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August 4, 2010

Solar Storms - potentially more than a pretty face

The last few days has seen the arrival on earth of a coronal mass ejection.The result has been a G2 geomagnetic storm that created northern lights in Europe, Asia and N.A. The sun after a period of very low activity is entering a more active phase.

Severe space weather could have exceptional social and economic impact on developed societies by bringing down power grids and interfering with computer communications. This National Aeronatics and Space Administration (NASA) article speaks to the issue and its potential severity.

Cascadia is one of the areas singled out for as a probable area of power system collapse should a "superstorm" occur, as they have in the past. The solar maximum is forecast to peak in 2013.

Emergency preparedness starts at home. (Water, Food etc.) The Cascadia region has any number of reasons for preparedness not least of which is the everpresent earthquake risk.

The website "Spaceweather" has been added to the Science and Technology News section of CascadiaPrime.It can also be found in the Safety and Security section (Solar Flares & Asteroids). which has links to emergency agencies like FEMA and PEP. iPhone users may want to download 3D Sun which provides solar weather alerts.

Here is the NOAA Space Weather Scale for Geomagnetic Storms and the potential implications of each class of storm.

May 17, 2010

Emerging Markets take a powder

According to Bloomberg emerging markets have dropped the most in three months on worries of a China slowdown. Readers will note my May 10 comment on likely future events.

Debt has to be paid back - whether you are a government, a business or a private citizen

Public spending from debt is like a candy bar - it feels good for a while, then there is an energy let down. We are now entering a period of extended let-down. Governments around the world committed about $12 trillion to revive the global economy. Most of this necessary infusion was debt financed. This debt now has to be paid off. Either services must fall or taxes must be increased or some combination thereof. The result is likely to be an extended period of economic growth at or around the long term economic potentials of the various countries in question. For most "mature" economies this is going to be rather slow growth.

Well managed economies will have a real opportunity to pull ahead of competitors during the next period.

Globalization likely to accelerate in new ways

Global rationalization of industry via the logistics and communications revolution is going to take a new twist in the decade ahead. Up until recently the trend lines have largely been an extension of those that started with ocean going transport, "highway" transport and only laterly the "just in time" computer/logistics (data based) boost.

For the most part the rationalization involved movement of both light and heavy goods great distances. This resulted in low cost and high skill areas displacing high cost and low skill areas. Simultaneously Detroit and surrounding regions were beat up economicially from Europe (think BMWs) and Asia (think Toyota)(think tool manufacturers from China).

In this model cheap/smart labour displaces expensive/dumb labour at a distance via transportation and a small data communications component.

Protected are those jobs that cannot be displaced via "foreign labour"because of "space constraints".

We do see the movement of people to places to facilitate personal services. In North America the obvious "incoming example" is the philipino nanny. The "outgoing example" is North Americans flocking to Mexico for "dental" vacations. In most cases though, "space bound" services like construction (plumbing, electrical work, gardenering services) and most "professional service are not subject to "trade" in large measure because of their "mobile component" and because almost all of these "jobs" have a high visual component.

The space constraints on "trade" in many of jobs are going to disappear over the next several decades - as it has for "customer service industry" (think Indian call centers).

Mobile communications and semi-robotics are going to permit many jobs to be "economically" shifted to other regions. Equipment operators in expensive, inhospitable environments (think Tar Sands) will operate remotely. (think call centers or the Predator). Semi-robotics are robots that have a human "supervisor" that will oversee them remotely - 7-24.

The demand for bandwidth both fixed and mobile is going to steadily climb.

This era of semi-robotics will come at a critical time for the OECD countries for labour shortages are going to become a serious issue in the decades ahead. At the same time semi-robotics is going to result in more labour dislocation at the "low end" at a time when "social equality" issues are likely to continue to be exacerbated by the increased "intellectual" content of jobs. But even high end jobs will be susceptible. The rate of change cannot be predicted or sectoral focus but the direction is clear. Robotic sensor capacity is increasing rapidly and mobile bandwidth is rising quickly. Here is a precursor.

North America, and Cascadia in particular, are likely to be at the forefront of these changes. We had best begin to give serious attention now to how we will make use of these capabilities and indeed how to make them a commercial success.

May 15, 2010

Trichet spells it out

The head of the European Central Bank Jean-Claude Trichet has laid it on the line for Europeans. Their government spending is the cause of the fall of the Euro. This Reuters story sums up the situation nicely.

May 10, 2010

Cascadia and Buddism

Vancouver Sun columnist Douglas Todd is a regular contributor to Cascadia cultural insights. His review of the book "Wild Geese: Buddism in Canada" comments on recent cultural changes. He commentary punctures some cherished perspectives that do not accord with on the ground realities. His"truth saying" is therefore welcome. It is worth a read.

EU Bailout

The European $1 trillion U.S. bailout is designed to forestall a stage two global financial crisis. One wonders though whether the principals - European voters - understand that debt was what got them into the current situation and that surpluses, not debt, is what will bring them out of the crisis zone. I doubt they understand, so steeped are so many of them in socialist and marxist dogma of the "free lunch". Even the EU leaders that cobbled together this package use the term "speculators" when refering to the unraveling of "confidence" in the ability of debt ladden mostly southern European countries to pay off their creditors.

The current "crisis of confidence" is not over. This financial retrenchment reminds one of Winston Churchill's quote after the Battle of El Alamein: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

As reported in the Financial Post "Pierre Lapointe, global macro strategist at Montreal-based Brockhouse Cooper, said the rescue package represents nearly 30% of the government debt held by the PIIGS bloc, and the EU has signalled it is willing to backstop that amount.

Still, "over the mid-term, the eurozone is still not out of the woods. EU governments will have to implement austerity programs that will help their finances but hurt their [corporate] profits," Mr. Lapointe said in a note to clients, in which he advised them to go "underweight" on European stocks and focus more on Asia-Pacific equities."

Europe will not be "out of the woods" until it develops fiscal discipline and starts running surpluses.

Lapointe's advice is fine as far as it goes but Japan and China have there own risks and this is where the third wave of the confidence crisis may well emerge.

Robots Everywhere

Robotics, this "studiously ignored" driver of economic, political and cultural change, surfaced in three areas in the last short while.

The financial "systemic" risks associated of robot market trading have continued to garner attention but no framework for its management.

The "cap" for the oil spill in the gulf was piloted to enormous depths by a robot. Our energy system is working at the limits of complexity and beyond human limits in terms of the physical environment.

The legal system is increasingly having to deal with the challenge of robots in the workplace. A Globe and Mail Opinion piece notes that "The American Bar Association runs a permanent expert committee on artificial intelligence and robotics." Here is the American Bar Association, Artifical Intelligence and Robotics Committee link.

What do these three items mean?

It means that the economic, political and cultural norm will be complexity beyond the grasp of most humans. This has perhaps always been the case since education and intellect where not universally endowed but we now have interactions across speciality boundaries for which "there are no specialist specialists" to advise on risk management.

Here is a video from Stanford Law on the Legal Challenges in the Age of Robotics (See page bottom)

May 7, 2010

BC HST support from unexpected source

Stephen Hume the Vancouver Sun columnist and Elizabeth Gugl have written a column, "Three reasons HST is a great idea for B.C", clearly laying out the benefits of the HST over the PST. What makes this article surprising is the Hume is not a supporter of the B.C. Liberal government. In fact, he is a long time foe. What perhaps explains his position on the HST is that he is on the faculty of the economics department at the University of Victoria. He has exposure to ideas incompatible with either the populist "no nothing" category or the left of center mindset "we have no responsibility" for the health of commerce.

May 6, 2010

International Financial Systemic Risk

According to the International Monetary Fund's Global Financial Stability Report (GFSR), April 2010 Advanced country sovereign risks could undermine stability gains and take the credit crisis into a new phase. The report discusses a variety of new challenges to stability.

Preparedness and network complexity

Recent mathematical studies associated with networks are consistent with the cautionary policies advocated here with respect to the global financial system aka the need to pay down public debt because of instabilities in the international financial system.(A network of networks)

As reported in Wired Science, Networked networks are prone to epic failure. Here is the original Nature paper

It may be that this feature is related to The Constructal Law of Design and Evolution in Nature. The constructal law, which was formulated in 1996: “For a finite-size flow system to persist in time (to survive) its configuration must evolve (morph) in time in such a way that it provides easier flow access to its currents." This paper provides an overview of the Constructal Law.

With time it may be that this law will be applied to the forms and scale of governance for it is clear that most governmental forms are constricted from following constructal forms and are therefore inefficient and subject to wider instabilities as global economic integration accelerates.

U.S. Healthcare Report

"The Commission on U.S. Federal Leadership in Health and Medicine: Charting Future Directions is releasing its second report, A 21st Century Roadmap for Advancing America's Health: The Path from Peril to Progress, emphasizing a comprehensive spectrum of actions to build a 21st century system that will make America the healthiest nation in the world."

The report notes:

"The United States spends over 17 percent of GDP on health care—nearly twice as much as any other nation—but ranks only 49th on life expectancy, and Americans get the right treatment only 55 percent of the time."

Note: The report is U.S. centric. Health care problems are common across OECD countries.

May 3, 2010

Global Cultural Fusion

A new Yankee Group report suggests that in the U.S. "1 in 8 Consumers Will Ax Their Coax This Year". This trend is likely to gather momentum in North America and globally. No doubt it will give rise to more attempts by Ottawa and its "cultural industry" to distort natural cultural forces at ever greater expense until its efforts become patently ludicrous to all.

May 3, 2010

Canada's financial reputation offers advantages

According to the the Financial Post

"A sharp rise in purchases of Canadian bonds by foreign investors, coupled with increased interest from global central banks and sovereign wealth funds, could serve to cushion positions in Canadian government debt even in a rising interest rate environment."

The question thus becomes: "How best to use this windfall?"

Paying down the existing federal and provincial debt is one of the most obvious ways of building longer term strength for it is simply a question of time before there is another global economic downturn. Yet another way to use this windfall constructively is to look at means for improving Canadian productivity. One obvious way would be to develop a program to reduce the featherbedding in the country's transportation infrastructure - particularly in ports. Automation could produce significant income gains in the country but it requires supportive Federal government policy.

