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More Great Thoughts from Jeremy Grantham

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I always look forward to Jeremy Grantham’s Quarterly Letter.  Grantham is the Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), an investment management firm, entrusted to oversee approximately $97 billion in client assets.

Unlike many asset managers, Jeremy Grantham has a social conscience.  As a result, during the past few years we have seen him direct some sharp criticism at President Obama, Tim Geithner, Ben Bernanke and – of course – Goldman Sachs.  Grantham fell behind schedule when his Third Quarter 2011 Letter was delayed by over a month.  As a result, Grantham’s Fourth Quarter 2011 Letter was just released a few days ago.  At 15 pages, it earned the title “The Longest Quarterly Letter Ever”.  As usual, Grantham has provided us with some great investment insights – along with some pointed criticism of our ignorant legislators and mercenary corporate managers.  What follows are some selected passages.  Be sure to read the entire letter here (when you have time).

To leave it to capitalism to get us out of this fix by maximizing its short-term profits is dangerously naïve and misses the point: capitalism and corporations have absolutely no mechanism for dealing with these problems, and seen through a corporate discount rate lens, our grandchildren really do have no value.

To move from the problem of long time horizons to the short-term common good, it is quickly apparent that capitalism in general has no sense of ethics or conscience.  Whatever the Supreme Court may think, it is not a person.  Why would a company give up a penny for the common good if it is not required to by enforced regulation or unless it looked like that penny might be returned with profit in the future because having a good image might be good for business?  Ethical CEOs can drag a company along for a while, but this is an undependable and temporary fix.  Ethical humans can also impose their will on corporations singly or en masse by withholding purchases or bestowing them, and companies can anticipate this and even influence it through clever brand advertising, “clean coal” being my favorite.  But that is quite different from corporate altruism. Thus, we can roast our planet and firms may offer marvelous and profitable energy-saving equipment, but it will be for profit today, not planet saving tomorrow.

It gets worse, for what capitalism has always had is money with which to try to buy influence.  Today’s version of U.S. capitalism has died and gone to heaven on this issue. A company is now free to spend money to influence political outcomes and need tell no one, least of all its own shareholders, the technical owners.  So, rich industries can exert so much political influence that they now have a dangerous degree of influence over Congress.  And the issues they most influence are precisely the ones that matter most, the ones that are most important to society’s long-term well-being, indeed its very existence.  Thus, taking huge benefits from Nature and damaging it in return is completely free and all attempts at government control are fought with costly lobbying and advertising.  And one of the first victims in this campaign has been the truth.  If scientific evidence suggests costs and limits be imposed on industry to protect the long-term environment, then science will be opposed by clever disinformation.

*   *   *

Capitalism certainly acts as if it believes that rapid growth in physical wealth can go on forever.  It appears to be hooked on high growth and avoids any suggestion that it might be slowed down by limits.  Thus, it exhibits horror at the thought (and occasional reality) of declining population when in fact such a decline is an absolute necessity in order for us to end up gracefully, rather than painfully, at a fully sustainable world economy.  Similarly with natural resources, capitalism wants to eat into these precious, limited resources at an accelerating rate with the subtext that everyone on the planet has the right to live like the wasteful polluting developed countries do today.  You don’t have to be a PhD mathematician to work out that if the average Chinese and Indian were to catch up with (the theoretically moving target of) the average American, then our planet’s goose is cooked, along with most other things.  Indeed, scientists calculate that if they caught up, we would need at least three planets to be fully sustainable.  But few listen to scientists these days.  So, do you know how many economic theories treat resources as if they are finite?  Well, the researchers at the O.E.C.D say “none” – that no such theory exists.  Economic theory either ignores this little problem or assumes you reach out and take the needed resources given the normal workings of supply and demand and you can do it indefinitely.  This is a lack of common sense on a par with “rational expectations,” that elegant theory that encouraged the ludicrous faith in deregulation and the wisdom of free markets, which brought us our recent financial fiascos.  But this failure in economic theory – ignoring natural limits – risks far more dangerous outcomes than temporary financial crashes.

