Friday, June 28, 2019
Wednesday, June 26, 2019
The Obama Presidency
Any time one of my Democratic friends gets bent out of shape by Trump's criminality, or his sexual predation, I have to remind them how Clinton and Obama paved the way for legitimizing those things.
Perhaps the worst is Obama (see the Twitter thread below). Not only did he not prosecute the war crimes of Bush 43/Cheney, he promoted the torturers and prosecuted the whistle blowers (more than all previous administrations combined).
But to really appreciate the corruption of the Obama administration, one has to compare its behavior with the previous biggest-ever bank scandal, the Savings & Loans. At its time, the S&Ls was the biggest scandal in American history, in terms of dollars, people involved, amount of theft... you name it. So what happened during Reagan / Bush 41? Answer: The regulators did their jobs. They filed 30,000+ referrals for criminal prosecution, and the Justice Dept. prosecuted 1200+ cases with a 90% conviction rate. They got really big fish, too: Mike Milken and Charles Keating among them.
Fast forward to the scandal Obama inherited, the subprime/derivatives scandal enabled by Clinton's deregulation of Wall Street. The latest bank scandal was about 70 times larger than the S&Ls. Just bailing out a single bank (IndyMAC in Southern California) cost more than the entire S&L bailout.
So...how many referrals for criminal prosecution from the Obama regulators? Answer: zero!
The crookedest Attorney General in American history, Eric Holder, prosecuted about a dozen cases, all small fish. Instead, he chose to settle with the malefactors in what is perhaps the largest theft in human history--U.S. net worth declined 40% in the wake of Lehman's bankruptcy--for dimes on the dollar of their loot. These cost-of-doing-business fines included no admission of guilt, so the civil cases against the thieves were harder to prosecute.
So any time someone asks me whether I'd vote for Joe Biden, I have to respond "What difference would it make?"
Recommended reading: Thomas Frank's Listen Liberal: Whatever Happened to the Party of the People?
Perhaps the worst is Obama (see the Twitter thread below). Not only did he not prosecute the war crimes of Bush 43/Cheney, he promoted the torturers and prosecuted the whistle blowers (more than all previous administrations combined).
But to really appreciate the corruption of the Obama administration, one has to compare its behavior with the previous biggest-ever bank scandal, the Savings & Loans. At its time, the S&Ls was the biggest scandal in American history, in terms of dollars, people involved, amount of theft... you name it. So what happened during Reagan / Bush 41? Answer: The regulators did their jobs. They filed 30,000+ referrals for criminal prosecution, and the Justice Dept. prosecuted 1200+ cases with a 90% conviction rate. They got really big fish, too: Mike Milken and Charles Keating among them.
Fast forward to the scandal Obama inherited, the subprime/derivatives scandal enabled by Clinton's deregulation of Wall Street. The latest bank scandal was about 70 times larger than the S&Ls. Just bailing out a single bank (IndyMAC in Southern California) cost more than the entire S&L bailout.
So...how many referrals for criminal prosecution from the Obama regulators? Answer: zero!
The crookedest Attorney General in American history, Eric Holder, prosecuted about a dozen cases, all small fish. Instead, he chose to settle with the malefactors in what is perhaps the largest theft in human history--U.S. net worth declined 40% in the wake of Lehman's bankruptcy--for dimes on the dollar of their loot. These cost-of-doing-business fines included no admission of guilt, so the civil cases against the thieves were harder to prosecute.
So any time someone asks me whether I'd vote for Joe Biden, I have to respond "What difference would it make?"
Recommended reading: Thomas Frank's Listen Liberal: Whatever Happened to the Party of the People?
[Thread] Obama years, in no particular order .... pic.twitter.com/jCdg0m8liU— Esha🌹🌷🌹 (@eshaLegal) December 19, 2017
Tuesday, June 25, 2019
David Harvey's overview of our current economic situation
Harvey reinstates classical economics' adoption of land as one of the units of production.
3/28/16
It is David Harvey’s contention that the production of space,
especially the distribution and organization of the territory,
constitutes a principal aspect of capitalist economies. His writings on
this theme have contributed to the ongoing political debate on
globalization and on the different spatial strategies associated to
global processes. A foundation of Harvey’s intellectual project is his
“close reading” and interpretation of Karl Marx’s Capital, which he has
taught and read for decades and documented in his Companion to Marx’s
Capital (2010). But Harvey’s work is distinguished by the way he has
brought Marxism together with geography with productive results for each
discipline. For instance, he has approached the overaccumulation of
capital by way of its reflection in spatial expansion in order to
demonstrate its causative role. His book Limits to Capital (1982), which
traces this argument, is a mainstay of the contemporary understanding
of capitalism’s perennial economic crises (among others are Ernest
Mandel’s Late Capitalism (1972), Giovanni Arrighi’s Long 20th Century
(1994) and Robert Brenner’s Economics of Global Turbulence
(2006)).
Among other ideas, Harvey is known for his critical
interpretation of the ideas of Henri Lefebvre and his own formulation of
the “right to the city.” His book Spaces of Hope (2000) explores a role
for architecture in bridging between the human body and the uneven
development that is characteristic of globalization. Asked to single out
a favorite of Harvey’s books, Dean Mohsen Mostafavi refers to Harvey’s
book Social Justice and the City (1973) as “an important articulation of
the relationship between the city as a physical artifact and its social
consequences. His writings have provided an acute analysis of our
society and provide an indispensable framework for new forms of spatial
imagination."
David Harvey, Distinguished Professor of Anthropology
& Geography at the Graduate Center of the City University of New
York (CUNY), is the 2015–2016 Senior Loeb Scholar.