May 1, 2010

B.C., Saskachewan, Alberta Launch New West Partnership

Cascadia's four western provinces are at it again reducing barriers to trade, growing their economies of scale and leaveraging joint purchasing power for economies.The Partnership was signed by Premier Campbell, Premier Ed Stelmach and Premier Brad Wall. The three premiers also crafted a joint opinion piece in the G&M.

B.C. HST a good idea

Jock Finalyson, senior vice-president of policy at the B.C. Business Council, has waded in on the HST. His Vancouver Sun opinion piece touches on some of the essentials.

B.C."to Do" List for a Post Olympic Renaissance

One of Vancouver Sun columnist Miro Cernetig more insightful columns comments on some of the strengths and weaknesses that B.C. needs to work with over the next while. One of the major questions is how the idea of productivity can be sold into a "idea market" where big labour has for years sold it as something to be resisted. There is as much "featherbedding" going as ever in traditional west coast industries - ports are a classic.

April 22, 2010

Japan - the beginning

The "Great Recession" that the world is now climbing out of is but one of a number of potential economic and political fault lines

Sovereign debt aka public debt run up over years of financial mismanagement and political inertia in Japan has now to be addressed.

Bloomberg reports that finally the debt rating agencies are pressing the Japanese government to get its house in order.

April 22, 2010

The Canadian economy - steady as she goes

The head of the Bank of Canada Mark Carney, today, in his Opening Statement following the release of the Monetary Policy Report, delivered a carefully nuanced overview of the current domestic factors and the international factors that might influence the Canadian economy on both the upside and the downside over the next several years.

It was basically a "good news" story.

The Globe and Mail summarized and reported on Carney's statement and interview putting emphasis on Carney's suggestion that he expected the rising Canadian dollar to slow Canadian growth over the next couple of years. The surprise would be if he did not lay emphasis on an equilibrum based forecast.

The future has a statistical probablity of a range of low probability - low, medium and high impact events that could tip over both the domestic and the international financial forecasts.

There are several storms brewing that could impact Canadian economic fortunes. The first is that the economies in Asia (not including Japan) are at risk of overheating which could act to create a bubble in commodity prices. This in turn could place "undue" upward pressure on the Canadian dollar. This may also coincide with a major realignment of the economic and political forces in Europe as unsupportable debt levels in both southern Europe and Northern Europe have to be managed in political environment characterized by "stasis".

So while the Governor of the Bank of Canada acknowledged an equilibrum based forecast he made no effort to quantify the external forces that could play on the value of the Canadian dollar. Those forces could be considerable and there is little that can be done to alter them.

This should be a reminder to all governments to take the political heat now and begin to get debt under control before the next seismic financial shock hits as it inevitably will.

B.C. HST a lot better than the alternative

Carole James and Bill Vander Zalm, the "odd couple", fighting the introduction of the Harmonized Sales Tax in B.C. should provide endless amusement for political watchers. And may I predict the coming of the day when James will rue the day she and her organization became water carriers for "The Zalm".:-)

What has so far gone largely unnoticed is how poorly we are served by the current Provincial Sales Tax. This article from the Vancouver Sun goes part of the way to shedding light on tax alternatives.

To this we must add the fact that the campaign cannot succeed as this article from the Globe and Mail points out.

Canada Health Care just waiting for Godot.

There seems very little political appetite for dealing with the looming calamity occasioned by a rapidly aging population and burgeoning medical capabilities.... at a price. The problem is common to all the OECD countries. Meantime everyone accumulates deficits and squeezes education and transportation investments.

April 11, 2010

Is Canada Health Care Act Dead? Or just "Waiting for Godot"?

Quebec, and like it could only be Quebec that could make such a move, is backing away from what has hitherto been seen to be a core Canada Health Act principle. This Globe and Mail article covers the opening of this discussion.

U.S Income Tax System one GIANT moral hazard

"It is a system in which the top 10 percent of earners - households making an average of $366,400 in 2006 - paid about 73 percent of the income taxes collected by the federal government."

"About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability."

At the same time the U.S. is running crushing deficits and the national debt is ballooning. It needs to be running a surplus as soon as economic growth picks up.

Too many are getting something for nothing....and putting their country and the world at risk.

The interesting question is how and why did the U.S. get it get itself in the current mess. The roots can be found in deep philosophical differences in what constitutes an "ideal society". Some felt that if you could cut taxes government would shrink and an ideal society would be achieved. What has occurred is that the other side of the equation - spending hasn't fallen - it has grown through two administrations. Financial and social disaster looms unless - balance is restored by tax reform (more across the board taxes) and reduced spending.

What is going to add to the pinch is that interest rates are going to rise. According to the New York Times: "The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012."

What is interesting in general media coverage in the U.S. is that there is almost no discussion of the need to close the gap between government spending and revenue, to stop running deficits and start a surplus.

Here is an example

Taxation Data Source(s)

Softwood Tax drop offsets rise in Canadian Dollar

Canadian producers of softwood are finally going to get a break. This is going to give a much needed breather to the British Columbia economy. "The lumber tax is going to drop by a third effective May 1, from 15 per cent to 10 per cent as a result of a surge in lumber prices."

According to an article in the Vancouver Sun, "Year-over-year statistics for January show lumber exports to the U.S. up only marginally at six per cent. For Japan they are up 11 per cent. Exports to China are up 400 per cent."

The price jump may be more related to supply shortfall than to demand so it remains to be seen whether this price increase and tax drop is sustained. It is one more example however of the degree to which the health of China's economy impacts Cascadia.

April 09, 2010

Canadian Dollar hovers near parity with the U.S. Dollar

"The Canadian dollar is rising on fundamentals: promising economic prospects, a relatively solid fiscal foundation, a favourable regulatory and tax regime and a highly educated labour force, against currencies that are weighed down by too much debt, high unemployment, political unrest and uncompetitive industries." This quote from an article in the Vancouver Sun sums up the current sanguine mood.

Another way to view the situation is that the Canadian economy is the best of a bad lot. It is currently packing on debt at a prodigious rate. Even B.C., known for the fiscal probity of its government, is running a $1.5 billion deficit this year, handing $18,000 per head in debt off to the next generation to pay off.

Nevertheless, a slow and steady rise of the Canadian dollar is good news for it will drive up productivity. Exporters will have to invest in process changes and technology upgrades. This will lift incomes.

I suspect that there is a "natural equilibrum" in the Canadian and U.S. dollar at about parity assuming reasonable financial management in both countries. This is a natural outflow of economic integration. When it is out of equilibrum it is generally a sign of poor financial management in one or the other country. For a long time the Canadian dollar fell against the U.S. dollar due to overspending by Canadian governments. Canada then began running surpluses, paying down debt and then reduced taxes. The U.S. by contrast ran up debt and reduced taxes. The results have been predictable.

I remain of the view that the Bank of Canada will have to raise interests before the U.S. This will add further upward pressure on the dollar. This will have the effect of initially slowing the Canadian economy which will put downward pressure on the dollar if it rises too far above the U.S. dollar. A new equilibrium price will be set. Much depends on the U.S. overcoming its overspending and undertaxing. (Yes, you can undertax, if you are spending more than you are taking in and making up the difference through debt.)

Democracy in Canada Suspect?

The stresses in Canada continue to build. Andrew Coyne in this Macleans magazine article lays out some of the gross electoral inequities that currently exist. For Example, "The six least populous provinces, plus the territories, have between them roughly the same population as British Columbia, yet are allotted 63 seats to its 36." As demographic and economic change accelerates in Canada the initiatives proposed by the current government can only be seen as last ditch efforts to delay the inevitable necessity to rebuild the Canadian Constitution.

Canada: Federal Liberals at the end of the line

Andrew Coyne in another fine article in Macleans magazine,"The End Of the (Federal) Liberal Empire" provides another insightful commentary on the state of Canadian affairs. He even proposes ideas for the Federal Liberals to end their march to oblivion. My take on it is that they are "hard of hearing" and will continue to wander in the wilderness. "Old and tired" are adjectives that comes to mind when talking about the Federal Liberals.

If Stephen Harper were to turn the leadership over to someone with any degree of magnatism the Liberal Party could be buried for good. This would not be a good thing for we would be left with flaming socialists and flaming Quebec separatists to act in opposition. Neither of those parties have accepted the 21st Century.

The best option would be for the Federal Liberals to look to the demands of the twenty first century - for they spend a lot of time looking backward. It needs to rethink Quebec and Atlantic Canada's new place in Confederation and act accordingly. The center of gravity has shifted. It also needs to look at how economies of scale are going to impact government overheads in the decades to come. And most of all it needs to recognize that health care costs unchecked will bury all the advanced economies unless they reinvent health care. It has nothing to say on the later except - same old same old.

Health Care Reform

Canada and the U.S. have drawn closer on health care. The U.S. had moved in the direction of social equity, Canada now needs to introduce market reforms to cut costs and speed innovation and to alter government pension ages to reflect increasing life spans and rising costs. The road to reform of health care has only just begun in the OECD countries. The current course is unsustainable. Public debt must be reduced to preserve education and the other social spending and to avoid longer term economic stagnation and collapse.

February 27, 2010

According to a Quebec Government report:

"In 2008-2009, if Québec were to offer Quebecers the basket of services that the Ontario government funds, it would reduce its expenditures by $17.5 billion. This means that the Québec government funds 26% more public services than Ontario does."

At the same time Quebec is expected... to receive somewhat more than $8.5-billion in equalization payments next year, up from about $8.3-billion this year. The payments will represent about 11 per cent of the government's total revenues. Source

Ontario, Alberta and B.C. will contribute to Quebec's level of services.... or viewed another way to reducing the taxation level in Quebec.(which is already astronomic)

Quebec is Canada's Greece....

February 24, 2010

Who controls the value of the U.S. and Canadian dollar?

The value of a country's currency is built ultimately on its national competitiveness. It is also influenced by the fiscal and monetary policies of its government - sometimes over an extended period. (For example, Greek and Argentine mismanagement have a very long history.)

One important way that currency value is expressed is by how many countries wish to hold the currency as an asset against the rainy day of financial turbulence of the sort seen of late and during the Asian financial crisis in 1997.

