Climate Economics

This essay will discuss man-made global warming and how it affects economics.

It has been quite a while since I last posted an article on this blog. I was not in the mood to post anything earlier, but right now I am very enthusiastic about giving you scientific insight into the climate plus related politics and economics. You might read or hear about climate change via the media, but their view is biased and I am inclined to give you the truth!

First I’d like to give you all the evidence you need that man-made global-warming is not taking place, more precisely that man-made carbon dioxide (“CO₂”) does not drive climate change. Secondly, I’d like to have a look on how the wrong assumption of man-made climate change has come about. How come politicians have put so much effort into letting people believe that we are affecting the climate? Third and last, I’d like to inform you about the economic implications that the idea of man-made climate change has had on economics.

Human CO₂ does not drive climate change

It was Al Gore that showed us a graph which showed the relationship between the earth’s temperature and the quantity of CO₂ in our atmosphere. A graph that showed a period of 650,000 years with temperatures and the quantity of CO₂ in the air correlating very nicely (http://www.adobe.com/uk/designcenter/thinktank/womack/tt_womack_2.jpg). What he missed out on was the relationship between the 2 over smaller periods of time, say 100s of years. When you look at the graph in detail you will see that temperatures have increased before the CO₂ quantities did, and that Al Gore has got it the wrong way around! More precisely increases in CO₂ lag behind ±800 years on temperature increases. So if the past 10 years have been really warm the quantity of CO₂ in the atmosphere will be higher in around 800 years from now.

“The problem we have here: Al Gore says that if the CO₂ increases in the atmosphere as a greenhouse gas, then the temperature will go up. But the ice core record shows the exact opposite. Hereby the fundamental assumption, the most fundamental assumption of the whole theory of climate change due to humans is shown to be wrong.”

Over the last 100 years changes in man-made CO₂ quantities did not correlate with rises in temperature. If you would assume that an increase of man-made CO₂ will lead to an increase in temperature, data over the past 100 years show us a different picture. Most increase in temperature has taken place from 1900 to 1940. During the industrial boom-period of 1940 to 1970 man-made CO₂ increased rapidly, while during that same period of time, temperatures declined. After the 1970s temperatures have increased again, then for the last 10 years they have decreased, regardless of the fact that we produced much more CO₂ over the last 10 years then we did in the period before that.

Climate scientists of the Intergovernmental Panel on Climate Change (“IPCC”) have shown us a hockey stick graph with the stick pointing upwards showing a temperature increase over the past 100 years (http://aninconvenientskeptic.files.wordpress.com/2007/03/hockey_stick_graph.jpg). Those same scientists have composed this graph by manipulating the data over the past 100 years showing a steady increase while ignoring the temperature decrease from 1940-1970 and the temperature decrease since the late 90s.

The climate is always changing. The ‘medieval high period’ from the year 1200-1400 shows that temperatures were much higher than they are today. During that same period of time the world prospered.

The period from 1600-1700 is known as ‘the little ice age’ during which temperatures were much lower than they are today.

But if CO₂ does not drive the climate, what does? The sun. It is the sun that directly and indirectly drives climate change. There is an obvious correlation between the number of sunspots on the sun and the temperature on earth. Sunspots are spots viewed on the sun that show huge explosions taking place on that star. The more sunspots, the higher the temperature. The fewer the sunspots, the lower the temperature.

The sun indirectly affects us via clouds. Exploding supernova leave subatomic particles, and when those subatomic particles hit the water vapor in our atmosphere they form clouds.

“subatomic particles + water vapor = clouds”

The quantity of subatomic particles is dependent on the strength of the sun. When the sun has more sunspots it sends out stronger solar winds so the number of subatomic particles decreases and the number of clouds decrease. Hence, this indirect effect through clouds will augment to the sun’s activity or to the sun’s inactivity.

How Margaret Thatcher and the media have gotten people by the balls

In this part of my essay I will explain how Margaret Thatcher was the source of the global warming craze, and how the media took that to the next level.

Margaret Thatcher was experiencing how troublesome the coal miners in Britain had become. Constantly on strike those miners were the ones creating problems already before Margaret Thatcher got into power and they just wouldn’t stop. Therefore, Margaret Thatcher was looking for alternative sources of energy that thereby diminished the power of those miners and guaranteed energy security. If only more nuclear power plants could be used instead of those labor-intensive coal mines, the problem would have been solved! So when the idea of climate change came up Margaret Thatcher found a reason why nuclear power plants would be better than coal power plants: they do not omit CO₂. She went to the Royal Society’s group of scientists and said: “there is money on the table for you to proof this stuff.”

Evidently, when politicians put their weight behind something, and attach their name to it in some way, money will flow, that’s the way it goes. So everywhere institutions, development and other organizations bubbled up, so to speak, but with a particular emphasis on the relationship between carbon dioxide and temperature.

