Rice Farmer

I’m sure that few if any readers have ever heard of the cold chain. Despite that, all of us living in developed countries, and even some people in developing countries, enjoy the benefits of the cold chain. Simply put, it is the system of storage and transportation that keeps temperature-sensitive things within a desired temperature range at all times from production to use.

For example, let’s say you buy some frozen fish. After the fish were caught and processed, they were frozen, and to keep them from thawing and spoiling, they have to be kept at the right temperature until you are ready to prepare and eat them. That entails storage in facilities and transport in conveyances that are always kept well below the freezing point. After delivery to a retailer, they are put in cold storage and then placed in frozen food cases. After purchase, you take them home (here in Japan many supermarkets provide customers with small bags of ice or dry ice to keep refrigerated items cold during transit), and then put them in the freezer until you decide to eat them.

Basically, the same system is used for all fresh and frozen perishables, and for other things that must be kept within a narrow temperature range, such as some pharmaceuticals.

You’ve no doubt already thought of where this is leading: the cold chain consumes a lot of energy. Just imagine how many large commercial coolers and freezers, refrigerated trucks, and the like are involved in this vast system. And efforts are underway to build and expand cold chains in developing countries as well. You can get a hint of what’s going on in “Rising interest in supply and cold chain financing in emerging markets: IFC.” While I don’t have the expertise to calculate how much energy would be required to operate cold chain systems in these emerging markets, it’s safe to say that it would be a lot. Remember, many of the people who would supposedly be served by these new and expanded cold chains don’t even have refrigerators yet, so when you start adding up all the new power consumption this would entail, it would obviously be very large. India and other “emerging markets” are already starved for electric power, and they are hard put to build new power production capacity. In that light, these ambitious plans for cold chain expansion will very likely run up against severe energy limitations, even if the capital is secured.

And then there is the matter of what happens to food distribution and storage when cold chains in developed countries break down, but I don’t even want to think about that now.

News reports say that Japan’s Ministry of Land, Infrastructure and Transport has appropriated ¥700 million for construction of port facilities, including the atoll that Japan calls Okinotorishima (Okinotori Island). Building port facilities would, in the calculus of Tokyo, make Okinotorishima into a habitable island, thereby considerably extending Japan’s exclusive economic zone in the Pacific/East China Sea region, and giving it exclusive access to any oil and gas discovered there. As readers can see by the linked articles, this idea has gone up like a lead balloon in China. The “island” is actually just a few rocks that are preserved with concrete works. Should Japan press ahead with this project, it could seriously increase friction that has long kept a dispute smoldering between the two countries over islands and marine gas fields.

A previous post, Tanker Glut, discussed the overcapacity in shipping capacity as a manifestation of global economic collapse. A very timely Financial Times article, Yards face closure as orders collapse, describes how shipbuilding yards around the world are going belly-up for lack of orders. It’s just another indicator of how the global trade system and globalization are swiftly declining.

What a topic! It must be a slow day for Rice Farmer, you say (well, the paddies are frozen solid at this time of year). Anyway, President Obama has declared that the Yemen branch of al-Qaeda is behind the attempted underwear bombing by Umar Farouk Abdulmutallab. How does he know that? Intelligence aside, I’m positive that the US government checked their official al-Qaeda membership cards. In order to appease Dick Cheney and show that the administration is not “soft on terror,” Obama made sure to say, “Our nation is at war against a far-reaching network of violence and hatred. We will do whatever it takes to defeat them and defend our country.” So, the US is, lest there be any doubt, still officially “at war.” Start planning your spring victory garden.

US military assistance to Yemen will be substantially increased, the British have called for a top-level meeting on the crisis in Yemen, the US and UK are going to fund an anti-terror police force in Yemen, and the US and Yemen are planning air strikes.

Naturally, this is a great opportunity to gain another military foothold in the Middle East.

Just one thing: Some people think that the US is after Yemen’s oil, but that’s a serious misreading of the situation. Truth be told, Yemen produces very little oil, and what’s more is in steep decline. That fast-dwindling oil revenue is in fact the major reason that Yemen is disintegrating. There just isn’t enough energy to hold the country together any more.