China and Japan are the two largest holders of U.S. dollars. Financial crises in either country hold great risk for the world community as a result. In addition, it means that policy makers in China and Japan can exert substantial global financial influence through their choices in their holdings of "reserve currencies".

China seems to be slowly "rebalancing its portfolio" of reserve assets. This appears to be a technical rather than a political move as suggested in this quote from an article in SAAG.

"“China can reduce its holdings of dollar assets, but should not "overdo" it as the country tries to adjust the structure of its dollar asset-dominated foreign exchange reserves, analysts said. The country's foreign exchange reserves amounted to nearly $2.4 trillion by the end of last year - a third of the global total - raising concerns that the massive scale of the holdings could backfire. About 70 percent of the reserves are dollar assets, according to various estimates by scholars, and the high proportion means that once the dollar's value slumps, China will incur huge losses. But it is equally difficult for China to dump its dollar assets because that could lead to a domino effect on other investors and cause depreciation of China's holdings. "China is in a dilemma," said Dong Yuping, economist at the Chinese Academy of Social Sciences." Source - SAAG

It would be wise for North American policy makers to consider the implications now of a financial crisis in China and/ or Japan and to conduct modeling and role playing excercises to consider how they would manage such an event. There is a great deal of evidence to suggest that the U.S. was so to speak "flying by the seat of its pants" in this most recent international financial crisis. There may well be legislation and rule-making that would assist in such a crisis.

So yes, legislators and central bankers in North America can and do influence currency values. But, it remains that "national economies" are more of an emotional idea rather than strictly speaking "stand alone" technical structures. This may have little meaning for those cheering for their team at the 2010 Winter Olympics in Vancouver but it remains that global interlinking is accelerating. It also means that emotionalism embodied in nationalism remains an obscuring and potentially disruptive force in the future that is emerging.

North South Energy Ties in North America to strengthen in unexpected ways?

The recent "revolution" in natural gas in North America - shale gas technologies - portends changes and a variety of political and geostrategic shifts.

North American dependence on the Middle East for its energy is being reduced in the burgeoning shale natural gas discoveries - in the U.S. and north of the 49th.

Apparently, U.S. eastern gas producers are looking at the Ontario market. This would strengthen north south ties in energy in the eastern half of the continent. There are already enormous electrical energy supplies going south from Quebec to the U.S. This development might also reduce the east west ties in Canada given the alternative to Alberta natural gas. This story from the Globe and Mail discusses this development.

The discovery of natural gas in Quebec shale (the true potential of which is still an unknown) is another potential sea change in East West North South Relations. This story in the G&M has some of the details.

It is too early to speculate with any degree of certainty but it may be that this resource find may alter the political equation on discussions around resources in Canada. It may lessen the chances of an Eastern "cash grab" on Western resources. And if the natural gas reserves in Quebec prove sizable it my help Quebec pay down its debt. This would of course strengthen the ability of the country to withstand coming international financial storms.

Olympic coverage of Canada

The Winter Olympics in Vancouver have occasioned a blossoming of coverage in the U.S. about "Canada". Tom Brokaw's coverage was an example. Another other feature of the games has been the references to North America that have vfeatured in the commentary. Yes, there are traditional rivalries between teams but, for example, the commentary noting that Tessa Virtue and Scott Moir were the first North American team to take the Gold in Ice Dance might be seen as an early signs of a developing North American "awareness".

B.C. Takes the Gold

According to the Conference Board, B.C. will take the top position in Canada in terms of economic growth in 2010. Real GDP in B.C. is expected to grow by 3.7 per cent in 2010 according to the Conference Board.

CB Press Release

Premier Wall a man to watch

This story carried by the Vancouver Sun reports on the Council of Federation meeting with U.S. Governors.

Wall is increasingly a man to watch. This is not something often said about Saskatchewan Premiers. He is now playing a role larger than his province.

February 21, 2010

Governors and Premiers Meet

Seven Canadian premiers participated in the National Governors Association conference on Saturday in Washington, D.C.. This G&M article covers the story - at least at one level.

What is perhaps emerging here is the growing recognition in some circles that there is defacto U.S. governance of Canada by virtue of the cross border impacts of U.S. national policies. This means that if you don't want to be road-kill you need to participate, at the very least indirectly, in ensuring your interests are at least considered in the legislative and administrative processes occurring in Washington and through the bottoms up influence of U.S. state governance. The cross border influence is mutual. The ratio may ten to one but the one is not insubstantial. Canadian influence is growing by virtue of its long term budget management and by virtue of its energy and resource endowments.

The recognition of the continental nature of U.S. and Canadian interests will grow if only because of the integrative forces of technology and alignment of global interests.

The active involvement of the Premiers is perhaps a recognition that the "continental agenda" is too important to be left to national governments - gridlocked as they frequently are by partisan politics and short planning horizons.

New Angus Reid Poll on Canadian Senate Reform

The poll results show "a solid majority of respondents (69%) are in favour of holding a nationwide referendum on the future of the Senate". "Most Canadians endorse allowing citizens to choose senators in direct elections (67%), and limiting the terms of appointed senators to eight years (65%)".

"Since January 2008, at least three-in-five respondents have consistently voiced support for allowing Canadians to directly elect their senators and limiting appointed Canadian senators to eight-year terms."

The chances of reforming the Senate are minimal. Reform of the Senate would not address the principal issues facing the country. It is almost a distraction from real reform. Public discussion of the topic may however lead to Canadian introspection on other wider issues facing them in the 21st century.

Montana and British Columbia sign Agreement on the Flat Head Valley - more than meets the eye

B.C. Premier Gordon Campbell and Montana Governor Brian Schweitzer announced on February 18 that the two governments they represent had signed an agreement to protect the Flat Head Basin and Glacier National Park.

Here is the B.C Government Press Release.

The Memorandum of Understanding and Cooperation on Environmental Protection, Climate Action and Energy builds on the obligation both jurisdictions have under the Environmental Cooperation Agreement of 2003.

"The memorandum covers three components – environmental protection, climate action and renewable and low-carbon energy:

1. Environmental Protection

• Remove mining, oil and gas, and coal development as permissible land uses in the Flathead River Basin.
• Co-operate on fish and wildlife management in conjunction with Ktunaxa Nation and Confederated Salish and Kootenai Tribes.
• Collaborate on environmental assessment of any project of cross-border significance that has potential to affect land or water resources.
• Share information proactively on proposed projects that have potential cross-border impacts and develop early notification procedures to identify concerns of residents, First Nations, Tribes or government entities.
• Collaborate in responding to emergencies that have the potential for environmental harm.

• Facilitate adaptation to climate change by building regional capacity to understand and address the challenges posed by climate change to Western North America.
• Promote a wood building culture for climate action through a strategy aimed at increasing forest stocks, producing an annual sustained yield of timber for wood construction, enable new building technologies in structural wood designs by amending building codes and encouraging the use of wood in public leasing and public building projects.
• Measure progress in reducing greenhouse gas emissions through the Climate Registry.
• Reduce greenhouse gas emissions, as signatories to the Western Climate Initiative.

• Pursue co-operative clean and renewable transboundary energy policies.
• Harmonize definitions of low impact renewable resources including hydropower, solar, wind, geothermal, biomass, and tidal/wave energy.
• Support the Western Renewable Energy Zones (WREZ) Project.
• Encourage a “Conservation First” Utility Framework with electricity and natural gas utilities.
• Leverage energy efficiency through shared information on energy performance standards in building codes.
• Enable clean transportation solutions by sharing information on standards and best practices to promote biofuels, natural gas, hydrogen, and electricity as transportation fuels, and promote consistent roadside signage for alternative fuel stations.

Sunday, February 14, 2010

Canada - Rising Personal Debt and proactive measures to forstall a Housing Bubble

One of the clear dangers of an extended period of extremely low interest rates is the likelihood that the demand for housing loans will rise. Real estate is the "dumbed down investment". In some markets with in migration and immigration risks of getting caught in a downturn appear negligible. This is what "bubbles" are made of.

Households caught in the last stock market downturn and having paniced into selling are looking around for the "sure thing".They might not understand high tech but they think they understand housing.

We are also now seeking a rising number of households that have been living beyond their means and taking on "cheap debt". This story in the Vancouver Sun

The Federal (Conservative) government is taking steps to proactively blunt the potential for a bubble by stiffening the terms for mortgages - a wise move.

The Financial Post covers the story. It appears that the government is listening to the advice of David Dodge the former governor of the Bank of Canada who on February 11 encouraged the government to act. The story

Sunday, February 14, 2010

Pacific Coast Collaborative - Sub-national government leadership

The governments of British Columbia, Washington, Oregon and California on Friday agreed to co-operate on addressing climate change and a broad range of initiatives related to environmental conservation and economic development.

The Vancouver Sun covered the story. The environment and transportation featured in the memorandum of understanding (MOU). Here is the BC Government Press release. Here is Governor Schwarzenegger's news release. A key phrase from that news release: “On these issues, a single state’s actions by itself will never be enough."

This is a theme common to the Premier and the Governors as they deal with an ever more complex and integrated world, one in which national governments are gridlocked due to disagreements on future "global" priorities.

The Pacific Coast Collaborative website may well have "emergent properties". Time will tell. Taken together the region would be the 7th largest economy in the world – by 2030 this Pacific Coast economy will surpass $4 trillion.

The “Vision 2030” paper sets out a strategic vision for the future of Pacific North America and regional collaboration. It is intended to serve as a living document for the Pacific Coast Collaborative.

Oregon Governor Kulongoski will host and chair the next PCC Leaders Forum in November 2010.

Lead, Follow, or Get out of the Way - National Governments

One of the issues facing the world today is the missmatch between constitutions and emerging trans-boundary problems. Constitutions and forms of governance from an era when people rode horses to work are frequently no longer up to the task - we have environmental and economic issues that can be advanced at the sub-national level between states and provinces. It is part of thinking "outside the box" and working creatively with the tools at hand.

Western Premiers and Governors are finding it increasingly useful to work together to get Washington and Ottawa to "pay attention" and to work together to achieve joint objectives. The environment and economic development issues have been fertile areas for collaboration.