Today's Bee Letter: Affordable Housing
6/25/19 RE: We need to break down root causes of California's homeless crisis to find solutions
The Bee’s “influencers” say we need to increase the supply of housing to make it more affordable, maybe cut some red tape, and perhaps contemplate why people end up on the street, and provide them with therapy. No mention that government closed the asylums without funding halfway houses to replace them.
No mention of increasing taxes on the rentiers--finance loves real estate--to curtail the rise of home prices and the epidemic of land speculation in the region--things that raise costs for everyone.
No mention of removing the restrictions on boarding houses or multi-family in the midst of single-family homes, you know, as in McKinley Park, the most valuable real estate in the region. No mention that maintaining infrastructure in compact development is roughly half as expensive as maintaining it in sprawl.
My question: Does “influencers” mean “people with their heads in the sand”?
The Bee’s “influencers” say we need to increase the supply of housing to make it more affordable, maybe cut some red tape, and perhaps contemplate why people end up on the street, and provide them with therapy. No mention that government closed the asylums without funding halfway houses to replace them.
No mention of increasing taxes on the rentiers--finance loves real estate--to curtail the rise of home prices and the epidemic of land speculation in the region--things that raise costs for everyone.
No mention of removing the restrictions on boarding houses or multi-family in the midst of single-family homes, you know, as in McKinley Park, the most valuable real estate in the region. No mention that maintaining infrastructure in compact development is roughly half as expensive as maintaining it in sprawl.
My question: Does “influencers” mean “people with their heads in the sand”?
Wednesday, June 19, 2019
Modern Money Theory (MMT) and Climate
The following appears in the New Economic Perspectives blog.
With great interest, I’ve been reading about the “Terraton Initiative”—a program designed to enlist farmers to sequester one trillion tons of carbon in their soil using innovative and “regenerative” planting techniques. The initiative was recently rolled out by Indigo AG—a young and rising Boston company recently named by CNBC as “the world’s most innovative company.” Indigo AG’s mark has been the establishment of a sophisticated platform enabling grain-farmers across the country (and around the world) to differentiate the quality-characteristics of their harvest (e.g. organic, non-GMO, heirloom varietal, etc.) and connect directly with buyers seeking those quality-characteristics. What got my attention was the fact that Indigo AG, with its recently announced “Terraton Initiative,” is now proposing to help farmers deploy strategies to maximize carbon sequestration in their fields—and then pay the farmers $15 for each ton of carbon they sequester. (Current agribusiness farming techniques, promoted by Archers Daniels Midland and Monsanto—now Bayer—add 4 billion tons of greenhouse gas to the earth’s atmosphere each year.)
To put this in perspective, one trillion tons of CO2 is what human civilization has pumped into the earth’s atmosphere over the past 250 years. Indigo AG is proposing to take it all back—and sequester it in the world’s 3.6 billion acres of agricultural soils. End of global warming—end of the threat of climate change! (Of course, it wouldn’t be that simple since many of the changes are “baked-into” the foreseeable future by mechanisms already set in motion; nevertheless, pushing atmospheric carbon counts back toward pre-industrial levels would obviously be a considerable step in the right direction.)
There is, of course, another perspective: At $15/ton, achieving the goal of the “Terraton Initiative” will require paying farmers $15 trillion for their services. Indigo AG says it has already lined up a group of “buyers” who will get the ball rolling by purchasing (from Indigo AG) “carbon credits” which they can then use to offset their own carbon footprints—and even claim their products are carbon negative. Presumably, Indigo AG is making a profit in this transaction; if they’re paying farmers $15/ton they might be selling a credit to that ton for, say, $17. So, to achieve their goal, they’d have to sell $17 trillion worth of carbon-credits.
The only way this sounds long-term plausible is if the entire consumer world got on board with the idea of buying only carbon-zero—or carbon-negative—agricultural-based products. Which is unlikely—especially within the ten-year time frame scientists are telling us we are up against to make a significant move to limit atmospheric carbon build-up. Nevertheless, what Indigo AG is undertaking is intriguing (and highly laudatory) for several reasons:
The initiative is clearly part of a rational, large-scale climate-change solution that is founded on current and reasonably projected technological capabilities. One North Carolina farmer who has already been experimenting with existing “regenerative” techniques has sequestered 1.5 tons/acre in his fields. If that efficiency were doubled, the 3.6 billion acres of cultivated land, world-wide, would be capable of sequestering 10.8 billion tons of carbon per year through agricultural practices alone.
The initiative is not top-down, but a genuine, diverse, bottom-up endeavor. It will “employ” thousands of individuals and small businesses in creative efforts to develop and deploy agricultural carbon-sequestration strategies and techniques. The initiative includes additional monetary awards for innovative ideas that can be used by others to increase the efficiency of their sequestration efforts. It puts the true “initiative”—and the financial rewards—squarely in the hands of people on the ground.
No one is coerced to do anything. The only enforcement is a measuring regime to document actual sequestration levels achieved. The motivation to participate is wholly “market-driven.” The same North Carolina farmer who’s sequestering 1.5 tons/acre on his 1000 acres will earn an extra $22,000/year “for doing,” he notes, “what I’m already doing.” Others would likely be motivated to start “doing” the same thing—and earn the premium, as well, on what they’re already growing and selling.
There are profound collateral benefits to the initiative. The “regenerative” farming techniques will replenish the fertility and water-holding capabilities of the world’s top-soil—capabilities which have been virtually destroyed by the intense chemical fertilizer-insecticide regimes promoted, and insisted upon, by the major agribusiness suppliers. One can imagine the ghost of Masanobu Fukuoka (One Straw Revolution)—who resolutely demonstrated that “regenerative” farming techniques can, in fact, outproduce chemical-intense methodologies—rising in celebration!