One of those institutions is the IPCC. This panel was set-up to proof the negative effect of manmade CO₂ on the climate but has since long surpassed its goal. The IPCC has seen many scientists leave after it was first set-up, because those scientists did not feel like they were listened to. The IPCC, trying to keep a certain rate of approval refuses to omit those scientists from the author list, effectively claiming those scientists still believe in what the IPCC papers say: that us humans are responsible for climate change. Besides, many of the panel members aren’t scientists, but politicians, with a large percentage of them not approving what the panel is saying. The IPCC pushes scientific data aside in order to let people believe in its viewpoints. The most recently example is the e-mail scam that has been discovered by a hacker. In those e-mails a number of the panel members admit they have changed data figures otherwise not being able to prove their point. Below you can see an e-mail as sent by one of the IPCC scientists (Michael Mann) to a number of his fellows:

"I've just completed Mike's Nature trick of adding in the real temps to each series for the last 20 years (i.e., from 1981 onwards) and from 1961 for Keith's to hide the decline."

Especially left-wing politicians have taken the idea of manmade global warming and made it an integral part of their campaigns. That makes sense if you see the changes that have taken place around the world form the 1970s onwards. The left had been slightly disoriented by the manifested failure of socialism and communism, and the fall of the Berlin wall. They needed something else to prove their point, than what better to say that we humans are warming the earth?

“Manmade climate change could be used to legitimize a whole suite of myths that already existed: anti-car, anti-growth, anti-development, and above all, anti that great Satan: the US.”

Journalists also played a huge role in letting people believe the climate is changing due to human influence. Those journalists have often got the same political viewpoints as the group mentioned above and love to proof those viewpoints to their audiences. Over the past 10 years a huge group of journalists have stood up, ‘climate change journalists’ that are dependent on the hoax of manmade global warming. These journalists like to stay in the news and like to see their importance acknowledged by making their publications more and more outrageous. Honestly, it isn’t very interesting to say that the climate is changing very slowly due to changes in solar activity. No! Climate reporters like to be felt and try to increase the number of people that pay attention to their publications.

“Oh, but now it’s much much worse! There is going to be 10 feet of sea level rise by next Tuesday.”

Wasting tax money and killing “The African Dream”

Environmentalist are wasting our tax money and are killing the African Dream – which is to develop.

Billions and billions of tax dollars are invested in projects and companies that should limit the production of CO₂ and the creation of alternative energy sources. Those tax dollars are being spent on something that has not been proven, as I have even proven manmade global warming unreal in the first section of this essay. From an economist’s point of view you would rather have people pay less tax money rather than having them pay for the building of sandcastles.

In Copenhagen politicians were saying the poor countries are the victims of manmade global warming that has been spurred by the West, because the poor countries will be faced with a changing climate due to the West’s behavior. “That’s right” say many parties and they promote the idea of giving money to Third World countries that can thereby use alternative sources of energy while developing their economy. The first question that comes to many people’s minds is whether this just isn’t another form of development aid, with the knowledge that most (but not all) development aid has proven to be useless (but that will be another post). But what’s more important, and what environmentalists are missing out on is that this whole system is killing the African Dream – which is to develop.

If you would ask an African person to define development they will certainly mention electricity. As most Africans do not have electricity they have to sleep early (no light) and they die younger due to the respiratory diseases caused by the in-house fires used to cook their food. Now they are asked to use solar panels and wind energy as their source for electricity. The problem with solar panels and wind energy is that they are not only expensive, but the energy that comes out of them is extremely limited. A solar panel can hardly power a transistor radio, let alone provide the electricity to power a train network or a steel mill!

“If you tell the Third World that they have to use solar power or wind power, what you are really telling them is that they cannot have electricity.”

Newspapers are warning us of the risk of using fossil fuels but never mention the risk of not using them.

Conclusion

In conclusion this essay has shown you that manmade global warming is not taking place and that due to politicians our tax money is being wasted with the African Dream being killed. I hope we are all realizing we do not have to believe what most media are saying about our CO₂ emissions . What I do hope for is that we will not waste our lives working on something that says otherwise, and to not feel guilty about ourselves and to live our lives to the fullest.

“We do not have to feel guilty for making the absolute best of our lives.”

A bailout has the opposite effect!

Bailouts disintegrate the economy. Companies took on too much debt and did not perform good enough to be profitable. A company would not perform because of an outdated business model, inferior products, bad cost control, etc. In any case they are doing something wrong which makes it uninteresting to let them continue operations. Instead, other companies are performing better, making those companies the ones that attract talent and investments. This is a logical economic process like in nature: “survival of the fittest”. With bankruptcies you would rid yourself of the bad performing companies, which would benefit the economy in the long run. Specializations in which other companies operate are more profitable so there is a shift in activities benefiting the economy. Giving companies bailout money would mean giving them money for being an inferior organization that is not suited for the current economy. Giving a company more money does not mean the company will suddenly be fit for the economic environment. It is nothing but a short-term fix, without addressing underlying problems.