The Premier of British Columbia, Gordon Campbell, in this Special to the Vancouver Sun put it this way:

"Sub-national governments need to be bold, innovative and show leadership that can drive national-level change. Successfully implementing these kinds of policies on a state or provincial level can spur adoption by national governments once they see the benefits on a smaller scale."

"sub-national and local governments play a vital role in developing adaptation strategies."

Western Economic Partnership Agreement

Saskatchewan, Alberta and B.C. are entering into a Western Economic Partnership to create Canada’s largest boundary-free trade and investment market.The Western Economic Partnership of the three provinces represent a total western market of nine million people with a combined GDP of $555 billion.

The Western Economic Partnership Agreement is comprised of three areas: internal trade, international marketing, innovation and procurement. The actual initiatives have not been spelled out but they are likely to be "non-standard" and seem likely to disturb the status quo.

Canada West Foundation's, Robert Roach, had this to say about the Western Economic Partnership: "Increased interprovincial cooperation has the potential to generate significant cost savings, improve the quality of services available to western Canadians, boost the region’s economic competitiveness, and increase the likelihood of successfully addressing a range of common public policy challenges. Ongoing fiscal pressures combined with greater exposure to a more competitive global economy are rendering “go it alone” provincial strategies in some areas too costly in a region where even the largest province is a relatively small player on the world stage."

Roach develops some of these themes in this paper. His approach to issues is "timid" but then he is "organizationally" dependent.

Again we see the observation that in this "New World" scale plays and historical organizational units are well past their "best before due dates" in terms of their size and appropriateness. Thus we see provincial and state leaders acknowledging this and working as best they can with existing "dated" frameworks. They are politically well ahead of their populations but then this is what leadership is all about. Now they must "spread the word".

All three governments face common problems: revenue shortfalls, regional trade barriers, lagging productivity, and sclerotic procurement processes occasioned by existing labour agreements and practises in major governments budget envelopes - health care and education.

Health care reform and education reform seem a likely area for joint or at very least "aligned" initiatives.

Here is the Alberta Government statement on the Agreement.

The Premier of Saskatchewan, Brad Wall, spoke to the Canada West Foundation. His talk is interesting in a variety of ways not least of which is his historical perspective on Canada's East-West Relations.

Sask, Alberta and B.C. Throne Speeches - Common Themes, Common Issues

A curious legacy of Canada's Imperial past is that its Federal and Provincial Governments make known their intentions before bringing in legislation by way of "Throne Speeches".

B.C. Speech from the Throne - February 9, 2010

Alberta Speech from the Throne - February 10, 2010

Saskatchewan Speech from the Throne - October 21, 2009

Fortunately these "outlines" provide us with a quick overview of governance issues and priorities which in turn provide us with a sense of where interprovincial cooperation is heading. The momentum has been building for years with the signing of the TILMA Agreement, joint Cabinet meetings and now the Western Economic Partnership.

The world is changing. The western state and provincial governments are moving slowly and steadily to acknowledge those changes and to get on with the business of governing in no matter how tortured an existing framework.

Saturday, February 6, 2010

Deleveraging - The Great Recession - More bumps in the Road?

The New York Times, in an article entitled "Fair Game - A Financial Crisis that just keeps moving" quotes David Rosenberg a Toronto based economist who, in looking at U.S. residential and commercial real estate, said “We are in a post-bubble credit collapse and there are going to be periods of calm and stormy weather. Investors will have to navigate through the volatility". The impact of the "bumps" in the road on consumer and business spending remain to be seen.

What we do know is that more than half of the current U.S. deficit is due to a shortfall of government tax receipts rather than new spending. So as always there will be a curious interplay between "sentiment" and underlying "technical" issues (deleveraging) in how well the U.S. economy does over the next five years. Rosenberg per this report appears to take a pessimistic view.

Friday, February 5, 2010

The Shape of Things to Come

The folks at SRI International have a long history of cutting edge work. Their CALO artificial intelligence project has been tied up with a iPhone Mobile App called Siri. Readwriteweb covers the story.

Siri is a virtual personal assistant that recognizes your voice query and either gives you the answer to your question or connects you to the right web service. It's focus is on restaurants, movies, events, local businesses and taxis. Here is a U Tube video demo.

Siri's voice recognition software is based on their servers because voice recognition is a very intensive processing task.

At one level Siri is mundane, at another it is quite sophisticated and a model of things to come.

Moore's law sees a doubling of processing and memory every twelve to twenty four months. Artificial intelligence solves problems by using algorithms once the nature of the problem is understood - not always but in many instances. Some problems are processing intensive and need to be linked to a variety of domain specific processing and "memory" repositories. (Rather like the brain.) It is apparent that the first General AI applications (like Siri) will be shared, server based and networked. Even robotic applications such as this GM and NASA prototype are likely to be modular and networked.

Bots are going to be special purpose but also multipurpose - like multitools. They are going to be reprogrammable, like the iPhone.

Siri is not (yet) tied to Wolfram Alpha but that combination and others like it will be stunning in their social, economic and geopolitical impact.

There are a whelter of special purpose ai and robotic applications that hitherto have been stand alone. We are entering an age of ai and robotic integration where a combination of mobile stand alone applications (iPhone-like terminals/bots) will interact with centralized servers and services.

This will produce enormous economies of scale and incremental costing - the result will be that (like cell phones) they are likely to globalize very quickly - if the current business and regulatory models remain....

Many of these apps will be commercially available. This is the good news. It is also the bad news. As we have discovered, brilliance, morality and modernity do not march hand in hand. There may be merit in considering a CoCom-like regulatory regime for access to some services.

These AI developments will create enormous economic value and simultaneously destroy economic value. The implication for the global financial system is straight forward. Financial volatility is going to increase. Governments everywhere need to look carefully at this and act accordingly.

Monday, February 1, 2010

U.S.Financial Picture not pretty

Paying down debt in the "fat years" is good public policy. Republican's and Democrat's conspired in the "fat" Bush years not to pay down debt and in fact to cause it to balloon as unrealistic tax cuts were introduced while expenditures blossomed.

Thus the U.S. having run up the debt in the "fat years" finds itself in the "bad years" running up further debt as it tries to stimulate the economy and reduce double digit unemployment.

These circumstances are the direct result of failed regulatory oversight for which the President (Bush) and Congress (Democrats and Republicans) must take the blame. And by definition the electors failure to insist on balanced budgets.

Thus it is that Obama's 2010 budget can be seen as "the chickens coming home to roost". This article from NewsDaily suggests

"Polls show voters are worried by the weak condition of U.S. finances, and Obama plans to create a bipartisan fiscal commission to figure out options on taxes and spending."

U.S. voters are right to be concerned and a bipartisan approach is essential.

Clearly Democrats and Republicans need to stop talking past each other and to commit to "budget surpluses" for the later half of this decade and to move the U.S. into balanced budgets by the middle of the decade. This will not be achieved without tax increases and expenditure reductions. It is going to be a long painful process that will require sustained "political will".

Sunday, January 31, 2010

Washington State's Trade with China up but problems looming

According to Kristi Heim in an article in the Seattle Times, trade with China is becoming more problematic. "Green technology is among 10 sectors protected by the Chinese indigenous-innovation directive, published in November.

The new policy will make it virtually impossible for foreign companies to win Chinese government contracts, worth an estimated $85 billion annually."

Heim quotes Mark Anderson a Washington based technology consultant:

"In politics, thought and business, China remains a police state"

"Our optimism in having China joining world commerce should never be confused with bad acting, illegal behavior, IP (intellectual property) theft, structural barriers, or other current practices which need to be dissolved before China is a trusted member of the trading community,"

Cascadian businesses and indeed governments should be alert to the "on the ground" realities of commerce with China and be prepared to stiffen resolve to win fair commerce.

Saturday, January 30, 2010

Canadian and U.S. Officials Discuss Efforts to Strengthen Aviation Security

North American aviation security will be an ongoing challenge as long as there are medieval jehadists on the planet. This is likely to be a permanent feature of the 21st century. Geography and modernity bind the continent together.

The Honourable Vic Toews, Minister of Public Safety, and John Baird, Canada’s Transport Minister, met with Jane Holl Lute, Deputy Secretary of Homeland Security and Ambassador Jacobson, on January 28 to discuss strengthening aviation security.

Here are the respective news releases on the meeting:

DHS Release

Public Safety Release

Bill and Melina Gates promise $10 billion for vaccines

In a Reuters report coming out of Davos Bill and Melinda Gates have indicated they would spend $10 billion over the next decade to develop and deliver vaccines for immunizing children in the developing world.

Canada looking south, east and west and wondering

Jeffrey Simpson's opinion piece in the Globe and Mail, "Balanced budgets are lifesavers in turbulent times", is right on the money.It should be widely circulated.

"For Canada, the debtor's neighbour, the U.S.'s inability to get a grip on any of its major national problems, and especially its borrowing, leads to the uncomfortable question: How do we protect ourselves from our neighbour's terrible habits?"

To the U.S., we must add looming sovereign debt issues in Europe and Japan to say nothing of the financial turbulence likely to be occasioned exponential technological change and demographic shifts. Global financial volatility is very likely to increase. Our only hope for the future is to pay down debt as fast as we can to prepare for the inevitable next storm. If this means higher taxes then so be it. This also means holding the line on public expenditures and selling of assets better run by private enterprises.

This basic formula applies to all Cascadia States and Provinces for if national political will cannot be found to reduce public and private debt then local and regional leadership must be found.

Iran and China

One is moved to wonder whether China is prepared to "get with the program" on Iran and the proliferation of nuclear weapons in the Moslem/Arab world or whether it wants to take the risks occasioned by a rupture with the west. It is not enough to hold U.S. debt. China faces the perfect global political storm if it does not begin to recognize international concerns on that and other subjects. It is not at all clear that China in its current nationalist mood is listening. While there is sympathy for China's desire to improve the status of its millions still languishing in abject poverty there are limits in the West to what the West can accommodate in terms of political pressures both economic and in terms of security threats from medievalists in the Moslem world.

China's leadership would do well to do more "listening", for the West views time differently and is apt to shift abruptly if it comes to the conclusion that China cannot be brought successfully into the international community and is playing its own game at the expense of the West and its allies.