*   *   *

As described above, the current U.S. capitalist system appears to contain some potentially fatal flaws.  Therefore, we should ask what it would take for our system to evolve in time to save our bacon.  Clearly, a better balance with regulations would be a help. This requires reasonably enlightened regulations, which are unlikely to be produced until big money’s influence in Congress, and particularly in elections, decreases.  This would necessitate legal changes all the way up to the Supreme Court.  It’s a long haul, but a handful of other democratic countries in northern Europe have been successful, and with the stakes so high we have little alternative but to change our ways.

*   *   *

Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence.  Fifty and one-hundred-year horizons are important despite the “tyranny of the discount rate,” and grandchildren do have value. My conclusion is that capitalism does admittedly do a thousand things better than other systems:  it only currently fails in two or three.  Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.

Keep in mind that the foregoing passages were just from Part II of the Quarterly Letter.  Part III is focused on “Investment Observations for the New Year”.  Be sure to check it out – it’s not as bearish as you might expect.  Enjoy!



 

Nasty Cover-Up Gets Exposed

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Ever since the Deepwater Horizon oil rig disaster occurred on that horrible, twentieth day of April 2010, I have been criticizing the cover-up concerning the true extent of this tragedy.  Sitting here in my tinfoil hat, I felt frustrated that the mainstream media had been facilitating the obfuscation by British Petroleum and the Obama administration in their joint efforts to conceal an ongoing environmental disaster in the Gulf of Corexit.  On July 22 of that year, I wrote a piece entitled, “BP Buys Silence of Expert Witnesses”.  On August 26 of 2010, I expressed my cynicism in a piece entitled “Keeping Americans Dumb”:

As time drags on, it is becoming more apparent that both BP and the federal government are deliberately trying to conceal the extent of the damage caused by the Deepwater Horizon blowout.

I got some good news this week when I learned that the mainstream media are finally beginning to acknowledge the extent of this cover-up.  While reading an essay by Gerri Miller for Forbes, I learned about a new documentary concerning the untold story of the Deepwater Horizon Disaster:  The Big Fix.

Once my enthusiasm was sparked, I began reading all I could find about this new documentary, which was co-produced by Peter Fonda.  The Guardian (at its Environment Blog) provided this useful analysis of the movie:

The Big Fix, by Josh and Rebecca Tickell, re-opens some of the most persistent questions about last year’s oil spill.  How BP was able to exert so much control over the crisis as it unfolded?  What were the long-term health consequences of using a toxic chemical, Corexit, to break up the oil and drive it underwater?

Rebecca Tickell herself had a serious reaction to the chemical after being out on the open water – and as it turned out so did the doctor she consulted in an Alabama beach town.  She still has health problems.

Josh Tickell, who grew up in Louisiana, said the Obama administration’s decision to allow the use of Corexit, which is banned in Britain, was the biggest surprise in the making of the film.

“The most shocking thing to me was the disregard with which the people of the Gulf region were dealt,” Tickell said.

“Specifically I think that there was sort of a turn-a-blind-eye attitude towards the spraying of dispersants to clean up the spill. I don’t think anyone wanted to look too deeply at the consequences.”

Gerri Miller’s article for Forbes provided more insight on what the film revealed about the injuries sustained by people in the local shrimping communities:

Dean Blanchard, whose shrimp processing company was once the largest in the U.S., has seen his supply dwindle to “less than 1 percent of the shrimp we produced before.  We get shrimp with oil in the gills and shrimp with no eyes.  The fish are dead and there are no dolphins swimming around my house.”  He knows five people who worked on cleanup crews who have died, and he suffers from sinus and throat problems.  Former shrimper Margaret Curole‘s healthy 31-year-old son worked two months on the cleanup and became so sick from dispersant exposure that he lost 52 pounds and is now unable to walk without a cane. “Most of the seafood is dead or toxic.  I wouldn’t feed it to my cat,” said her husband Kevin Curole, a fifth-generation shrimper who, like Blanchard, had friends who died from Corexit exposure.  “I used to be a surfer but I won’t go in the water anymore,” he said.  “The last time I did my eyes and lips were burning.”

EcoWatch warned us that the movie can be emotionally upsetting:

When you watch how the the Gulf residents captured in The Big Fix have been affected by Corexit and the spill, beware, it is both heart wrenching and frightening.  When you see Gulf residents driven to tears by this environmental tragedy, you want to cry with them. Rebecca, herself, was seriously sickened by Corexit during their filming in the Gulf.