The ubiquitous “only one problem” ….
The stickler, of course, is: Where is the $17 trillion going to come from to pay the sequesters? It seems reasonable to presume that Indigo AG’s carbon-credit “buyers” will, at some point, fall short of that number. The “profit-motive,” in other words, will soon fail to motivate the creation of the necessary dollars by the Federal Reserve banking system. This seems—by definition—a perfect application for the principles of Modern Monetary Theory: The federal government, in other words, would instigate the creation of the dollars necessary to pay for the carbon sequestration efforts.
To be quite specific, the payments for the sequestered carbon would not come from tax collections. Nor would the payments come from money “borrowed” from the private sector. The payments would be made by the appropriation of new dollars created by the Federal Reserve for the purpose of funding the Treasury’s payments to the participating sequesters. The necessary deposits would be made to the Treasury’s spending account by the process of trading future Reserves (i.e. treasury bonds) for existing Reserves—and then trading the future Reserves for new Reserves created by the FED. (The same process, it should be noted, by which the Treasury has been getting its “deficit” spending money for a long, long time.)
But why limit what I’m now thinking of as the “MMT Carbon Initiative” to only agricultural carbon-sequestration in support of Indigo AG’s admirable efforts? Why not propose that the federal government will buy sequestered carbon—or its equivalent—from anybody?
For example, a kilowatt of electricity produced by a solar panel can be calculated to be equivalent to 1000 lbs. of sequestered carbon (carbon that would have been emitted to produce the same electricity with fossil fuels). Families and businesses that install solar panels, therefore, would earn their share of the $15/ton payments.
Importantly, there are many less obvious endeavors that would also be motivated (and financially assisted) by the sequestration payments. Two examples: The Salk Institute for Biological Studies in San Diego is developing plant species and hybrids with enhanced capability for storing carbon in their roots. Their success could be financed by the market established by farmers looking for plant varietals that enable them to increase their carbon sequestration payments.
The Marin Carbon Project is a group located in the San Francisco Bay Area that seeks to enhance carbon sequestration not just in cultivated soils, but in unoccupied rangeland and forest soils, by the large-scale recycling of organic waste—including food waste—into compost. When dumped into landfills, organic waste emits methane (a more potent greenhouse gas than CO2) into the atmosphere. When it is recycled into compost—and the compost is spread on soils whose capacity to absorb carbon has been severely depleted—the project has determined the revitalized soil can sequester up to 1 ton of CO2 per acre. Right now, this group is a non-profit sponsored by charitable fund-raising. The MMT Carbon Initiative could go a long way to help them expand their efforts.
How does the MMT Carbon Initiative differ from a carbon tax—or cap-and-trade system?
A carbon tax sets a price that emitters must pay for each ton of CO2 emissions they create. This cost-of-doing business is passed on to consumers who would, presumably, gravitate to products least affected by the tax (i.e. with lower prices)—creating an incentive for businesses to switch fuels or adopt new technologies to lower their emissions. This would create a virtuous cycle that would, through a decentralized, market-based process, reduce CO2 in the atmosphere. All good if you can politically get business to swallow a new tax that intentionally disrupts their existing business models.
In a cap-and-trade system, the government sets an emissions cap and issues “emission allowances” to meet that cap. Businesses must acquire and hold allowances for every ton of CO2 they emit. Companies buy and sell the allowances, establishing a price per ton of CO2 emitted. The net result, presumably, is that businesses are motivated to develop strategies and technologies to reduce their emissions—and are paid to do that by selling their unneeded allowances to other companies which must continue to emit more than their allowance. This has always seemed to me a round-about and complicated way to create the appearance that markets are magically undertaking the mitigation of climate-change.
The MMT carbon initiative seems superior to either a tax, or a cap-and-trade system, on at least two accounts:
It doesn’t disrupt anybody’s existing business plan. Instead (as illustrated by the examples cited above) it underwrites and incentivizes a lot of new and expanded business plans across a wide spectrum of economic endeavors.
It incentivizes, right from the start, a great many people (e.g. farmers) to take specific, concrete actions (“regenerative” planting and harvesting techniques) which will result directly in the immediate sequestration of carbon from the earth’s atmosphere. No waiting around for complicated cap and trade market-structures to be negotiated.
Will the MMT Carbon Initiative generate run-away inflation?
At first blush (which is usually how far economic pundits go on the topic) it would seem that adding $17 trillion to the world economy (by paying people newly created dollars to sequester carbon) is—almost by definition—going to create run-away inflation. Right? How could it not? One day, everyone is buying stuff with X no. of dollars, the next day they’re buying the same stuff with X+17 trillion dollars—so how is the price of everything in the world not going to explode off the charts requiring people to carry money around in wheelbarrows to buy a loaf of bread? Man the barricades against MMT! Prepare for America’s decent into the realms of Venezuelan chaos!
But please put these visceral ideological juices aside, and give some thoughtful, rational (and, above all) self-interested consideration of what is really going to unfold with the MMT Carbon Initiative I’ve just outlined:
Dollars are not going to be “dumped” into people’s bank accounts. They’ll be deposited incrementally—and only in exchange for the accomplishment of real, useful tasks. And it’s the real tasks—and the outcomes they achieve—that are the most important things. We’re trying to confront, here, an existential threat to human society. So what if one of the residual effects of accomplishing that goal is that a can of Coca-Cola ends up costing $2 instead of $1? When I was a kid, a bottle of soda only cost ten cents! And, in the process of getting from 10 cents to $1, I’ve never once carried money around in a wheelbarrow. In other words, so long as prices rise incrementally—reflecting the incremental expansion of human endeavors and accomplishments—inflation doesn’t matter. And the MMT Carbon Initiative embodies the very idea of the incremental expansion of useful human endeavors.