Cascadian leaderships would do well to continue to nurture economic relations with China but should acknowledge that as so often happens in history, things could change abruptly.

Friday, January 29, 2010

Uptick in the U.S. Economy Good News for all

The U.S. economic growth jumped 5.7% the fastest pace in six years. This Business Week report provides an analysis of this promising development. The world's largest economy can provide hope for a great many other countries looking for export growth and for the market confidence that can help buffer adjustments still to be made - notably in Europe.

Canadian Economy Strengthens

Canada's Gross domestic product rose 0.4 per cent during the month of November, the third consecutive monthly increase. The Vancouver Sun also reports that the IMF has increased its 2010 growth output estimate for Canada to 2.6 per cent.

MIT Talks at Davos

Brain research and artificial intelligence are moving forward rapidly together. Developments in these fields are going to create revolutionary change in the decade ahead which is why world leaders gathered at Davos for the World Economic Forum are taking in lectures on these subjects.

Here are three lectures:

MIT - Josh Tenenbaum Reverse Engineering the Human Brain

MIT Rebecca Saxe Social Brain

MIT Sebastian Seung Connectome Deconstructing the human brain

Thursday, January 28, 2010

Canadian Senate Reform on the Way?

As reported in the Globe and Mail, the Federal Conservatives are about to hold a majority in the Canadian Senate. On Friday, the Prime Minister will appoint five new senators.

This will permit the government's legislation to pass with greater ease. The Federal Liberals in power for so many years had stacked the Senate with its appointees. It is a watershed of sorts.

More importantly, as noted in the G&M report it opens the way to make changes to the Senate, such as eight-year term limits and an initial stab at Senate elections in the provinces.

As stated in the G&M "Those changes wouldn't necessarily require the provincial consent called for in the Constitution. For instance, provinces could hold their own elections for vacant Senate positions and Mr. Harper could appoint the victor to the Red Chamber. But the Prime Minister knows that the fundamental Senate reform he has championed is impossible without a constitutional amendment and several provinces have said they would not provide the unanimous agreement required to make those changes."

The problem the Prime Minister faces is that there is growing doubt in the West about the reformability of the country and the commitment of the Prime Minister to make any real change in the way the country is governed.

Note the reluctance of perhaps the country's largest paper to name names about which provinces would scuttle a constitutional amendment to reform the Senate.

As Jeffery Simpson noted in this G&M article the Supreme Court of Canada ruled in 1979 (on a reference from Pierre Trudeau's government) "9-0, that Ottawa could unilaterally do almost nothing to the Senate. In particular, Ottawa could not unilaterally abolish the Senate, change the powers of the Senate, alter the number of senators from each province or fiddle with the method of senators."

It will be interesting to see what Harper does when he reaches that inevitable cross road where the impossibility of Canada's reform becomes evident to all. Will he take on the Constitution, and all that means, or will he whimp out?

Sovereignty a problem

This week in Davos one of the major global issues of our time is playing out with global leaders taking up varying positions on global financial management. As mentioned here before the current system is not a system rather it is a financial kluge destined to recreate the kind of instability we have seen.

On the one hand we have those who hope for a successful nation state driven international financial system where the parties all do a good job of regulating their own economies and by inference the "whole" will do well. The difficulty is that even among the OECD countries there are widely differing opinions of what "correct" policy is ranging from highly restrictive to the something resembling anarchy.

According to a Campbell Clark article in the Global and Mail, Canadian Prime Minister Stephen Harper took the middle line between financial over-regulation and end to the regulatory blindness evident of late. According to Campbell Clark, Harper "argued it is a time for all nations to change their own policies for the global good, from regulating banks to reducing trade restrictions to improving the health of children – calling it “enlightened sovereignty.”

"And instead of global regulation, he wants national standards, which will face international review and G20 peer pressure. Canada has backed G20 plans to improve standards for thinks like bank capital and liquidity, but has shown concern about nations proposing their own more interventionist measures in discussions in Davos, sources say."

Unfortunately the text of Harper's Davos speech is not yet available.So we must rely on second hand reports.

When the text of the speech becomes available I will post a link to it. (Here is the the speech which for the time being is front and center on the Prime Minister's website.)

The world is on the cusp of some important transitions one of which is global financial management. This seems destined to start with international reviews of nation state "financial plans" and G20 peer pressure.

Nation states have lost the ability to manage internally by virtue of "global interconnectedness". This is not widely understood. (Massive understatement) Only through a Group of 20 - Parliament can the financial system be regulated and managed to limit global financial instability.

European Crisis looms with Greece's worsening financial situation

The Economist bailed into the debate over what is to be done about Greece in this article

The problem is that the Greeks are largely out of touch with the nature of their home grown problem. They pose a threat to their sister EU countries and indeed the world. Their lack of realism may well set off another round of global financial instability.

Meanwhile German retail sales dropped sharply in January which does not auger well for European financial forcasts.

Sunday, January 24, 2010

Quebec, Still "on the dole" after all these years

According to a report by columnist Jeffery Simpson

"Quebec is expected to receive somewhat more than $8.5-billion in equalization payments next year, up from about $8.3-billion this year. The payments will represent about 11 per cent of the government's total revenues."

Bearishness on Europe and debt ridden EU countries is showing

This Reuters article, by Jeremy Gaunt, "Banks, Greece, China weigh on stock markets", notes rising investor uncertainty about rising sovereign debt risk, disappointing Wall Street earnings season and macroeconomic challenges from rising inflation to stubborn unemployment.

The article notes the market sentiment is beginning to play in terms of the spreads for German bonds versus Greece bonds and now Portugese and Spanish bonds. There are still lots of financial risks out there only this time they are free spending governments.

Cascadia Competitiveness

Learning and organization are the only offset for the wage differentials and economies of scale of Asia. This is the stark reality for all of North America and Europe.

This means that resources need to be targeted toward technical colleges and universities to build their standards, scope and scale. It means that we need to make it easier for students to get into engineering and scientific disciplines and to ask ourselves how we encourage our best and brightest to "want to" pursue careers in these areas.

It also means that we need to streamline our regulatory process particularly on environmental studies if we are not to be left in the dust by Asia. North America is also "competing in time". The new Port of Vancouver container port expansion waited seven years for completion of environmental studies. Environmental studies need to be conducted, but they need to be conducted with dispatch.

Bank Reform in the U.S only part of the equation

There is much "to do" about the banking reforms proposed by the Obama administration. (They are needed)

But the real question that needs to be asked and answered is:

Can nation states (including the U.S.) effectively control banking and financial stability as globalization accelerates?

As noted in this Bloomberg article : "Obama Bank Curbs May Not Leave U.S. Financial System Much Safer", the point to be noted is, not that reforms are not necessary, but that without global financial management (with teeth) then the spillage from economic crisis and mismanagement from beyond is likely to recreate the recent crisis.

"There are doubts whether the U.S. could shut down a big international institution in an orderly way even if it got such authority, Litan said. That’s because regulators overseas lack similar powers, raising questions about how much the U.S. could do on its own."

What no national figures really want to talk about is that the existing nation state structure and the lack of global or even regional (aka continental) financial management means that periodic crises are bound to occur because nation states cling to their sovereignty which in the financial world does not ultimately exist.This is at the root of the instability we have seen and are likely to see in the years to come. Even in the EU no central authority can tell Greece to change it policies, to clean up its act, yet everyone in Europe and likely here in North America is going to be impacted when they are bankrupt. And there are a number of countries on the path toward bankruptcy.

This is the problem that no one wants to talk about. The international banking system is a "kluge" and destined to go into crisis again because of the nation state system. There is no "supra national" governance. Nor does the man in the street understand this - whether he be in Athens, Madrid, Dublin, Rome, London or Washington. Other ideas are simplier and more comfortable. Nationalism remains a potent force but as pointed out in my December blog constructal theory and systems theory suggest that current nation state approaches will fail and be superceded.

There are efforts afoot to reform international financial management. The Financial Stability Board a new international forum created by the Group of Twenty is to make recommendations on: "targeted capital, leverage, and liquidity requirements; improved supervisory approaches; simplification of firm structures; strengthened national and cross-border resolution frameworks; and changes to financial infrastructure that reduce contagion risks."

Their mandate seems to be bounded so while immediate risk can be contained the ultimate problem will go unaddressed.

The too-big-to-fail (TBTF) institutions problem finds it roots in the increased scale of the "financial" aspects of national economies relative to the size of the "real economy".

As mentioned in my December 17 Blog:

David Miles, Member of the Monetary Policy Committee of the Bank of England has noted

"And the banking sector in the UK has indeed grown enormously. Banking sector assets – relative to the size of the economy – were fairly stable at about 50% of GDP in the hundred years from 1875 to 1975, but in the last 40 years have increased about 10 fold. They now stand at about 500% of annual GDP. Much of that increase reflects UK banks’ overseas business. But even if we exclude foreign currency assets there has been a huge increase in the size of bank balance sheets relative to the economy; they have risen roughly five-fold since 1980."

The U.K. is too small for its banks or its banks are too big for it.

Either way something has to give with nation state concepts. This is something neither elites nor mainstreet are comfortable with. However, as technology change accelerates, the creative destruction of Schumpeterian economics is going to continue to play havoc with financial values and risk estimation. To that we must add badly run states whose poor public policy impacts the global community via the international financial system.

It is important to ask what would be the implications of a really large OECD player, like Japan for instance, going bankrupt and whether or not it is time to begin to build the political basis of global financial management. This is the issue in the EU. A regional approach is where this should start.

Wednesday, January 20, 2010

CascadiaPrime has a new Banner Item: Oil Price

The price of oil is going to be a defining issue for the future of the northern half of the North American Continent.

If the price of oil rises substantially then it is going to drive the value of the Canadian dollar up squeezing Quebec and Ontario's economic recovery which was likely to be long and hard in any event. It is doubtful Harper's conservative government in Ottawa would do anything rash to cater to sentiments in Quebec and Ontario that are "unfriendly" to western Canada. Nevertheless the Liberal Party is not so bound because it has a long history of having very few seats in the west of the country and of not being particularly responsive to Western economic needs and social values.

