these two cooking takes up the most energy. And this analysis excludes the energy cost of washing the dishes.

You can see this represented graphically in two charts I found on the internet that measure the total carbon footprint / energy consumption for potatoes and broccoli in the UK.

For those of you who aren’t that good with graphs, the vertical bars in each graph measure the total energy used / carbon emitted to deliver one kilogram of potatoes and broccoli to the plate at home. The different energy consuming steps in this process are represented by the different colours – the hights of each colour represents the amount of energy used in that stage.

As you can see if the case of potatoes, approximately 11 mega joules (M J) of energy is consumed getting a kilogram of potatoes to a cooked state. And when you look at the light blue part of the bar you can see that just over 4 M J – about 37 percent –  is used by us processing the potato at home. And this excludes the cost of driving to buy the potatoes.

In the case of broccoli – the graph compares broccoli sourced from Spain and the UK. The vertical bars measure the amount of carbon dioxide produced in the chain and the light green bars – the biggest in all cases – represent the energy used at home. This varies from around 50 to 60 percent of the total carbon dioxide.

The bottom line is that you can save more energy and carbon dioxide emissions by boiling your potatoes with the lid on the pot than by buying local produce.

In terms of transport economics the car is the most energy intensive form of oil powered transport. A large ship can carry one ton of food 8oo miles on a gallon of fuel. In comparison a train can move the same ton 60 miles, a truck 20 miles and a car 10 miles. When you see these statistics it is easy to see why the cat of driving to the shops to buy food is  a relatively energy intensive part of the food chain.

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New Treasury data suggests that the USA collapse has started

By Alan McCrindle

Back in December 2008 I wrote the post titled “Financial Depth” and sophistication or “diminishing Marginal returns” and Collapse.

In this post I pointed out the trend in the USA of the “Diminishing Marginal Productivity of Debt” as illustrated in the chart below.

The USA economy could start start shrinking as early as 2014

What this trend is pointing out is that each new dollar of debt has been producing less and less economic growth over time – another way of saying that each new dollar of economic growth requires more debt. The trend line on the chart suggested a “zero hour” in 2015 – the point where new debt stopped producing economic growth and started to destroy economic growth.

I suggested that when the USA reached this point it would start to collapse because it would no longer be able to solve any emerging problems.

New problems cost money to solve. But in this state of negative marginal debt productivity any new debt raised to solve the problem would make the situation worse not better. Joseph Tainter had found this to be the common cause of the collapse of 24 civilisations he had studied.

The bad news is that zero hour has already arrived for the USA

New data from the latest U.S. Treasury Z1 Flow of Funds report was released on March 11, 2010. The chart for this data is below. And it looks very very bad. By the end of 2009 each new dollar of debt was destroying 45 cents of GDP.

- the report and update of the chart from this data is available at http://economicedge.blogspot.com/2010/03/most-important-chart-of-century.html.

The exponential mathematics of our capitalist system reveal the inbuilt dynamics of an unsustainable ponzi scheme with a totally predictable outcome

The mathematic underpinning the reason for this trend are simple and are an inbuilt property of our capitalist system which requires exponential growth to function and where new money is loaned into existence . The outcome is entirely predictable and inescapable. Unbelievably this has escaped classically trained economists the world over.

This is how it works.

Productivity growth means that every year the same amount to goods and services are produced by less people. In this situation, if there was no economic growth, productivity growth would result in increasing unemployment. And if population growth was added, unemployment would rise even faster. This type of situation could not last for long – people would soon be starving and the government would be thrown out.

The solution has been to growth the economy fast enough to at least maintain stable employment. In countries like the USA and Australia this requires real economic growth of around 2.5% a year. Anything less and unemployment starts to increase. Real life data from Australia and the USA demonstrates this relationship – the change in unemployment is completely correlated to the contribution that new debt plays in the economy. The correlation for the USA is exhibited below.

Economic growth requires new debt and because this debt grows faster than the economy the debt to GDP ratio increases. In Australia, for example, debt grew 4.2% faster than GDP between 1964 and 2008 (with a correlation coefficient of 0.994).

The end result are the “hockey stick” graphs for debt to GDP ratio’s – the graphs that show the diminishing marginal productivity of new debt to produce economic growth are simply mirror images of these. Eventually interest payments on debt swamp the economy.

We  sustained this growing debt burden by reducing interest rates and pretending that we didn’t have rising debt but rather we had rising profits from the inflated asset prices that this additional debt produced – without this the US economy would have hit the straps long ago. However with interest rates at almost zero there is no more room to move. Game up.

This chart shows how long term interest rates as measured by 30 year treasury bonds have been trending down since the 80’s.