Here is a piece on energy which makes some valuable points about why dreams about expanding renewable energy capacity have grown a bit too big. In short, a dearth of manufacturing capacity and money will prevent us from achieving grandiose goals for large-scale manufacturing and construction of new generating capacity. Of couse, we could build a lot of new manufacturing facilities and hire more workers, but that would take a lot of money — which we don’t have. That kind of financing would require us to take on much more debt, but as the writer of this piece observes, “with several of the world’s leading economies already leveraged to the hilt (i.e. America, the UK, and Japan), such a level of spending seems deeply implausible.” To say the least. (And all that money has been borrowed in a desperate gamble to keep the Ponzi-scheme economy afloat, but that’s another story.) To put it another way, a person who is broke and up to his eyeballs in debt won’t be covering his whole roof with solar panels.

Apart from the problems of manufacturing capacity and financing, there is the matter of finding the energy to invest, which is discussed in detail here. All these plans for vast renewable energy capacity would have had to be developed and implemented decades ago, when there was more money and fossil fuel energy was still cheap. It’s too late now.

The environmental consequences of coal use aside, India has a serious shortage of coal to run its thermal power plants. It will have to mine and import a lot more to satisfy its growing appetite for energy, but it turns out that domestic extractable reserves are far more limited than previously thought. This is going to seriously crimp India’s economic growth, but India isn’t the only one with this problem. In recent years several reports have concluded that economically extractable reserves of coal worldwide are much smaller than thought. And if an attempt is made to compensate for expensive oil by producing liquid fuels from coal, that would considerably exacerbate the problem by further accelerating coal use. It’s just a matter of time until India’s coal problem becomes everyone’s problem.

Mention of piracy brings to mind, first of all, Somalia, but also Nigerian coastal waters (another hot spot), and of course the Strait of Malacca, where piracy is now largely suppressed by the expenditure of much energy on joint patrols. But we hear little about small-scale piracy. “Fisherman face rash of attacks” provides a window on this little-known phenomenon. This article describes how Iranian pirates prey on UAE fishermen (presumably this is not condoned by the Iranian government). Although I haven’t done any research in this area, this suggests that such piracy may be widespread in unstable parts of the world. At the very least, instability provides the opportunity for such activities, while poverty would provide a strong motive. Watch for more of this — not to mention more “highway robbery” on land — as energy decline leads to weaker social order and law enforcement.

There is a big oil tanker glut. Let’s consider what this means. One interpretation leads to the conclusion that there is also an oil glut, and therefore, peak oil is a crock of baloney. In fact, it’s estimated that about 100 million barrels of crude and distillates are stored at sea in tankers, waiting for higher prices. But is 100 million barrels a “glut”? Considering that the world consumes well over 80 million bpd, the oil and distillates stored in tankers come to a little over one day’s supply. Some may call that a glut; I call it a mighty thin cushion. If the world’s oil supply were disrupted even for a short time, those 100 million barrels would disappear in no time. And as I write this, the price of crude is again closing in on $80/bbl as we head into the coldest part of the year in the northern hemisphere. If there truly is an oil glut, why isn’t crude half that price or less?

So if this does not signal an oil glut, what’s really going on? The answer is that there’s a glut of shipping capacity for everything. Since the world economy experienced its first wave of collapse in 2008, far less of everything is being shipped, as reflected by the Baltic Dry Index. In fact, about the only thing that has been propping up the BDI these days is Chinese stockpiling.

Therefore, the many tankers and dry-bulk ships sitting idle at sea are a manifestation of world economic collapse, not of a glut of anything. Prior to the first wave of collapse in 2008, dry-bulk shippers were enjoying high rates, which is why there are so many new ships on order. When the next wave of collapse washes over the world, we’ll see a lot more idled capacity.