We might see a "National Energy Policy II" (See Wikipedia) that robs from the western provinces and creates renewed demands for constitutional change, but this time from the West.We are approaching a perfect storm for political change.

Canada concludes Euro denominated 2 billion global bond issue

The Department of Finance on January 8 announced:

"The Department of Finance announced today the successful conclusion of the Government of Canada’s first euro-denominated global bond issue.

The 10-year bond issue raised €2 billion, equivalent to about US$2.9 billion at current exchange rates. The proceeds will be used exclusively to supplement and diversify funding for Canada’s foreign exchange reserves, rather than to finance public debt or spending.

The bond transaction achieved all of the Government’s objectives, including providing cost-effective and diversified funding for the foreign reserves held in the Exchange Fund Account. The investor base for the 10-year bond issue includes more than 200 investors from a wide range of central banks, other official institutions, commercial banks and foreign-based investment funds across a diverse geographical area."

It looks like the Bank of Canada thinks that the Euro is a poor bet going forward. ie. The Bank of Canada plans to pay the bonds back with discounted Euros.

Canada's central bank has a relatively good track record of reading trends.

New Jobs likely to be very different than disappearing old jobs

Cascadia needs to develop an economic vision consistent with likely Singularity outcomes over the next twenty years and the known economic restructuring that is going to occur.

This study from the U.K looks at what the new jobs are likely to look like. They are very different from the resource based roots of Cascadia.

This is not to suggest that "resources" will not be important going forward to provide government revenues for health care, transport infrastructure etc. However, "resource jobs" seem unlikely to employ great numbers. They can however provide funds that can be invested in high growth, high technology sectors. It is in those sectors that the value add aspects can be achieved to compete with lower offshore costs and massive economies of scale that come from global markets and very long production runs.

In British Columbia, the Premier's Technology Council issued its 12th report in April 2009.

It is an extended shopping list that lacks focus.

At page 35, it provides sector GDP and employment. Most importantly it notes that most of the growth is in the high technology sector.

Cascadia needs to invest heavily in applied sciences in the fields implied by the previously mentioned U.K study.

As noted in the Technology Council Report: "Mathematics and scientific disciplines in particular drive the bulk of innovation for a knowledge economy." It is on this front that significant inroads must be made in improving the overall standards of education and in the production of the absolute number of graduates.This implies the need to make it easier for high calibre students to elect to study these disciplines.

One of the things missing in the Technology Council's Report is the depth of the changes that are likely to occur in the next decade as Moore's Law plays out in economic sector after economic sector.

Cascadia governments would be well advised to start sending its senior administrators off to Singularity University so they might better understand the likely dynamics in key science and technology sectors in the near future. With this background they will better be able to frame new policy proposals and to vet those that they receive. Speakers from Singularity U should also be brought in to begin to educate legislators who will have to frame the communications strategies as accelerated, disruptive economic and social change engulfs the continent.

Friday, January 15, 2010

Google Stand on China

China needs to understand that ideas need to flow freely for it to advance. It's "ham fisted", anachronistic, "old think" attitudes do not play well in the rest of the world at a time when more dialogue than ever is needed to deal with the three great issues facing mankind.

Google's announcement puts China on notice.

Friday, January 8, 2010

Rising interest rates and steady population requires a new formula for government

Edward Hugh , the Spain based economist noted, in the context of the sovereign debt piling up with a number of shaky EU governments, that

"A country with nominal growth lower than the interest rate level will ... have to run primary surpluses in order to keep the debt-to-GDP ratio steady."

The implication is that in countries at or below replacement levels in terms of births have to be very careful not to fall into a economic death spiral.

The OECD countries have had declining birth rates and many are at or below replacement.

This basic idea needs to be understood by environmentalists who seek to cap population and by socialists who seek "social just now" and tend to discount the crippling effects over time of accumulated public debt.

CascadiaPrime takes the view that capping global population growth is necessary to safeguard the planet. This means that democracies are going to have to create a greater degree of economic literacy if they are to avoid economic collapse. Cultures that cannot be disciplined in their spending are destined to fail economically and socially.

North America Governance Slowly Evolving via regional channels and leadership

The traditional nation state is under a ceaseless assault from technology change and the changing economics of "appropriate" scale for governance. One area that has seen a good deal of regional leadership (fostered by regional popular demand) is in the area of environmental protection.

This paper written by Debora L. VanNijnatten, Wilfrid Laurier University explores some of the North American regional policy making that has occurred in recent years.

"Environmental governance in North America has become increasingly trans-border since at least the early 1990s.

In an era where traditional state authority is “bleeding” upward, downward, and outward, decision-making power and legitimacy directed at public ends straddle the boundaries of the formal and informal political systems, and conventional political institutions are increasingly supplemented by other sites, or “hubs”, of governance.

Some of these governance hubs are primarily transboundary, involving actors from different governments and from outside government. Most often, these hubs do not emerge organically; rather, officials at one level – bilateral, trilateral, or subnational in the North American context – take the lead in defining and implementing policy activities."

There is much nashing of teeth south of the 49th over the progress or lack of progress on the Health Bill. Oracles are reading much into the Democratic loss in Massachusetts. Yet as noted in the New York Times "Massachusetts already has near-universal health coverage, thanks to a law passed when Mitt Romney, a Republican, was governor."

If national governments are unable to act then state and regions can provide the necessary leadership.

CascadiaPrime takes the view that there will be universal health care in the U.S., if not now then later. Demographics suggest that groups now opposing health care reform are declining in numbers.

Tuesday, January 5, 2010

Alberta Political Shakeup - Wildrose Alliance Party Gains two converts

The Wildrose Alliance Party of Alberta has picked up two elected representatives - Calgary-Fish Creek MLA Heather Forsyth and Airdrie-Chestermere MLA Rob Anderson - who crossed the floor to join Wild Rose Party leader,Danielle Smith,leaving the Progressive Conservatives and Provincial Premier Ed Stelmach.

This Calgary Herald article covers the story of the two MLA's crossing. Wikipedia provides background on the Wild Rose Alliance Party

There is a good deal playing in the backfield for the changes signal wider political schisms mentioned before at CascadiaPrime.

This blog commentary contains seeds of what is at play.

The Wildrose Alliance Party has become the most popular political organization in Alberta, according to a poll by Angus Reid Public Opinion. The Wildrose Alliance Party has a 39% support rating. The Stelmach Government is the least popular provincial government in Canada. The National Post covers the latest faltering of the Alberta Progressive Conservative government in this article.

Wikipedia notes: "According to a media advisory issued by the party on June 26, 2007, its main emphasis was to be:" (Three goals: one of which is:)

"Reducing by constitutional means the enormous net outflow of wealth from Albertans to the federal government"

The problems is that there is no effective means for changing the constitution.

The "by constitutional means" reference reflects the need to moderate language until such time as the obvious is obvious to "mainstreet".

There is a Conservative government in Ottawa but it has stolen the Liberal Playbook - write cheques in Quebec and Atlantica, hug Ontario regularly, and try to minimize the number of times you "poke" the West. It has lost its conservative credentials in its attempt to hold power. Efforts to reform the political structure have gone nowhere.

The Wild Rose Alliance commentary on climate change is ambiguous which likely reflects the lack of consensus within the party and the Alberta electorate.

Nevertheless the developing strength of the Wildrose Alliance Party needs to be watched closely for it may well be the framework around which a crystalization of tensions in Canada occurs.

The Rise of the Canadian Dollar continues

The Canadian dollar was up again and the U.S. dollar was down again today: The Currency Trend If the current trendline continues then the Canadian dollar will be worth more than the U.S. dollar by mid 2010. The price of fuel at the pump continues its rise as well. As noted here before, this rise of the dollar and the fuel prices increases are going to cause east - west tensions to build in Canada. Ontario has not come to terms with its altered position in Confederation.

Should the Harper government fall in Ottawa and the Liberals be elected then the "pot" would really begin to boil - particularly if they where a minority government depending on the NDP and the Bloc to stay in power. It is far too early to speculate though.

Wednesday, December 30, 2009

The Year in Review

It is the time of year when we look where we have been and consider where we are going.

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only."

Charles Dickens, English novelist - From A Tale of Two Cities about another revolutionary time.

Near Global Financial Collapse

We came very close to a complete global economic collapse and a multi-year depression. The repercussions are going to reverberate around the globe for years to come. It is not clear to me that the mainstream media appreciates the underlying causes and of the coffee shop chatter the less said the better. When the bankers have trouble understanding the global system then "Houston, We have a problem".

The issue of global financial management is primarily that it is not global system but a "Kluge". It is run haphazardly by central banks and regulators. To that we add representative and "not so representative" governments that don't want to hear that they can't spend forever without consequences - take the Greek, Italian, Spanish and Japanese governments. It is like a committee trying to drive a car where some of the drivers are more concerned about passing sights then where the road leads. It is a function of the nation state and international system that the world's financial scale has outgrown. The technological underpining is such that we cannot put it "back in the bottle". Thus, we have an immovable object - nation state sovereignty - and an irresistable force - technology change that are meeting head on. Old paradigms "Die Hard". Politics is a tough business.

Peak Oil in Sight and Growing Global Demand for Energy

Peak oil is in sight. Energy is the underpining of the standards of living we have come to know and others to expect. Here is the International Energy Agency's latest World Energy Outlook

Here is a commentary from The Oil Drum including a quote from George Bush in 2001 that sets the foregoing in perspective.

The net of it all is that we are going to see historically unparalleled change in basic infrastructure globally to adapt to a "new world".This is not going to be welcomed since there is a good deal of mis-information out there about how the world actually works.

Energy Technologies rapidly evolving but no clear winners in sight

This list from Technology Review provides some of the developments we have seen.

Robotics continues to make steady progress

This list from Technology Review provides insights into the robotics revolution currently underway. The thing to note about all these developments is that we are on the cusp of convergence - integration of programming of multi-talented robots that will begin to alter in fundamental ways underlying economics in our societies - with social implications yet to be discovered.

Top Scientific Discoveries captured by Wired

Wired picked ten top top scientific breakthroughs for 2009. Gene therapy ranked number one. A life extension breakthrough for rodents ranked number four. 2010 should bring us a whole new crop of life science breakthroughs that are going to impact how long we can expect to live.