Long term interest rates have been falling since the 80's

We Need to focus on Energy not Money

Yet the type of collapse that Tainter is talking about is not simply driven by financial  collapse – money is easy to debase. It is easy for government to “print” new money and give it new names like “quantitative easing” to hide the fact. Other tactics used by governments of all persuasions are to change the way statistics are collected – typically to make high inflation look lower than it is, to make low economic growth look higher than it is and to make high unemployment look lower than it is.

This is why Tainter uses the concept of Energy rather than money. Energy is what really does the work in the universe.  When a country starts to collapse inflation soars like it did recently in Zimbabwe. A friend of mine from school days who still lives in Zimbabwe and runs a mining business there only works with diesel fuel as his currency for exactly this reason.

What is unrecognised by economists – who deal with money rather than energy, and who look at the world in the relative short term – is the historical development of the human species is a history of our capacity to harness greater and greater amounts of energy per person. This started right back when we learned to use fire. Our use of fire gave us the capacity to cook out food. Cooking allowed us to extract greater amounts of nutrition from our food and this facilitated the expansion of our brains.

The industrial revolution and green farming revolution has been built on the back of fossil fuels and would have been impossible without them. There was a time when food was an energy producer. Now though modern industrial agriculture in the USA is  a net energy destroyer that operates like a miner.

- 10 calories of fossil fuel energy are required to produce one calorie of food.

- Soil and nutrients are being destroyed faster than they are being replaced.

- Nitrogen from fertiliser use is poisoning the environment and

- We are using more water globally than we have (we achieve this by extracting underground supplies of “fossil water” faster than their replacement rate)

In addition to energy we depend on ecosystem services for our survival. The unfortunate story around ecosystem services is two fold. The first is that we are amidst the 6th great extinction and this is being caused by us. Predictions are that we will have wiped out commercial fish stocks by 2050. The second is that we probably started to run down our ecological capital some time in the 1980’s.

Given that we live on a single planet that has boundaries and limits this begs the question – what happens when we run out of easy energy and ecosystem services?

The issue around peak oil is not that oil will run out. The issue is that as the supplies run down the net energy we get from fossil fuels declines. So when we used to be able to get 100 barrels of oil by using one barrel of oil to do the work to get it out of the ground and refined, one barrel of oil will now only produce 10 barrels of refined oil.

There are people who believe that technology will somehow save the day. May be it will, maybe it wont.

Our first Ponzi scheme started with the invention of Agriculture – the history of humanity is the history of successive ponzi schemes as temporary solutions to problems

My hypothesis is that our first ponzi scheme started when we invented agriculture as a solution to the fact that the environment became unable to sustain a hunter gather lifestyle.

This agricultural solution in turn created unintended consequences that we solved with further innovations. The whole history of innovation then has been a story of “solutions” creating new problems that were “solved” in the short run only to create bigger problems down the track.

The moral of the story is that there are no permanent solutions to anything in a world that is constantly evolving. Moreover short term solutions create problems in the future. In other words, one ponzi scheme creates the need of a new ponzi scheme to solve its problems …. and so on.

We are literally surrounded by ponzi schemes that most of us are ignorant or in denial about. Governments are particularly good at running up unfunded liabilities such as future health and pension costs.

Recent research from the Societe Generale revealed the extent to which some governments have hidden their insolvency by hiding most of their liabilities. In the chart below the red bars for each country represent the liabilities that the governments have reported and form the basis that justify their policies and their legitimacy. The green bars represent the “real” situation. Are you panicking yet?

Yet despite the fact that this information is available on the internet I can almost guarantee you that at least 99% of the population are oblivious of this situation. And, if the became aware of it, denial and instant forgetting of it would be the order of the day.

When this observation that solutions eventually become problems is mapped onto the fact that the rate of change and innovation is increasing, it means that we are creating future problems for ourselves at a faster and faster rate. What this means is that new problems created by these “solutions” – which are currently hidden or not yet manifest – will also start surfacing at a faster and faster rate.

And we live in an interconnected 24/7 world where we now  demand “instant solutions” to problems as they arise. The consequence of this is extreme short term thinking. In this situation we are forced to respond to the surface level symptoms of the situation. There is no time to look for the causes and attempt to respond to these. Look at how bail out was presented by Hank Paulson – if we don’t act now we will collapse. And the result is that the majority of the people who didn’t see the GFC coming are still in power and their bonuses are even larger than before the crisis.  At the same time as main street heads south.

At some time in the near future  we will be spending all of our resources trying to solve the problems that are currently “in the pipe line” as they mature into “sales”.

This is when the collapse will occur.