A government is meant to govern a country, and not meant to play for an investor that will see negative returns. Any logical investor would refuse the idea to invest in a company that is about to go bankrupt. Besides, it is your taxes they invest with. I could simply refer to the failed Chrysler bail out in the 80s. No bailout can benefit the economy over the long-run. Unfortunately, politicians still don’t get that.

Economic freedom: working where you please

Recently news is reporting on the refusal of the United States government to give work visas to foreigners. I believe people should get more freedom on where they would like to work. This is because of shortages in human resources in many countries and to promote economic efficiency.

In the United States only, there are more than 3 million job vacancies that are unlikely to be filled in anytime soon. Other countries are facing the same problem, a problem that could be overcome by bringing in foreign talent. If there are job vacancies that can’t be filled, economic growth will have a limitation.

Some jobs could better be filled by foreigners. For example in The Netherlands, who would like to do cleaning work nowadays? Or paint your house? And if there are people that do it, they charge way too much for it. This forces people to “do-it-themselves” and being limited in the time they spent on other things (including work). Bring in a foreigner and he or she will do a good job for a decent price, saving the locals money and/or time. The foreigner that did the work would also be better off then when doing the same work in his or her home country. The economy will benefit because the local people will have more time for highly-skilled work and the foreigner is contributing by being part of the work force and spending part or all his money in The Netherlands.

Now it won’t be a good idea to be giving work visas to everyone that enters a country. But step by step a country could let more people in to fill vacancies, which will lead to an overall higher level of economic prosperity.

Pig Flu in China

Just for the record: the pig flu has already been in Mainland China for a while. Doctors and hospitals here know about it, but it is still kept secret by the authorities.

How the Central Bank can fight a recession

In this post I would like to show you how a countries’ Central Bank can fight a recession.

Many believe a fiscal stimulus would be the thing to go for, but as I have shown in my first article about the US stimulus this has proven not to be the right answer to a recession. It was the Chicago School of Business economist Milton Friedman that proved the Central Bank is the one and only mechanism to fight a recession. Even though he won the Nobel Prize in the 1960s, governments tend to neglect his findings.

The Central Bank could use the following tools to get an economy back on its feet:

• Lower interest rates
• Decrease in banks’ reserve ratio
• Increase money supply

Lower interest rates

The economy can benefit from an increase in peoples’ consumption. Lower interest rates will both discourage saving and encourage borrowing. It would discourage saving because the returns on those savings would be very low, and it would encourage borrowing because the interest rate on borrowing is very low. Both would in their turn trigger spending.

Interest rates should not be below zero. This is because such a rate would make money worth more when someone is not saving it, effectively making spending a stupidity.

Decrease in banks’ reserve ratio

The Central Bank could decrease the banks’ reserve ratio regulation. When banks can keep lower reserves, they have more money available to lend. Companies in their turn would have more chance of landing the loans needed for their development.

Too low reserve ratios would be risky though, since they would not protect the bank from market fluctuations. When there is a “run” on the bank or many people take out their deposits the bank would not have enough liquidity to give back its deposits. Banks would then go bust, calling Lehman Brothers as an example.

In China banks have the benefit of having a shitload in deposits. Even though many loans are non-performing, there are enough deposits to cover them. Still, instead of their American counterparts these banks see their problems shifted towards the future.

Increase of money supply

When increasing the supply of money the Central Bank simply “creates” (supplies) more money that is brought into the market in the form of cheap loans to financial institutions.

A Central Bank should not “create” (supply) too much more money. When too much money gets into the market serious inflation could dispose of the money’s value. Decreasing the real value of money would then be the opposite of the effect that the Central Bank is aiming for.

Conclusion

I hope you now get an idea on how a government can best fight a recession. Hence, no taxpayers’ money would be spent to build sandcastles. ;-)

The Fake Recovery of the Chinese Economy

The expected recovery of the Chinese economy is a “fake one” and this text will proof it. First I will let you know why figures would show a revival of the Chinese economy. Then, I will show you how this will negatively impact the economic long-term future of China. Last but not least I will explain the politics that lead to this destructive short-term thinking.

The Chinese economy is expected to grow up to 8% in 2009

While many Western economies are expected to contract with 2-3%, the Chinese economy is expected to grow with 8%. Well, most of this growth, as I read recently in some economic magazine, comes from a direct and indirect government spending. Estimates are that in case the government did not carry out the stimulus expected growth would be 3%, five percentage points lower. Then the next question would be: how is this stimulus composed? How can its effect be so big?