When you listen to eco-activist, Jean-Michel Cousteau, son of champion of the seas Jacques-Yves Cousteau, state so emotionally in the film, “We’re being lied to,” you realize the truth about the Gulf oil spill is being covered up.

The most informative essay about The Big Fix was written by Jerry Cope for The Huffington Post.  The “official trailer” for the film can be seen here.

Ernest Hardy of LA Weekly emphasized how the film hammered away at the mainstream media complicity in the cover-up:

Josh Tickell, a Louisiana native, had two questions he wanted answered when he set out to make his documentary:  What were we not told by the media in the days and weeks immediately following the April 2010 British Petroleum oil spill in the Gulf of Mexico, and what haven’t we been told since the story faded from the news cycle?  If The Big Fix had simply tackled those questions, the story uncovered would be maddening:  BP’s repeated flaunting of safety codes; their blatant disregard for the lives of individuals and communities devastated by the spill; collusion among the U.S. government (from local to the White House), the media, and BP to hide the damage and avoid holding anyone accountable.  The film’s scope is staggering, including its detailed outlining of BP’s origins and fingerprints across decades of unrest in Iran.  By doing smart, covert reporting that shames our news media, by interviewing uncensored journalists, by speaking with locals whose health has been destroyed, and by interviewing scientists who haven’t been bought by BP (many have, as the film illustrates), Fix stretches into a mandatory-viewing critique of widespread government corruption, with one of the film’s talking heads remarking, “I don’t have any long-term hope for us [as a country] unless we find a way to control campaign financing.”  And yes, the Koch brothers are major players in the fuckery.

The theme of regulatory capture played a role in Anthony Kaufman’s critique of The Big Fix for The Wall Street Journal’s “online magazine” – Speakeasy:

Tickell says that U.S. politicians, both in the Democratic and Republican parties, are too closely tied to the oil and gas industries to regulate them effectively.  “Even if these people come in with good intentions, and what to do good for their community, in order to achieve that level of leadership, they have to seek money from oil and gas,” he says.

While the film promises to take a crack at BP, Tickell says the company is more held up as a “universal example, in the way that resource extraction companies have a certain set of operating paradigms which have lead us to a situation where we have Gulf oil spills and tar sands.”

I felt that my conspiracy theory concerning this tragedy was validated after reading a review of the movie in AZGreen Magazine:

The Big Fix makes clear that the Deepwater Horizon disaster is far from over.  Filmmakers Josh and Rebecca Tickell (makers of groundbreaking films Fuel and Freedom) courageously shine the spotlight on serious aspects of the BP oil spill that were never addressed by mainstream media.  Central to the story is the corporate deception that guided both media coverage and political action on the environmental damage (and ongoing human health consequences) caused by long-term exposure to Corexit, the highly toxic dispersant that was spewed into the Gulf of Mexico by millions of gallons.   The Big Fix drills deeply beyond media reports to demystify the massive corporate cover-up surrounding the Gulf oil spill, and BP’s egregious disregard for human and environmental health.  The film exposes collusion of oil producers, chemical manufacturers, politicians and their campaign funders that resulted in excessive use of Corexit to mask the significance of the oil, and thereby reduce the penalties paid by BP.

Reading all of this makes me wonder what happened to the people, who were discussed in my July 2010 posting, “NOAA Uses Human Canaries to Test Gulf Fish”.

The movie received a standing ovation at the Cannes Film Festival, as it did in its initial screenings in the United States.  Once audiences have a deeper look at the venal nature of the Obama Administration, it will be interesting to watch for any impact on the President’s approval ratings.


 

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Solar Mix

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The debate over global warming is about to heat up once again.  The politicians, pundits and scientists who get paid-off by the carbon-based fuel industry to debunk research demonstrating that climate change is caused by human activity – finally have some exciting news.  The upcoming period of increased sunspot activity, which has been the subject of so many scientific articles – solar max – is now expected to be even more disappointing than the downgraded, 2009 forecast.  (Back in 2006, NASA was reporting expectations of “the most intense solar maximum in fifty years”.)   Beyond that, many scientists are suggesting that once our current sunspot cycle ends, there might not be any sunspot activity for the following 20-30 years.  Some commentators believe that the consequences for earth could involve global cooling – or as some have discussed – a “mini ice age”.