This view of the evolution of innovation, from hunter gather time till now, is brilliantly captured by Sander Van der Leeuw in his presentation titled “The Archaeology of Innovation” than can be viewed at fora.tv

The question is not whether the USA will collapse – it is a question of when.

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The Free market destroys its creators – how the Free-market mindset is destroying the USA Economy

By Alan McCrindle

I constantly hear Americans and American politicians talking about how innovative the USA is. America is the home of “the free market”. This is something that Americans are incredibly proud of and a major reason that they site for the economic success of the USA.

Yet I predict that this very same fee market is paradoxically going to be the cause a  major economic decline in the USA.

This economic decline is already evident and has been occurring for some time now. However this trend was hidden by a ponzi scheme driven by cheap debt, low interest rates and lax lending standards combined with shonky Government economic Statistics.

Real Wages in the USA have been falling since the 70's - shonky CPI data has hidden the depth of the decine

While real wages from employment were falling for the majority of Americans,  households were bolstering their income with imaginary profits from unrealised gains in house prices . At one point almost  8% of annual USA GDP was coming from equity withdrawals predicated on unrealised profits from the housing boom.

Without the “false income” generated by home equity withdrawals the US economy would have looked very sick as illustrated by the chart below

There is a conceptual failure to understand that the free-market does not care about countries – competitive reality will force corporations to dump uncompetitive US businesses and labour for greener pastures

What most people forget about capitalism and the free market is that it is based on competition between companies and not countries. Companies have no loyalty to countries. If companies want to survive in a global market place against global competitors they need to think and act globally.

This is why manufacturing has been in decline in the USA and other parts of the developed world and why it is now taking place in places where labour costs are lowest – all other costs considered.

So far it has really only been blue collared jobs that have gone off-shore. The American’s feel that the highly skilled engineering jobs that have maintained their global leadership edge in new product innovation are safe. It is assumed that these high paid jobs will stay in the USA and countries like China and India will get the low skilled and low paid jobs.

This is a delusion. High-tech R&D is starting to shift out of the USA to China. Moreover this shift is set to continue and accelerate – competition and the free-market will drive it now that it has started.

Extremely cheap highly skilled staff in China

Take a look at the city of Xian, located about 1000 km south west of Beijing. According to a New York Times article titled China draws high-tech researcher from the USA it has 47 universities and other institutions of higher learning. Engineers with masters degrees can be hired for $730 per month.

And the result is that Applied Materials, one of Silicon Valley’s most prominent firms and the worlds biggest supplier of equipment used to make semiconductors, solar panels and flat-screen displays, has just built its newest and largest research lab in Xian. And, in addition, Mark Pinto, The chief technology officer of the company has relocated to China too.

High Health Care, Housing and tertiary Education Costs in the USA have created a structurally high wage economy that can’t compete with low Chinese wages

How can the USA compete? It cant. Thanks to the free-market almost 20 cents in every dollar in the US economy is spent on health. And when high health care costs are added to high house costs it is easy to see why someone on $760 a month in the USA would starve.

And besides, with the cost of a 4 year University degrees in the USA as high as $200,000, big salaries are required to justify this sort of cost. Moreover this is just the price of an undergraduate degree and apparently reflects only half the cost of delivering it.

The reality is that in a globalised free-market  expensive health care and expensive houses translates into wage needs that are globally uncompetitive.

And there are other reasons why the USA will find it difficult to compete against the likes of China – the free-market mindset is reluctant to see the government get involved in the market in any way. This doesn’t work when governments in other countries act differently.

For example, Western companies relocating to China not only get  local access to the worlds largest Auto, and desk top computer markets and cheap highly skilled labour – they are often also offered subsidies by many Chinese cities and regions, particularly for green energy projects.

For example, in the case of the new Applied Materials Lab,  the Xian city government sold a 75-year land lease to the company at a deep discount and is reimbursing the company for roughly a quarter of the lab complex’s operating costs for five years.

President Obama and American politicians talk about creating new Green Tech jobs in the USA but this is likely to be a pipe dream. Even if he could muster the political will to stand up to the Republican free-market right the competitive playing field is tilted against the USA.

The bitter irony is that the free-market is and has destroyed its inventor and greatest proponent. Even more surprising is that these proponents don’t seem to be able to either see this or understand it.

The same is true for democracy – it is a system that holds in it its own seeds of destruction. I will leave that for another day.

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The Con in Economics – how we are being fooled by shonky Government Economic data that is fooling even the experts

http://wp.me/plM5Z-2I – shortlink

By Alan McCrindle

It is amazingly easy to hoodwink economists using shonky government statistics – even in this age when there are easily accessible articles that can be found with a few simple internet searches that point to the errors in the data.