Keeping fossil fuels in the ground
The final argument I’ll make for the MMT Carbon Initiative is that it is potentially a passive (i.e. non-regulatory) strategy for keeping fossil fuels in the ground. To have a profound effect, the initiative doesn’t need to accomplish this—but it is enticing to play with back-of-envelop calculations that suggest it plausibly could accomplish it. And there probably wouldn’t be a bigger game-changer in the race against global warming than significantly limiting—for a period of, say, 10 years—the extraction and refinement of fossil-fuels.
My back-of-envelop calculations are based on the presumption that oil and gas companies want to figure out a profitable way to transition to alternative fuels and energy systems. The MMT Carbon Initiative—paying anyone $15/ton for sequestered carbon—could get their attention (and participation). Here’s the calculations (using quick, google-search numbers):
A barrel of crude oil = 0.5 tons of carbon emissions. Leaving a barrel of crude oil in the ground, therefore, would earn $7.50 from the MMT Carbon Initiative.
Average cost to extract a barrel of crude oil from the earth = $25/barrel. Average cost to refine that barrel of crude oil into burnable fossil-fuel = $3/barrel, for a total cost of $28/barrel extracted and refined.
Assuming an average net profit of 20%, oil and gas industry earns $5.60/barrel of crude it extracts and refines.
Therefore, if the crude oil were left in the ground, under the MMT Carbon Initiative, the oil and gas industry would earn the same $5.60/barrel profit plus a nearly $2/barrel premium!
If the $2 premium (from the MMT Carbon Initiative) were applied to research and development, $127 billion/year would flow into the development and deployment of zero-carbon energy systems.
Over ten years, this would amount to a $1.2 trillion investment in zero-carbon energy solutions by the oil and gas industry—an investment which, hopefully, would secure a transition to a zero-carbon business model for the energy sector.
There would, therefore, be virtually zero need to recommence the extraction of fossil-fuels after the ten-year research and development effort. The entire world-economy would now be operating on a new business model—and, according to the IPCC’s latest reports, just in time.
It should be noted that the MMT Carbon Initiative, itself, for the same reason just illustrated, could be given a ten-year time limit. Ideally, at the end of that “decade of sequestration,” not only would the world be operating on a zero-carbon energy model, but atmospheric carbon would be re-established near pre-industrial levels. An astonishing collateral benefit would be the transformation of world agribusiness into a “regenerative” process that builds topsoil, conserves water, and produces healthier food.
Perhaps, a decade hence, the experience of accomplishing all this will have brought us together around the realization that we can, as a collective society, use a modern understanding of money to accomplish things we didn’t think possible. At that point perhaps we could genuinely—and with an effort equal to what we’d just undertaken—focus on saving the other species on the planet that we’ve put gravely in danger.
MMT Carbon Initiative—a modest proposal
Posted on June 18, 2019 by J.D. AltWith great interest, I’ve been reading about the “Terraton Initiative”—a program designed to enlist farmers to sequester one trillion tons of carbon in their soil using innovative and “regenerative” planting techniques. The initiative was recently rolled out by Indigo AG—a young and rising Boston company recently named by CNBC as “the world’s most innovative company.” Indigo AG’s mark has been the establishment of a sophisticated platform enabling grain-farmers across the country (and around the world) to differentiate the quality-characteristics of their harvest (e.g. organic, non-GMO, heirloom varietal, etc.) and connect directly with buyers seeking those quality-characteristics. What got my attention was the fact that Indigo AG, with its recently announced “Terraton Initiative,” is now proposing to help farmers deploy strategies to maximize carbon sequestration in their fields—and then pay the farmers $15 for each ton of carbon they sequester. (Current agribusiness farming techniques, promoted by Archers Daniels Midland and Monsanto—now Bayer—add 4 billion tons of greenhouse gas to the earth’s atmosphere each year.)
To put this in perspective, one trillion tons of CO2 is what human civilization has pumped into the earth’s atmosphere over the past 250 years. Indigo AG is proposing to take it all back—and sequester it in the world’s 3.6 billion acres of agricultural soils. End of global warming—end of the threat of climate change! (Of course, it wouldn’t be that simple since many of the changes are “baked-into” the foreseeable future by mechanisms already set in motion; nevertheless, pushing atmospheric carbon counts back toward pre-industrial levels would obviously be a considerable step in the right direction.)
There is, of course, another perspective: At $15/ton, achieving the goal of the “Terraton Initiative” will require paying farmers $15 trillion for their services. Indigo AG says it has already lined up a group of “buyers” who will get the ball rolling by purchasing (from Indigo AG) “carbon credits” which they can then use to offset their own carbon footprints—and even claim their products are carbon negative. Presumably, Indigo AG is making a profit in this transaction; if they’re paying farmers $15/ton they might be selling a credit to that ton for, say, $17. So, to achieve their goal, they’d have to sell $17 trillion worth of carbon-credits.