This press release from the National Solar Observatory seems to be a stark departure from last week’s National Geographic report concerning an enormous coronal mass ejection (CME) which resulted from a solar flare on June 7.  However, it’s important to keep in mind that our current sunspot cycle won’t end until 2018.  The National Geographic piece included remarks by Phillip Chamberlin, an astrophysicist involved with NASA’s Solar Dynamics Observatory (SDO), one of several spacecraft which recorded the CME event.  Here is a passage concerning some of what Chamberlin had to say:

But he warned space-weather experts are concerned about future solar events.

The sun’s 11-year cycle of activity, driven by tangled surface magnetic fields, will hit its maximum in late 2013 or early 2014.  Magnetic messiness will peak around that time and prompt nasty solar storms.

“We’ll probably see [extreme] flares every couple of months instead of years,” Chamberlin said.

If one of these powerful flares – and its coronal mass ejection – faces Earth, the particles will pound satellite components with charged particles, short some out, and potentially cripple them.

The recent report from the National Solar Observatory reveals that astrophysicists are now making a 180-degree turn away from prior forecasts about solar activity:

A missing jet stream, fading spots, and slower activity near the poles say that our Sun is heading for a rest period even as it is acting up for the first time in years, according to scientists at the National Solar Observatory (NSO) and the Air Force Research Laboratory (AFRL).

As the current sunspot cycle, Cycle 24, begins to ramp up toward maximum, independent studies of the solar interior, visible surface, and the corona indicate that the next 11-year solar sunspot cycle, Cycle 25, will be greatly reduced or may not happen at all.

*   *   *

“This is highly unusual and unexpected,” Dr. Frank Hill, associate director of the NSO’s Solar Synoptic Network, said of the results.  “But the fact that three completely different views of the Sun point in the same direction is a powerful indicator that the sunspot cycle may be going into hibernation.”

*   *   *

“If we are right,” Hill concluded, “this could be the last solar maximum we’ll see for a few decades.  That would affect everything from space exploration to Earth’s climate.”

In response to news inquiries and stories, Dr. Frank Hill issued a follow-up statement:

“We are NOT predicting a mini-ice age.  We are predicting the behavior of the solar cycle.  In my opinion, it is a huge leap from that to an abrupt global cooling, since the connections between solar activity and climate are still very poorly understood.  My understanding is that current calculations suggest only a 0.3 degree C decrease from a Maunder-like minimum, too small for an ice age.  It is unfortunate that the global warming/cooling studies have become so politically polarizing.”

So what can we expect here on earth?  Two years ago, NASA was predicting that our current sunspot cycle (Cycle 24) would have the lowest peak number of sunspots since Cycle 16, which peaked in 1928.  The peak sunspot activity for our current cycle will occur in 2013.  The May 29, 2009 report from NASA included this admonition from Doug Biesecker of the NOAA Space Weather Prediction Center:

“Even a below-average cycle is capable of producing severe space weather,” points out Biesecker.  “The great geomagnetic storm of 1859, for instance, occurred during a solar cycle of about the same size we’re predicting for 2013.”

The 1859 storm–known as the “Carrington Event” after astronomer Richard Carrington who witnessed the instigating solar flare–electrified transmission cables, set fires in telegraph offices, and produced Northern Lights so bright that people could read newspapers by their red and green glow.  A recent report by the National Academy of Sciences found that if a similar storm occurred today, it could cause $1 to 2 trillion in damages to society’s high-tech infrastructure and require four to ten years for complete recovery. For comparison, Hurricane Katrina caused “only” $80 to 125 billion in damage.