Shonky USA productivity Data fools the Economist Magazine

A current example is a piece in the Economist based on a report by a USA based organisation called the Conference Board. The Economist – Slash and earn Productivity has surged in America and slumped in Europe. Neither trend can last - rightly questions large differences in recent productivity growth between the USA and Europe. In the article they speculate as to the reasons for the large increases in productivity in the USA.

However no where in the article do they even question the validity of the data as a proxy for measuring productivity growth in the USA.

If the Economist had done an internet search they would have discovered the same article that I had read a few weeks earlier that explained the issue. The article – an op-ed piece on this in the New York Times titled – Trading Away Productivity: How American Trade Policy Relies on faulty measures of Productivity

To quote parts of the article

“But there’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.”

“The result is an apparent drop in the number of worker hours required to produce goods — and thus increased productivity. But actually, the total number of worker hours does not necessarily change.

“This oversight is no secret: as Labor Department officials acknowledged at a 2004 conference, their statistical methods deem any reduction in the work that goes into creating a specific unit of output, whatever the cause, to be a productivity gain.

This continuing mismeasurement leads economists and all those who rely on them to assume that recorded productivity gains always signify greater efficiency, rather than simple offshoring-generated cost cuts — leaving the rest of us scratching our heads over stagnating wages.

“Above all, if offshoring has been driving much of our supposed productivity gains, then the case for complete free trade begins to erode. If often such policies simply increase corporate profits at the expense of American workers, with no gains in true productivity, then they don’t necessarily strengthen the national economy.

In this regard, the case for free trade as a stimulus for innovation weakens, too. Because productivity gains in part reflect job offshoring, not just the benefits of technology or better business practices, then the American economy has been much less innovative than widely assumed.”

Shonky Economic Data is widespread and Used by Governments of all political persuasions

Maybe it is time for the Economist to do an article on how governments of all persuasions around the world have changed how they measure statistics such as employment, inflation, productivity, debt levels and GDP to mask economic problems, dodge liabilities and justify damaging economic policies that help special interest groups at the expense of the general public.

Kevin Phillips has an excellent article on the subject in the MAy 2008 edition of Harpers Magazine. In the – Numbers racket: Why the economy is worse than we know -

To quote his article:

“since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is”

The corruption has tainted the very measures that most shape public perception of the economy—the monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation; the quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth; and the monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity. Not only do governments, businesses, and individuals use these yardsticks in their decision-making but minor revisions in the data can mean major changes in household circumstances—inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions, and Social Security benefits. And, of course, our statistics have political consequences too. An administration is helped when it can mouth banalities about price levels being “anchored” as food and energy costs begin to soar.

The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range). We might ponder as well who profits from a low-growth U.S. economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?“

Another interesting article written by Chris Martenson looks at USA economic data and attempts to divide it into 3 groups – Good Data, Murky Data and Unreliable Data.

Is the Internet setting us free or being used to delude us?

The commonly held idea is that the easy accessibility of data via the internet is making it harder for  governments and special interest groups to deceive us. The internet is supposed to be devolving power to the people.

But as I have attempted to show here it is surprisingly simple to delude even so called experts

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China’s Internet obsession

A new McKinsey report claims that People in the country’s 60 largest cities spend 70 percent of their leisure time online. In the smaller towns it 50%.

And there are more people hooked up to the internet than there are people living in the USA. Mindblowing.

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Toyota’s Collapse – a sign of what to expect in the future – we grew to fast

“We pursued growth over the speed at which we were able to develop our people and our organisation and we should be sincerely mindful of that.” – Mr Toyoda explaining his understanding of why Toyota is now in such trouble.

I wonder how many more times this is going to be repeated in the near to mid term future?

It doesn’t take a genius to observe that many firms have been doing exactly what Toyota did – and probably even more so.

M&A has been the order of the day method for fast growth for many firms. Cheap money, competition, short term incentives and pushy investment banks have surely driven firms to create for themselves even bigger integration problems that those faced by Toyota.

In addition many of these firms have been reducing head counts and skimping on repairs and maintenance to boost short term returns. There simply have not been enough people on the ground with enough time and experience to make good decisions.

So as interest rates rise,  sales stagnate or decline as consumers continue to stay away because of job cuts or fears of them, it is likely that we will see many more Toyota excuses in the future – we grew to fast.

And the same could be said for the human species and the global economy. But then this is a whole different ball game. Infinite growth on a finite planet is not only impossible but potentially suicidal – but with the majority voting for the political party promising the fastest and largest growth we will only have ourselves to blame.

Alan McCrindle

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