The only way this sounds long-term plausible is if the entire consumer world got on board with the idea of buying only carbon-zero—or carbon-negative—agricultural-based products. Which is unlikely—especially within the ten-year time frame scientists are telling us we are up against to make a significant move to limit atmospheric carbon build-up. Nevertheless, what Indigo AG is undertaking is intriguing (and highly laudatory) for several reasons:
The initiative is clearly part of a rational, large-scale climate-change solution that is founded on current and reasonably projected technological capabilities. One North Carolina farmer who has already been experimenting with existing “regenerative” techniques has sequestered 1.5 tons/acre in his fields. If that efficiency were doubled, the 3.6 billion acres of cultivated land, world-wide, would be capable of sequestering 10.8 billion tons of carbon per year through agricultural practices alone.
The initiative is not top-down, but a genuine, diverse, bottom-up endeavor. It will “employ” thousands of individuals and small businesses in creative efforts to develop and deploy agricultural carbon-sequestration strategies and techniques. The initiative includes additional monetary awards for innovative ideas that can be used by others to increase the efficiency of their sequestration efforts. It puts the true “initiative”—and the financial rewards—squarely in the hands of people on the ground.
No one is coerced to do anything. The only enforcement is a measuring regime to document actual sequestration levels achieved. The motivation to participate is wholly “market-driven.” The same North Carolina farmer who’s sequestering 1.5 tons/acre on his 1000 acres will earn an extra $22,000/year “for doing,” he notes, “what I’m already doing.” Others would likely be motivated to start “doing” the same thing—and earn the premium, as well, on what they’re already growing and selling.
There are profound collateral benefits to the initiative. The “regenerative” farming techniques will replenish the fertility and water-holding capabilities of the world’s top-soil—capabilities which have been virtually destroyed by the intense chemical fertilizer-insecticide regimes promoted, and insisted upon, by the major agribusiness suppliers. One can imagine the ghost of Masanobu Fukuoka (One Straw Revolution)—who resolutely demonstrated that “regenerative” farming techniques can, in fact, outproduce chemical-intense methodologies—rising in celebration!
The ubiquitous “only one problem” ….
The stickler, of course, is: Where is the $17 trillion going to come from to pay the sequesters? It seems reasonable to presume that Indigo AG’s carbon-credit “buyers” will, at some point, fall short of that number. The “profit-motive,” in other words, will soon fail to motivate the creation of the necessary dollars by the Federal Reserve banking system. This seems—by definition—a perfect application for the principles of Modern Monetary Theory: The federal government, in other words, would instigate the creation of the dollars necessary to pay for the carbon sequestration efforts.
To be quite specific, the payments for the sequestered carbon would not come from tax collections. Nor would the payments come from money “borrowed” from the private sector. The payments would be made by the appropriation of new dollars created by the Federal Reserve for the purpose of funding the Treasury’s payments to the participating sequesters. The necessary deposits would be made to the Treasury’s spending account by the process of trading future Reserves (i.e. treasury bonds) for existing Reserves—and then trading the future Reserves for new Reserves created by the FED. (The same process, it should be noted, by which the Treasury has been getting its “deficit” spending money for a long, long time.)
But why limit what I’m now thinking of as the “MMT Carbon Initiative” to only agricultural carbon-sequestration in support of Indigo AG’s admirable efforts? Why not propose that the federal government will buy sequestered carbon—or its equivalent—from anybody?
For example, a kilowatt of electricity produced by a solar panel can be calculated to be equivalent to 1000 lbs. of sequestered carbon (carbon that would have been emitted to produce the same electricity with fossil fuels). Families and businesses that install solar panels, therefore, would earn their share of the $15/ton payments.
Importantly, there are many less obvious endeavors that would also be motivated (and financially assisted) by the sequestration payments. Two examples: The Salk Institute for Biological Studies in San Diego is developing plant species and hybrids with enhanced capability for storing carbon in their roots. Their success could be financed by the market established by farmers looking for plant varietals that enable them to increase their carbon sequestration payments.
The Marin Carbon Project is a group located in the San Francisco Bay Area that seeks to enhance carbon sequestration not just in cultivated soils, but in unoccupied rangeland and forest soils, by the large-scale recycling of organic waste—including food waste—into compost. When dumped into landfills, organic waste emits methane (a more potent greenhouse gas than CO2) into the atmosphere. When it is recycled into compost—and the compost is spread on soils whose capacity to absorb carbon has been severely depleted—the project has determined the revitalized soil can sequester up to 1 ton of CO2 per acre. Right now, this group is a non-profit sponsored by charitable fund-raising. The MMT Carbon Initiative could go a long way to help them expand their efforts.
How does the MMT Carbon Initiative differ from a carbon tax—or cap-and-trade system?
A carbon tax sets a price that emitters must pay for each ton of CO2 emissions they create. This cost-of-doing business is passed on to consumers who would, presumably, gravitate to products least affected by the tax (i.e. with lower prices)—creating an incentive for businesses to switch fuels or adopt new technologies to lower their emissions. This would create a virtuous cycle that would, through a decentralized, market-based process, reduce CO2 in the atmosphere. All good if you can politically get business to swallow a new tax that intentionally disrupts their existing business models.
In a cap-and-trade system, the government sets an emissions cap and issues “emission allowances” to meet that cap. Businesses must acquire and hold allowances for every ton of CO2 they emit. Companies buy and sell the allowances, establishing a price per ton of CO2 emitted. The net result, presumably, is that businesses are motivated to develop strategies and technologies to reduce their emissions—and are paid to do that by selling their unneeded allowances to other companies which must continue to emit more than their allowance. This has always seemed to me a round-about and complicated way to create the appearance that markets are magically undertaking the mitigation of climate-change.