The effect of the stimulus is big because it is both direct and indirect. Direct by making sure the government spends more by hiring more people, providing more subsidies, spending more on healthcare and education, etc. Indirect spending is more interesting to mention. The Chinese government has forced its own state-owned banks to lend money like crazy. The banks have certain quotas on how much they should lend to companies! Currently banks are knocking on companies’ doors asking them to borrow some. The requirements for getting these loans are so few that the chances of getting the loans paid back are really small. Besides, most companies borrowing the money are state-owned, companies that have previously proven to default on their loans.

Let the next generation deal with it

The next generation will have to deal with two matters. First, it will face the government debt over which interest will need to be paid and which one will need to pay back. Secondly, they will have their money in banks that will not be able to pay them back their deposits. This is simply because the companies that are now borrowing will not be able to pay their loans back. Even if the banks will be bailed out (which has been done before in China), this will only lead to a limit on government spending in areas where it should be used (safety, clean environment) or this will increase government debt. In other words, we will not face the interest rates and government spending limits today, but they will definitely be faced in the future – say 20 years from now.

The political motive behind the huge increase in government spending

The goal of politicians in China is not to think about the long-term growth of their country, but to think about keeping people quiet. With keeping people quiet I mean making sure they do not start protests or go against the Party. This is the whole idea behind keeping this one-party dictatorship alive you see – as long as people are happy they will not bother the government. As long as the Chinese are focused on making money they would not be bothering the government. The Chinese government is keeping the economy going to keep the people happy, but with such short-term thinking a few years down the road problems will only be bigger, with the Communist Party directing its own failure.

President Obama and his Genius Stimulus BILL and the 'Sand Castle Building' Theory

(The first part is taken from the internet and slightly modified. The second part is written by myself.)

Let's run a mindboggling defecit that guarantees failure for my children's children and use that money for the illusion of wealth creation. GDP will certainly has the potential to rise next year, probably beginning in Q3 but it's a fake rise. The idea that building things that cost enormous amounts of money that you don't have making things better is even crazier than having a guy run the economy who can't figure out his own tax liability. The Obama stimulus plan can be basically summed up as follows: "if I give my 21 month son a 'job' working in the family sandbox and he makes a massive sand castle are we better off? Additionally I pay him off of one of my credit cards." Technically his business is bringing in money and thus conributing to GDP, but the money isn't real. It has to be paid back eventually! This means that money cannot be used for wealth creation in the future and instead of going into new goods it's going into NONSENSE. The economic stimulus package works exactly the same way. Robbing Peter's grandchildren to pay Paul is no way to practice macroeconomics. What are they teaching at the previously esteemed Harvard (or any university) these days?

Additionally all this 'job creation' is total and utter crap. The government doesn't create wealth it spends it. THE GOVERNMENT IS A COST CENTER. Creating 3,000,000 new jobs at let's say 40,000.00 per year just means that eventually American taxpayers will have an additional $120,000,000,000.00 in annual bills, not even thinking about including pensions and other benefits because then the number will get really scary. That's right he has proposed 120 billion dollars of perpetual new spending into what is really a depression. Where will this come from? Well, since businesses employ people and both people and businesses pay taxes it's likely that businesses will have less money to employ people as they will be paying for guys to stand at a construction site smoking a cigarette while leaning on a shovel. This can only mean less income for the government and higher taxes to make up the gap until total failure becomes evident; something which I predict grandchildren to witness.

This stimulus plan is stupid and will only bring long term harm to the economy. No matter how you look at it 'running a defecit' (wasting the taxpayers' money) with a national debt that basically equals GDP means: higher taxes, decreased business profitability and additional costs for future generations.

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Instead let's start making the economy effective and start to spend money in ways that make sense and promote the economy to become more healthy. Actuallywe learn in middle school that spending now means that you can spend less in the future. Therefore what in fact would be good is to just stop spending for a change. People refer to spending tax money to grow the economy while we should actually stop spending tax money to grow the economy. 'Borrowing money costs money (try explaining that to Obama).'

Get rid of all these taxes and what is left is companies that have more money to hire people instead of paying that money in taxes to the government that in turn hires more useless bureaucrats. Additionally, people who work more or better will get the equivelant seen in their pay. Useless people will be just accepted for how they are (useless) and will not be pushing the economy down with their low productivity so productivity will go up and we will have an unprecedented era of prosperity. Plus, our children will not be paying for current and future 'sand castle building' costs in a stimulus which has never proven to be economically beneficial. See, the less we spend now the more we can spend in the future, plus we won't be building sand castles in the hope to stimulate the economy. Let's start treating the roots of the problem instead of the symptoms.