Tuesday, December 29, 2009

The value of assets rise and fall but debt is forever

Global financial fluctuations will likely become more extreme in the decades ahead for the following reasons:

• Effective global financial management structures may not be put in place - owing to nationalism.
• Nation states that are financially badly managed refuse to allow outsiders to correct their policies (in the EU and elsewhere)
• Elderly dependency ratios (demographics) create unsupportable structural deficits in some "mature" countries.
• Commodity prices are likely to "take off" again as Asian demand grows.
• Asset bubbles via the "carry trade" ripple through the international financial structure.
• A number of sovereign defaults are likely - ie countries going broke (possibly Greece, Spain, Latvia, Italy, Japan)
• Technological change is going to create large asset collapses alongside asset increases

It will be important for Cascadia governments at all levels to pay down debt to increase their resilence and capacity to bear economic shocks.

As economic growth returns, central banks will work to contain inflationary forces while trying not to choke off the global recovery. This will be a balancing act made more difficult by the likelihood of rising global commodity prices and too many central bank players. While the risk of inflation will increase, a wage-price spiral is less likely in non-government areas because of global competition.It may nevertheless become a serious problem because of the massive liquidity out there.

Rather than trying to forecast inflation or deflation—a herculean task—governments should focus on how they might manage price instability. Supplier contracts, wage agreements, pricing policies, and energy strategies should be reviewed to determine where the dangers may lie. This will be the basis of sound public policy.

In an inflationary environment, it is easy to get caught between rising short term prices for inputs and long-term commitments with fixed service delivery parameters. The key is to maintain flexibility, to remain cautious in long-term commitments on both the buy and the delivery side, and (if negotiable) to create links between input costs and "delivery" budgets.

In a deflationary environment, the reverse is true. Either way, the purchasing function assumes strategic importance in what is likely to be a wild ride over the next decade. Governments that have failed to refine their purchasing and expenditure practices will find a good deal of grief in store.

Worldviews Changing - Global challenges require new governance structures

To the "man in the street" current local, regional, nation state and international organizations seem immutable. Most however were created when the primary mode of transport was the horse.

But the world moves on:

Nicholas Sarkozy, France's President, made this observation about the Copenhagen conference on climate. "So the difficulties of organizing this conference demonstrate the limitations of a UN system which is on its last legs. This doesn’t mean the UN is unnecessary, quite the contrary, you’ve clearly understood that we need the UN, but we very clearly need an organization where decisions can be taken, where the decision-making organs are far more representative. It was the same for the G8 which was on its last legs, whereas the G20 can take decisions."

Intuitively one might come to the conclusion that the United Nations is too ponderous a body to actually govern and will need to be replaced if the challenges to the survival of humanity are to be overcome.

To repeat Sarkozy's observation: "a UN system which is on its last legs."

The "last legs" reference can easily be applied to governance at all levels for current structures simply cannot deliver on the results expected by the populations in the current structures. It applies to European nation states and it applies to North American nation states, states and provinces and municipalities.

Modern science and technology have altered both space and time and the nature of life on the planet. The old forms are dying bit by bit in the face of an altered economic reality used in its widest sense to include natural economies - ecosystems.

One might intuitively make the leap to the need for simplified governmental structures - larger structures (but with fewer of them) and with accompanying checks and balances.

I believe that the new forms will have a mathematical foundation and will likely be informed by constructal theory which at its heart deals with how process flows are optimized in the physical world, in the natural world and in the world of information.

Constructal Theory

Constructal Theory goes a long way to explaining many of the phenomena observed in life that somehow seemed interrelated. I suspect that it is going to have wide, long term implications.

I believe it will provide insights into appropriate scales for governance in an era of rapidly evolving information technology overlayed on the intrinsic social communications historically defined by space and time now being quickly eroded and reshaped.

Most of what we know is obsolete

Technological obsolecence is accelerating. This article from Business Insider lists 21 commonly used things that became obsolete this decade. First on the list is email accounts that you have to pay for.

Terahertz Processors coming to a PC near you soon

MIT researchers have developed a graphene based processor that they believe will break the 1 THZ mark and that might become available within two years. Here is the story. The fabric of the political world is being transformed by the rapidly altering process flows driven by the ongoing information revolution. This is not a metaphorical reflection but a hard fact the grasping of which compels a rethink of existing political organizational paradigms. It is difficult to "think outside the box", to escape from the current "framing" of political dialogue but it is to be devoutly hoped that the "penny begins to drop" sooner rather than later.

Goggles

The New York Times reports on one of the more interesting developments of 2009 - the introduction of Google Goggles which searches by images alone.

This is no mean development and as processing speeds continue to climb, face recognition technology is going to get a major boost. Here is a talk on unstructured data that provides some insights into the nature of the achievement.

Saturday, December 19, 2009

Canada’s new Ambassador to the United States Speaks to PNWER

The Ambassador's November 6, speech was workmanlike.Since I wasn't at the meeting its hard to gauge how it was received. But the contents, which you can read for yourself, while covering the main areas of cross border discussion showed little imagination.

Perhaps that is the role Mr. Doer sees for himself as he steps into his new job and that this is the role Mr. Harper, his eye ever cocked for possible signs of an impending election, would have him play. But, there is a sanctimonious tone in some of the content, that will be as familiar now to U.S. leadership as it is to Chinese leadership. It doesn't play well in either location. When you are are up to your proverbials in alligators you do not welcome finger wagging.

That said, I would encourage Canada's new ambassador to eschew the Central Canada line and take on his communications task south of the 49th in earnest - the concept of "North America" should be introduced....into the framework.

Former Bank of Canada Governor David Dodge predicts moderate rise in the Canadian dollar

The highly respected former Governor of the Bank of Canada suggests there will be a moderate rise in the Canadian dollar next year as a result of rising commodity prices. This article in the National Post captures part of Dodge's commentary.

I believe that both the current and former BOC Governors are crossing their fingers. This article carries a hint of the problem. There is a reference to "minimal sovereign risk". Now imagine you held large quantities of funds and were looking for a place to park it while the questions surrounding the magnitude of the EU sovereign debt overhang were being resolved - and the Euro falls under a shadow. The options aren't good which is why the Gulf states are looking at their own currency.(Prematurely I think) You might split the difference and park it in a number of currencies but as the least risk and potentially strongest currency you would definitely consider Canada. The problem is "hot money". Sentiment can create volatility that is almost impossible to predict for it is not rational.

Separatist rumblings in Alberta

Tensions in Canada are slowly rising as economic and political trends develop. This article in the National Post speaks for itself.

Canada's Inflation hotter than the BOC expected

This BMO Nesbittburns article notes that Canadian inflation is picking up. "while it’s hardly a source of concern at 1.5%, at the margin, it makes that much more of a case that “normal interest rates” will return before too much longer."

Stats Can reports rising balance of payments deficit

The Daily notes that Canada's current account deficit with the rest of the world (on a seasonally adjusted basis) increased to a record $13.1 billion during the third quarter.

This section of the report however caught my eye:

Canada's international official reserves generate large movements of funds Transactions in the other investment account of the balance of payments resulted in a net outflow of $10.5 billion in the third quarter. This mostly reflected an increase in official reserve assets denominated in US dollars and in short-term loan assets.

"Also evident in the flows, Canada's official international reserves changed significantly as a result of the International Monetary Fund implementing new allocations of Special Drawing Rights, which added close to $9 billion to both reserve assets and long-term liabilities in the third quarter."

I might be mistaken but this appears to be consistent with a policy of "harmonizing" Canadian dollar, U.S. dollar valuation toward ends that have been discussed before in this blog - a controlled rise and a controlled fall.

Friday, December 18, 2009

Debt Endures

The Governor of the Bank of Canada in his December 16, 2009 speech made the following observation:

"While asset prices can rise and fall, debt endures. Moreover, the linkages between the real economy and the financial sector are complex, non-linear, and often opaque. That is why we cannot afford to be complacent."

This may be obvious, but it is, in many ways, a profound statement.

The opaque nature of the financial system even to those who have worked in it all their lives is cause for sober reflection.

As the world becomes wealthier the financial sector is going to continue to grow. And as economies develop in parts of the world not characterized by transparency and any systems of checks and balances one can expect more financial volatility.

What we have seen is the rise of systemic risks flowing not only from poor oversight regulation but also from technology change and the development of new financial instruments. Hot money, money that can shift in large volumes from one currency to another, in the proverbial twinkling of an eye, can both chasten financially poorly run countries - like the U.S. - and cause the total collapse of financial systems such as in the case of Iceland.

The current global recession is perhaps a great blessing for with luck and perseverance over the next year or so a good deal of the systemic risk that still exists can be removed from the system. "The Great Recession" we are experiencing could have been much, much worse and we have further financial shocks yet to manage.

To the above list of risks, we must add the risks to the international financial system presented by accelerating technological change. Accelerating technologial change poses new and I believe profound challenges to economics theory as shortening "event horizons" make the measurment of risk increasingly difficult.

As the Governor of the Bank of Canada noted "asset prices can rise and fall". As technology change begins to impact our movement away from carbon based fuels, (Peak oil and Climate Management) and the capital intensive basic infrastructure of civilization shifts, asset values will be altered, but "liabilities will endure".

Whole regions in the world will see asset values crumble or soar and the international financial system is going to have to cope with those changes. Financial volatility seems destined to increase.

I say "international financial system" because no state is an island and even the mega states - the U.S, China and India - will continue to be impacted from external forces.

The world has three planetary management priorities in the 21st Century:

• Planetary management of the atmosphere, oceans and land - to safeguard human survival
• Management of Violence - limits on nuclear proliferation and other humanity threatening technologies
• Global Financial Management to avoid global financial instability and to support sustainable development

The world is working on item one, at Copenhagen.

The world is also working international arms control in a variety of fora.

The Group of 20 expects to put together plans by end of 2010 for international financial reform. Among other things it has created a Financial Stability Board to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies in the interest of financial stability.

As the G20 have acknowledged there is a close interrelationship between global climate management and global financial management. And as others have remarked the success in these two areas will influence the third leg of the stool - global management of violence.

Existing governance forms are going to alter substantially over the next decade and the emphasis will be on institutions that supercede current nation states, both small and large.