The MMT carbon initiative seems superior to either a tax, or a cap-and-trade system, on at least two accounts:
It doesn’t disrupt anybody’s existing business plan. Instead (as illustrated by the examples cited above) it underwrites and incentivizes a lot of new and expanded business plans across a wide spectrum of economic endeavors.
It incentivizes, right from the start, a great many people (e.g. farmers) to take specific, concrete actions (“regenerative” planting and harvesting techniques) which will result directly in the immediate sequestration of carbon from the earth’s atmosphere. No waiting around for complicated cap and trade market-structures to be negotiated.
Will the MMT Carbon Initiative generate run-away inflation?
At first blush (which is usually how far economic pundits go on the topic) it would seem that adding $17 trillion to the world economy (by paying people newly created dollars to sequester carbon) is—almost by definition—going to create run-away inflation. Right? How could it not? One day, everyone is buying stuff with X no. of dollars, the next day they’re buying the same stuff with X+17 trillion dollars—so how is the price of everything in the world not going to explode off the charts requiring people to carry money around in wheelbarrows to buy a loaf of bread? Man the barricades against MMT! Prepare for America’s decent into the realms of Venezuelan chaos!
But please put these visceral ideological juices aside, and give some thoughtful, rational (and, above all) self-interested consideration of what is really going to unfold with the MMT Carbon Initiative I’ve just outlined:
Dollars are not going to be “dumped” into people’s bank accounts. They’ll be deposited incrementally—and only in exchange for the accomplishment of real, useful tasks. And it’s the real tasks—and the outcomes they achieve—that are the most important things. We’re trying to confront, here, an existential threat to human society. So what if one of the residual effects of accomplishing that goal is that a can of Coca-Cola ends up costing $2 instead of $1? When I was a kid, a bottle of soda only cost ten cents! And, in the process of getting from 10 cents to $1, I’ve never once carried money around in a wheelbarrow. In other words, so long as prices rise incrementally—reflecting the incremental expansion of human endeavors and accomplishments—inflation doesn’t matter. And the MMT Carbon Initiative embodies the very idea of the incremental expansion of useful human endeavors.
Keeping fossil fuels in the ground
The final argument I’ll make for the MMT Carbon Initiative is that it is potentially a passive (i.e. non-regulatory) strategy for keeping fossil fuels in the ground. To have a profound effect, the initiative doesn’t need to accomplish this—but it is enticing to play with back-of-envelop calculations that suggest it plausibly could accomplish it. And there probably wouldn’t be a bigger game-changer in the race against global warming than significantly limiting—for a period of, say, 10 years—the extraction and refinement of fossil-fuels.
My back-of-envelop calculations are based on the presumption that oil and gas companies want to figure out a profitable way to transition to alternative fuels and energy systems. The MMT Carbon Initiative—paying anyone $15/ton for sequestered carbon—could get their attention (and participation). Here’s the calculations (using quick, google-search numbers):
A barrel of crude oil = 0.5 tons of carbon emissions. Leaving a barrel of crude oil in the ground, therefore, would earn $7.50 from the MMT Carbon Initiative.
Average cost to extract a barrel of crude oil from the earth = $25/barrel. Average cost to refine that barrel of crude oil into burnable fossil-fuel = $3/barrel, for a total cost of $28/barrel extracted and refined.
Assuming an average net profit of 20%, oil and gas industry earns $5.60/barrel of crude it extracts and refines.
Therefore, if the crude oil were left in the ground, under the MMT Carbon Initiative, the oil and gas industry would earn the same $5.60/barrel profit plus a nearly $2/barrel premium!
If the $2 premium (from the MMT Carbon Initiative) were applied to research and development, $127 billion/year would flow into the development and deployment of zero-carbon energy systems.
Over ten years, this would amount to a $1.2 trillion investment in zero-carbon energy solutions by the oil and gas industry—an investment which, hopefully, would secure a transition to a zero-carbon business model for the energy sector.
There would, therefore, be virtually zero need to recommence the extraction of fossil-fuels after the ten-year research and development effort. The entire world-economy would now be operating on a new business model—and, according to the IPCC’s latest reports, just in time.
It should be noted that the MMT Carbon Initiative, itself, for the same reason just illustrated, could be given a ten-year time limit. Ideally, at the end of that “decade of sequestration,” not only would the world be operating on a zero-carbon energy model, but atmospheric carbon would be re-established near pre-industrial levels. An astonishing collateral benefit would be the transformation of world agribusiness into a “regenerative” process that builds topsoil, conserves water, and produces healthier food.
Perhaps, a decade hence, the experience of accomplishing all this will have brought us together around the realization that we can, as a collective society, use a modern understanding of money to accomplish things we didn’t think possible. At that point perhaps we could genuinely—and with an effort equal to what we’d just undertaken—focus on saving the other species on the planet that we’ve put gravely in danger.
Sunday, June 16, 2019
Some Answers about Affordable Housing
Pundits, public policy mavens and environmentalists are working overtime to describe how to make California's housing affordable. Here's the latest from the Davis Vanguard, for one example. Typical policy recommendations include "streamlining" the permitting process, reducing building fees, and a dog's breakfast of public and charitable institutions to provide subsidies or discounts for the (worthy) occupants of such affordable houses.
Ironically, even my environmentalist acquaintances have told me they want fewer environmental regulations to inhibit affordable home developments, and more California Environmental Quality Act (CEQA) exemptions for such housing. Unfortunately, like "streamlining" the tax code, such "simplifications" and exemptions open the door for gaming the system, and seldom provide relief on the scale needed.
Economists are often the high priests who bless public policies, yet current, conventional, neoclassical economics amends classical economics to omit land as one of the elements of productive enterprise. Neoclassicals also ignore the mechanics of money and credit, saying the entire economy is, in effect, a barter economy and money simply enables barter. History says otherwise, but mere facts do not impede such myth making.