The fiscal situation of US states is going from bad to worse. California is $68 billion in the hole and begging for help from the federal government. Help from the federal government of course means that taxpayers in other states will foot the bill. There goes the nation’s love for California. Arizona is staring into the abyss. New York State parks are shutting down. New Jersey is slashing its budget. Hawaii’s tourism decline is battering the beleaguered state (see the recent post on Hawaii, below). So many people have defected from Michigan that the state’s population is now below 10 million. And nationally, state and local governments have $530 billion in unfunded pension liabilities. This last item is the tip of the iceberg, as pension systems around the world are in big trouble.

This is what happens to a system predicated on economic growth when growth slows and begins its decline. In that connection, take a look at this chart and then assure me that we will return to the good old days.

This isn’t the first time I’ve written about the absolutely hopeless debt situation that the US faces. Perhaps you think I am exaggerating. World’s largest economy! High bond rating! Frontier spirit! Yes indeed, these and other sterling qualities of the US and its people will pull the fat out of the fire. Just in time, as in a Hollywood movie.

But even sterling qualities cannot prevail over insurmountable odds. On that note, I turn your attention to a quite shocking article over at Forbes, “Trillions Of Troubles Ahead: A crushing burden of debt threatens to sap America’s growth for years to come.” Sap America’s growth? You have got to be kidding. Just check out some of these desperate, impossible figures. According to the article, adding up public, household, and corporate debt comes to a whopping 557% of GDP. And then it goes on to say, “Add the unfunded portion of entitlement programs and we’re at 840% of GDP.” Allow to remind you to breathe here.

Even the writer of the article recognizes that America’s situation is worse than Japan’s, when you start adding up all the numbers. So when finance/business gurus or politicians tell us that somehow, everything will turn out all right, we can safely conclude that (1) they are self-deluded, or (2) they are lying through their teeth.

For more fun facts, read the whole article. And get ready for the defaults.

Things are hard everywhere. But in some places, they’re harder. Unless there is a dramatic turnaround, things could get really ugly in Hawaii. “Hawaii dimmed by severe cuts” gives us a snapshot of how the island paradise is falling apart. Food sanitation, homelessness, education cutbacks, and what have you — Hawaii is the poster child of down-at-heel states. Hawaii’s situation is particularly serious because of its isolation. If food and energy imports were curtailed, deterioration would proceed more quickly than a in state with more ready resources at hand. So here’s another canary in the coal mine. When it falls off its perch is anyone’s guess, but although it might be the first, it certainly won’t be the last.

An AP news story tells how insufficient infrastructure funding is pushing local governments to return some stretches of paved road to gravel road. First street lamps, then paved roads. What next?

Pavement, of course, is a hallmark of civilization. In previous ages, people used stones and bricks. Now we have asphalt and concrete. People have considered it a sign of progress to a higher state of existence when a gravel road is paved. So it is in these new times — the latter days of the Empire — that pavement returning to gravel signifies a transition to a new state. Whether one considers it a “higher state” or not will be hotly debated. Nevertheless, it is happening, just like reducing bus and subway services, and downsizing cities.

Keep watching for these and other signs of the times.

Governments are digging themselves deeper and deeper into debt, beating a dead horse in a bid to ramp up the economy and bring back the good times. Now even Germany has decided to embark on record borrowing to stave off the worst. National and local governments are slashing expenditures and introducing austerity budgets.

The second linked article notes, “By the end of 2009, global sovereign debt will hit almost $50 trillion.”

$50 trillion! And who will pay that back? Any realistic person knows the answer to that: nobody. Of course some of it will be paid back, but there’s a disaster in the making. So what if the EU bails out Greece? That wouldn’t make the debt go away. So far the US has been bailed out by China and Japan, but there are limits. Japan itself is in very dire straits (world’s second-highest debt-to-GDP ratio), and it’s anybody’s guess when the Chinese bubble pops. Same thing within the US: Even if the federal government bails out states, it doesn’t solve any problems in the long run. The Day of Reckoning will surely arrive.

Since the only two ways to deal with debt are paying it off or defaulting, and because paying off $50 trillion is clearly impossible, some big fish will be going belly-up.