So I guess we aren’t really getting “off the hook” just because our current sunspot cycle is turning out to be “below average”.  From the “climate change” standpoint, the new debate should concern the extent to which permanent damage can be inflicted upon the Earth before the anticipated “global cooling” begins.  The May, 2009 NASA article also told us what we can expect during periods of “low solar activity”:

Low solar activity has a profound effect on Earth’s atmosphere, allowing it to cool and contract.  Space junk accumulates in Earth orbit because there is less aerodynamic drag.  The becalmed solar wind whips up fewer magnetic storms around Earth’s poles.  Cosmic rays that are normally pushed back by solar wind instead intrude on the near-Earth environment.  There are other side-effects, too, that can be studied only so long as the sun remains quiet.

Regardless of what particular events are directly caused by solar activity (or the lack thereof) one thing is for certain:  We will be hearing a great deal about the latest National Solar Observatory report from the outspoken opponents to theories of human-caused climate change.


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Transparency Gives Way To Cover-Ups

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It hasn’t been limited to the Obama administration and it’s really catching on.  Transparency just isn’t working out anymore.  Things run much more smoothly after a good, old-fashioned cover-up.  This attitude is becoming more popular all over the world.

President Obama’s transition from transparency to opacity became obvious last summer, in his discussion about the catastrophe in the Gulf of Corexit.  Here’s how I discussed this situation on August 26, 2010:

Consider what our President said on August 4th:

“A report out today by our scientists shows that the vast majority of the spilled oil has been dispersed or removed from the water,” Obama said.

Beth Daley of the Boston Globe gave us another example of what our government told us about all that oil:

Earlier this month, Jane Lubchenco, National Oceanic and Atmospheric Administration chief, declared that “at least 50 percent of the oil that was released is now completely gone from the system, and most of the remainder is degrading rapidly or is being removed from the beaches.”

On August 20, we learned about the falsity of the government’s claims that the oil had magically disappeared.  The Washington Post put it this way:

Academic scientists are challenging the Obama administration’s assertion that most of BP’s oil in the Gulf of Mexico is either gone or rapidly disappearing — with one group Thursday announcing the discovery of a 22-mile “plume” of oil that shows little sign of vanishing.

After the Fukushima earthquake and nuclear power plant disaster in March, I immediately became suspicious about the lack of transparency concerning that crisis:

A good deal of the frustration experienced by those attempting to ascertain the status of the potential nuclear hazards at Fukushima, was obviously due to the control over information flow exercised by the Japanese government.  I began to suspect that President Obama might have dispatched a team of Truth Suppressors from the Gulf of Corexit to assist the Japanese government with spin control.

More recently, Vivian Norris reported on what she has learned about the extent of radioactive contamination resulting from the Fukushima events in the Huffington Post.  In the middle of the piece, she took a step back and shared a reaction that many of us were experiencing:

Why is this not on the front page of every single newspaper in the world?  Why are official agencies not measuring from many places around the world and reporting on what is going on in terms of contamination every single day since this disaster happened?  Radioactivity has been being released now for almost two full months!  Even small amounts when released continuously, and in fact especially continuous exposure to small amounts of radioactivity, can cause all kinds of increases in cancers.

In the United States, the EPA has apparently become so concerned that the plume of radioactivity may have contaminated fish, which are being caught off the Pacific coast and served-up at our fine restaurants – that the agency has decided to cut back on radiation monitoring.  That’s right.  Thorough radiation testing of water and fish causes too much transparency – and that’s bad for business.  Susanne Rust of California Watch discussed the reaction this news elicited from a group called Public Employees for Environmental Responsibility (Public Employees – uh-oh!):

The EPA and the Food and Drug Administration increased their radiation monitoring efforts after a massive earthquake and tsunami off the coast of Japan set off the world’s worst nuclear disaster since Chernobyl.

But on May 3, the EPA announced [PDF] in a press release that it was falling back to a business-as-usual schedule of radiation monitoring, citing “consistently decreasing radiation levels.”

*   *   *

“With the Japanese nuclear situation still out of control and expected to continue that way for months and with elevated radioactivity continuing to show up in the U.S., it is inexplicable that EPA would shut down its Fukushima radiation monitoring effort,” said Jeff Ruch, executive director of the watchdog group, in a statement.

*   *   *

According to Public Employees for Environmental Responsibility, the EPA has proposed raising their guideline radiation limits, or Protection Action Guides.  These values are used to guide decision makers about when a clean up is needed after a nuclear incident.