Following neoclassical conventions, economists fold the economic input of land into capital, so their modeling reduces classical economics' inputs (land, labor, capital) to labor and capital only. Ignoring land and money meant the gigantic crisis at the confluence of money and land in the subprime / derivatives meltdown in 2007 blindsided conventional economists. Only unconventional economists predicted it (e.g. Steve Keen).
Yet land and credit are critical to understanding our current situation. Rethinking the Economics of Land and Housing (by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane) explains recent housing price inflation and income inequality, primarily in the UK, by re-integrating land and money/credit into their economic models. The authors conclude that ”it’s clear ... a major driving force in UK house price increases in the last thirty years has been a relatively elastic supply of credit meeting a fixed supply of land along with increased speculative demand for home ownership. Without the existence of a credit- and money-creating banking system, it is impossible to envisage how such huge increases in prices would have been possible given the slower pace of income growth.” (p. 117) They say: “the increase in the wealth-to-income ratio observed in recent decades which has underpinned the rise in inequality has been driven not by productive activity, but rather by increasing residential land values.” (p. 162)
So income inequality, unaffordable housing, even homelessness, are not bugs, they are features! This outcome is baked into the design of the current system. Without examining, and ultimately revising that system, we are only rearranging the deck chairs on the Titanic.
California's property tax system is part of that unhelpful system. Since Proposition 13 reduced revenues, local governments have had to increase building fees to cover their infrastructure costs. If they do not collect such costs up front, their services and infrastructure languish as inadequate maintenance revenue starves them. Another factor seldom mentioned in these conversations: infrastructure for compact infill is roughly half as expensive to maintain as sprawling outlying development.
Speculation inflates land prices in California, too. The speculators can purchase outlying agricultural land for a few thousand dollars an acre, then after persuading local government to bless their development plans, speculators can sell the land to builders for 50 to 100 times more than they paid for it. This also gives the speculators a perverse incentive to develop the worst possible land.
One example: North Natomas is deep floodplain surrounded by weak levees. It is so unsuited to development that a grant to increase regional sewer capacity included a $6 million penalty if that capacity served North Natomas. The speculators were unfazed; they went to then-Vice President G.H.W. Bush and got that penalty payable in installments, and got a $43 million grant to bring those weak levees up to pre-Katrina standards.
There are alternatives. In Germany, developers must sell the land to local government at the ag land price, then re-purchase it at the upzoned price before they can develop such land. All of that 5,000% - 10,000% gross profit--the "unearned increment"--benefits the public rather than lining some plutocrat's pocket.
Germany's public realm is very nice, too. Their infrastructure is first class, college tuition is free even for foreigners, and the arts budget for the City of Berlin exceeds the National Endowment for the Arts for the U.S. of A. Meanwhile, our system reduces Americans to begging for crumbs from the plutocrats' table.
Even residential house price inflation is deceptive. People think they are growing rich as home prices rise--as long as they ignore how their offspring cannot afford homes. But the truth is that banks profit the most from property price inflation since their loans are often 90% or more of the purchase price.
Taxing bank profits, or land itself would eliminate this incentive for house / land price inflation. In California, Proposition 13 does just the opposite. The evidence is that increasing taxes on the monopoly rent implied by land ownership actually decreases prices by discouraging speculation (see realestate4ransom.com for more about that).
One bit of good news is that a revision of Proposition 13 to eliminate its loophole for commercial properties will soon be on the ballot (see makeitfairca.com). The current Prop 13 loophole lets commercial propery transactions avoid reassessing to current values. Thanks to this loophole, a Silicon Valley billionaire can buy a Santa Monica hotel, splitting ownership with his wife and son, without changing the tax assessment. The hotel remains taxed at its 1978 price, in effect. This costs the state roughly $11 billion a year. It also discourages new businesses who want to build their own facilities--they cannot get that tax discount grandfathered into new construction.
So California has CEQA exemptions for plutocrats building stadiums, and loopholes for commercial property, but can't even discuss the real means to make housing affordable. Finland has significantly reduced homelessness--they give people homes--but we're too busy favoring billionaires to do that.
And it's not because California can't afford such solutions. The evidence says "housing first" (the Finnish solution) is actually cheaper than hassling people with police and treating them with emergency rooms, which is what we do now. The problem exists because current practice is designed to shovel money to the billionaires, while impoverishing the public realm. The fact that most of the "solutions" ignore the basis of the problem is a symptom of the systemic failure of civic design and discourse...even when Democrats run the state.
More from Rethinking the Economics of Land and Housing
p. 73: “In the heyday of laissez-faire liberalism itself, it became apparent that only collective intervention into the land market could provide the infrastructure that society and the economy required.":
p.186 “...increasing household debt-to-GDP ratios may repress consumption demand and lead to less demand from firm for borrowing for capital investment…. Empirical research has found that this phenomenon played a key role in causing the Great Depression and the 2008 financial crisis….”
P. 196 “In South Korea, around half of all residential land development and almost all industrial land development is carried out by the Korean Land Corporation (KLC)”
Note: A version of this appeared in the Davis Vanguard.
Ironically, even my environmentalist acquaintances have told me they want fewer environmental regulations to inhibit affordable home developments, and more California Environmental Quality Act (CEQA) exemptions for such housing. Unfortunately, like "streamlining" the tax code, such "simplifications" and exemptions open the door for gaming the system, and seldom provide relief on the scale needed.
Economists are often the high priests who bless public policies, yet current, conventional, neoclassical economics amends classical economics to omit land as one of the elements of productive enterprise. Neoclassicals also ignore the mechanics of money and credit, saying the entire economy is, in effect, a barter economy and money simply enables barter. History says otherwise, but mere facts do not impede such myth making.
Following neoclassical conventions, economists fold the economic input of land into capital, so their modeling reduces classical economics' inputs (land, labor, capital) to labor and capital only. Ignoring land and money meant the gigantic crisis at the confluence of money and land in the subprime / derivatives meltdown in 2007 blindsided conventional economists. Only unconventional economists predicted it (e.g. Steve Keen).
Yet land and credit are critical to understanding our current situation. Rethinking the Economics of Land and Housing (by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane) explains recent housing price inflation and income inequality, primarily in the UK, by re-integrating land and money/credit into their economic models. The authors conclude that ”it’s clear ... a major driving force in UK house price increases in the last thirty years has been a relatively elastic supply of credit meeting a fixed supply of land along with increased speculative demand for home ownership. Without the existence of a credit- and money-creating banking system, it is impossible to envisage how such huge increases in prices would have been possible given the slower pace of income growth.” (p. 117) They say: “the increase in the wealth-to-income ratio observed in recent decades which has underpinned the rise in inequality has been driven not by productive activity, but rather by increasing residential land values.” (p. 162)
So income inequality, unaffordable housing, even homelessness, are not bugs, they are features! This outcome is baked into the design of the current system. Without examining, and ultimately revising that system, we are only rearranging the deck chairs on the Titanic.
California's property tax system is part of that unhelpful system. Since Proposition 13 reduced revenues, local governments have had to increase building fees to cover their infrastructure costs. If they do not collect such costs up front, their services and infrastructure languish as inadequate maintenance revenue starves them. Another factor seldom mentioned in these conversations: infrastructure for compact infill is roughly half as expensive to maintain as sprawling outlying development.
Speculation inflates land prices in California, too. The speculators can purchase outlying agricultural land for a few thousand dollars an acre, then after persuading local government to bless their development plans, speculators can sell the land to builders for 50 to 100 times more than they paid for it. This also gives the speculators a perverse incentive to develop the worst possible land.
One example: North Natomas is deep floodplain surrounded by weak levees. It is so unsuited to development that a grant to increase regional sewer capacity included a $6 million penalty if that capacity served North Natomas. The speculators were unfazed; they went to then-Vice President G.H.W. Bush and got that penalty payable in installments, and got a $43 million grant to bring those weak levees up to pre-Katrina standards.
There are alternatives. In Germany, developers must sell the land to local government at the ag land price, then re-purchase it at the upzoned price before they can develop such land. All of that 5,000% - 10,000% gross profit--the "unearned increment"--benefits the public rather than lining some plutocrat's pocket.
Germany's public realm is very nice, too. Their infrastructure is first class, college tuition is free even for foreigners, and the arts budget for the City of Berlin exceeds the National Endowment for the Arts for the U.S. of A. Meanwhile, our system reduces Americans to begging for crumbs from the plutocrats' table.
Even residential house price inflation is deceptive. People think they are growing rich as home prices rise--as long as they ignore how their offspring cannot afford homes. But the truth is that banks profit the most from property price inflation since their loans are often 90% or more of the purchase price.
Taxing bank profits, or land itself would eliminate this incentive for house / land price inflation. In California, Proposition 13 does just the opposite. The evidence is that increasing taxes on the monopoly rent implied by land ownership actually decreases prices by discouraging speculation (see realestate4ransom.com for more about that).
One bit of good news is that a revision of Proposition 13 to eliminate its loophole for commercial properties will soon be on the ballot (see makeitfairca.com). The current Prop 13 loophole lets commercial propery transactions avoid reassessing to current values. Thanks to this loophole, a Silicon Valley billionaire can buy a Santa Monica hotel, splitting ownership with his wife and son, without changing the tax assessment. The hotel remains taxed at its 1978 price, in effect. This costs the state roughly $11 billion a year. It also discourages new businesses who want to build their own facilities--they cannot get that tax discount grandfathered into new construction.
So California has CEQA exemptions for plutocrats building stadiums, and loopholes for commercial property, but can't even discuss the real means to make housing affordable. Finland has significantly reduced homelessness--they give people homes--but we're too busy favoring billionaires to do that.
And it's not because California can't afford such solutions. The evidence says "housing first" (the Finnish solution) is actually cheaper than hassling people with police and treating them with emergency rooms, which is what we do now. The problem exists because current practice is designed to shovel money to the billionaires, while impoverishing the public realm. The fact that most of the "solutions" ignore the basis of the problem is a symptom of the systemic failure of civic design and discourse...even when Democrats run the state.
More from Rethinking the Economics of Land and Housing
p. 73: “In the heyday of laissez-faire liberalism itself, it became apparent that only collective intervention into the land market could provide the infrastructure that society and the economy required.":
p.186 “...increasing household debt-to-GDP ratios may repress consumption demand and lead to less demand from firm for borrowing for capital investment…. Empirical research has found that this phenomenon played a key role in causing the Great Depression and the 2008 financial crisis….”
P. 196 “In South Korea, around half of all residential land development and almost all industrial land development is carried out by the Korean Land Corporation (KLC)”
Note: A version of this appeared in the Davis Vanguard.
Tuesday, June 11, 2019
Yoga: An Alternative to Detention
This school sends students to yoga class instead of detention, and the results are incredible pic.twitter.com/OLH2z747jK— NowThis (@nowthisnews) June 10, 2019
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