According to Ruch, the new clean up standards are “thousands of times more lax than anything the EPA has ever before accepted.”

Documents obtained by the watchdog group [PDF] via the Freedom of Information Act indicate the EPA made a decision to approve the revised guidelines months ago, but has yet to make a formal announcement.

Meanwhile, aversion to transparency is now being discussed in Geneva.  John Heilprin is reporting for the Associated Press that the Global Fund to Fight AIDS, Tuberculosis and Malaria is considering a reversal of its policy of transparency regarding how it spends the billions of dollars contributed to it.  Mr. Heilprin’s report discusses the hostile reaction to this suggestion – which resulted from revelations (by the organization’s internal transparency program) that the fund lost millions of dollars as a result of fraud and mismanagement.  The proposed solution:  to hell with transparency!  Be sure to read Heilprin’s entire report.  It presents a fine example of the latest trend in coping with the “transparency problem”.


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BP Buys Silence Of Expert Witnesses

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July 22, 2010

You might be familiar with the manner in which British Petroleum has been silencing potential witnesses to the extent of damage caused by the Deepwater Horizon disaster.  A typical example was recently discussed by Anne Macquarie of the Nevada Appeal:

I have a friend who has been working for the last month for a private contractor, doing wildlife inventories in areas affected by the oil spill.  I asked her if I could talk to her about what she saw down there and share it with Nevada Appeal readers.

She told me she’d been required to sign a confidentiality agreement.  She couldn’t talk to anyone about anything she did there.  I didn’t push her — times are tough and I sure didn’t want her to lose her job.

Anticipating criminal prosecution and a nearly infinite number of civil lawsuits, BP has begun a campaign of signing-up as many potential expert witnesses as can be found, not only to testify on BP’s behalf in the numerous proceedings – but, more importantly – to buy their silence.  Litigation attorneys often refer to this tactic as, “buying experts off the street”.   Precious little attention has been focused on this activity.  Dylan Ratigan has exposed it and CBS News briefly touched the subject.  Other than those instances, the mainstream media have not discussed this ploy – at least as of this writing.   Here’s some of what CBS had to say:

BP has been trying to hire marine scientists from universities around the Gulf Coast in an apparent move to bolster the company’s legal defense against anticipated lawsuits related to the Gulf oil spill, according to a report from The Press-Register in Mobile, Ala.

Scientists from Louisiana State University, Mississippi State University and Texas A&M have reportedly accepted BP’s offer, according to the paper.

The federal government is expected to file a massive Natural Resources Damage Assessment lawsuit against BP, and it’ll have to draw on large amounts of scientific research to build its case.

*   *   *

Robert Wiygul, an Ocean Springs lawyer who specializes in environmental law, said BP is in effect denying the government access to valuable information by hiring the scientists and adding them to its legal team.  “It also buys silence,” Wiygul told the Press-Register, “thanks to confidentiality clauses in the contracts.”

Scientists who sign the contract to work for BP will be subject to a strict confidentiality agreement.  They will be barred from publishing, sharing or even speaking about data they collected for at least three years.

George Crozier, director of the Dauphin Island Sea Lab, who was approached by BP, told the paper:  “It makes me feel like they were more interested in making sure we couldn’t testify against them than in having us testify for them.”

The original story for the Alabama Press Register was written by Ben Raines.  His article included this interesting aspect of his investigative work on the piece:

BP officials declined to answer the newspaper’s questions about the matter.  Among the questions:  how many scientists and universities have been approached, how many are under contract, how much will they be paid, and why the company imposed confidentiality restrictions on scientific data gathered on its behalf.

Coincidentally, CBS also provided us with the perspective of musician/performance artist Laurie Anderson on this subject.  She appeared on David Letterman’s Late Show on July 14 to perform a song entitled, “Only An Expert”.

On July 21, Bloomberg News televised an interview with Matthew Simmons, founder of the Ocean Energy Institute.  Among the subjects included in the conversation was the topic of BP’s confidentiality agreements.  If what Mr. Simmons said is correct, BP’s legal defense efforts will become futile once the public realizes “we have now killed the Gulf of Mexico”.  At least on that one point, the cretins at BP are probably not the only individuals who are hoping that Mr. Simmons is wrong.



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