The drivers are the altered economics of a variety of technologies and the need to simplify structures for humanity to survive and to thrive. There are "emergent properties" (important link) to the changes we shall see.

I recommend a book: Evolution - the Grand Synthesis, by Ervin Laszlo who noted the relationship between instability and transformation to a convergence at higher levels (and simplicity):

" Change occurs and evolution unfolds because dynamic systems in the third state are not entirely stable. They have upper thresholds of stability that, if transgressed, produce critical instabilites.

Experiments confirm that dynamic systems far from equilibrum can be moved out of their steady states by changes in some of their environmental parameters. Such systems are critically sensitive to changes in the parameters that are essential for the functioning of the structure - maintaining catalytic cycles.

When changes of this kind occur, the systems enter a transitory phase characterized by indeterminacy, randomness, and some degree of chaos, with a relatively high rate of entropy production.

The chaotic phase comes to an end when the systems are again maintained by catalytic cycles and multiple feedbacks, and entropy production drops to a minimum."

What I believe is occurring globally is that we on track to an "evolutionary" leap to a new steady state. The leap will come about in large measure because the old structure cannot deal with the new dynamics set in motion by changing technology and economics.

This is the challenge that current nation states face and the challenge to popular "paradigms" that support them.

In dynamic systems, most of what you come to know becomes obsolete, once forces for a new equilibrum build. Social reordering is seldom without angst.

Thursday, December 17, 2009

Small Countries on Borrowed Time

I have commented before that small countries are having greater difficulty being effective for their citizens. They are are too small to influence the cross border impacts from the units around them.

Many countries like Iceland, that went bankrupt last year sought to manage their affairs by free movements in capital, independent monetary policy and flexible exchange rates. It did not save them from international financial volitility.

Other countries have formed currency unions to deal with changing monetary conditions. This ‘Euro’ model includes free movements in capital, no monetary policy control and internally fixed exchange.

The Gulf States: Saudi Arabia, Kuwait, Bahrain, and Qatar are taking the "Euro" route.

"The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China." The Blog Big Picture

This Telegraph article speaks to the same development.

The risk associated with the EU model is that it lacks monetary and fiscal controls. Poor national policies can lead to disasterous financial consequences for the partners. Greece's lack of financial discipline is classic. Austria's bank regulation failure demonstrates once again the financial risks to the whole of the EU from its lack of solid political integration.

Too many countries have banks that are bigger than they are.

Something has to give with globalization. Either countries and political units have to get bigger or the scale of firms will need to be capped at some level consistent with the size of countries.

The latter denies the advantages of scale and geographic reach and guarantees that firms operating from larger countries will prevail. Either way small countries are on borrowed time.

I include Canada in this small country category. Its financial institutions have been well regulated. They have not attempted, as yet, to buy out poorly run institutions elsewhere. They are scaled to the country.

This Bloomberg article lays out the developing problem. The banking failure in the U.K. has all but financially ruined it for some time to come. Yet finance has been an important source of economic growth up until recently.

David Miles, Member of the Monetary Policy Committee of the Bank of England has noted

"And the banking sector in the UK has indeed grown enormously. Banking sector assets – relative to the size of the economy – were fairly stable at about 50% of GDP in the hundred years from 1875 to 1975, but in the last 40 years have increased about 10 fold. They now stand at about 500% of annual GDP. Much of that increase reflects UK banks’ overseas business. But even if we exclude foreign currency assets there has been a huge increase in the size of bank balance sheets relative to the economy; they have risen roughly five-fold since 1980."

Scientific Revolutions emerging from data

This blog is focused on North America and Cascadia in particular. Yet, the challenge of our times is to learn faster than the whelter of change that rushes upon us.

This article in the New York Times contains I believe some key ideas about the changing nature of the world that is being wrought by information science. Computing is fundamentally transforming the practice of science.

It posits four paradigms:

• experimental science
• theoretical science
• computational science
• and now, data-intensive Scientific Discovery

One might conclude therefore that research institutions and research funding programs need to acknowledge this as an avenue of progress and make adjustments.

Bank of Canada takes another tack on jawing down the Canadian dollar

Mark Carney, Governor of the Bank of Canada, spoke to the The National Forum (Canadian Club of Toronto and Empire Club of Canada) on Wednesday, 16 December 2009.

The speech in Toronto contained the following observations.

"Our advice to Canadians has been consistent: We have weathered a severe crisis – one that required extraordinary fiscal and monetary measures. Extraordinary measures are the means to an end: the return to the ordinary. Although we expect the recovery to be gradual and protracted, these measures are working. Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing. It is the responsibility of households now to ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts."

He went on to say:

"Financial institutions should actively monitor risk stemming from households and not take false comfort derived from mortgage insurance and past performance of household credit. As our simulations suggest, the overall credit profile of Canadian households could well shift if debt continues to grow at current rates. The Bank expects that Canada's financial institutions will continue to apply their high standards of risk management, for which they are being justly lauded the world over."

It is a considered speech which seeks to manage the various risks the bank now sees.

One risk of course is that the current downturn will end and that the liquidity that has been poured into the system in Canada and world-wide will lead to an inflationary bubble (likely real estate) that the bank will have to stem with higher interest rates. Inflation management is its primary objective.

The Bank of Canada is going to have to raise rates at some point. When it does the Canadian dollar will rise with adverse effects on Canada's 21st Century industries and older primary industries that are selling into mature and shrinking markets - like the newspaper market. If the rise is too abrupt it will exacerbate east west political tensions within the country.

Another risk is of course that the global financial instability we have seen is only the first wave of change and that consumers and bankers in Canada would be wise to strengthen their balance sheets and reduce their risk.

So the Governor of the Bank of Canada seeks to kill two birds with one stone. He seeks to modify consumer behavior and lending organizations behavior in such a way that he will not have to raise interest rates thus causing the Canadian dollar to climb and he seeks to prepare for the known banking system and sovereign debt risks now emerging in Europe that could easily cause world wide financial reverberations.

The implications of Carney's speech were not lost on investors as this Bloomberg article shows.

Sunday, December 13, 2009

Municipal Expenditure and Taxation Increases not sustainable

This study from the Canadian Federation of Independent Business has some interesting numbers about the growth in local government operating expenditures.

The provincial and federal governments could provide funds for consolidation of local government that would help to bring operating expenses for local government in line with GDP growth.

Canada in better financial shape than the U.S.despite "Socialized Medicine"

This September 2009 statement from the Federal Minister of Finance has a good many interesting graphs that provide an overview of financial trends in OECD countries.

One shows for instance that "The Unemployment Rate in Canada is 1 percentage point lower than in the U.S. for the first time in a generation."

"Canada had by far the best fiscal position among G7 nations going into the current crisis, and is projected to maintain this strong position as it emerges from recession. The OECD projects Canada’s total government net debt-to-GDP ratio will be 32.6 per cent in 2010."

Robotic Perception - two senses integrated

European researchers have integrated sight and sound perception in a robot they have developed under Sixth Framework Programme for research.

Canada's budgetary deficit will need to be tackled starting in 2010

Here is Canada's Department of Finance Update of Economic and Fiscal Projections. It was issued in September 2009 but it has much to recommend it. It is a difficult time to be pulling together projections.

Wednesday, December 9, 2009

Saskatchewan Energy Plan

Dianne Francis recently interviewed the Premier of Saskatchewan for the Financial Post. The story carried by the Calgary Herald suggests a Premier with a clear grasp of energy and environmental issues and the political acumen needed to make progress on both areas.

Saskatchewan might seem like the world's most boring place but that would be a mistaken view. It has 26% of the world's supply of uranium and 10,000 square miles of potential oil sands, which could be recovered through steam injection. It's policy paradigm is important.

Premier Brad Wall's key points:

• We need a North American approach to energy and the environment.
• We need to look at a per capita cost of carbon capture and reduction, and share the load across jurisdictions.
• We need to look at small nuclear technology in the context of tar sands and other applications.
• We need to work together to develop trials of new energy and environment solutions.

New Natural Gas Process - produces water and pure CO2 for carbon sequestration

This Science Daily article reports on "a new type of natural-gas electric power plant proposed by MIT researchers (that) could provide electricity with zero carbon dioxide emissions to the atmosphere, at costs comparable to or less than conventional natural-gas plants, and even to coal-burning plants. But that can only come about if and when a price is set on the emission of carbon dioxide and other greenhouse gases" The fuel-cell based system produces clean water that could easily be treated to provide potable water as a side benefit.

This might be very attractive to Saudi Arabia where water is scarce and expensive and gas is abundant. It may also have implications for Athabasca tar sands production since water is a constraint as is CO2 production from burning natural gas to extract the oil from the sand. Alberta is working on carbon sequestration facilities so this appears on the surface as a natural fit.

The modular nature of this energy technology is attractive from an investor standpoint. (It has that quality that helped cell phones take off globally – the exact opposite of satellite phones where up front investment costs for the geostationary satellites killed the potential.) The key though is, of course, as the article states the "carbon pricing".

Astounding Changes are occurring in the Natural Gas Industry in North America

This article from the Canadian Gas Association provides an overview of the industry in North America, the shift from conventional gas to shale gas and the impact on gas prices. This is a development that wants to be followed closely because if the trend holds it could remake the North American energy market and the political fortunes of states, provinces and political parties.

North American Energy, Environmental and Economic Policy - a perfect storm?

Canada has a problem with a rapidly rising currency. The problem is caused by two factors better financial management than the U.S. and rising energy and resource exports. These two forces are driving the Canadian dollar upward against the U.S. dollar threatening 21st century high technology exports and threatening regional stresses.

The question is how can this problem be turned into an opportunity?

One possible solution is to create a common North American currency. This is not an approach that citizens north and south of the 49th parallel are perhaps ready for as yet. It is a challenge to develop consensus within countries never mind on a continental basis. There simply isn't enough "political capital" to go around. (This will occur as the EU strengthens and China and India move to center stage.)

As the economy ignites the Bank of Canada is going to have to increase interest rates in advance of the U.S. which in turn will place more upward pressure on the Canadian dollar.

Already the property market in Vancouver, the inflation "canary in the coal mine", is "hot".

Long term economic competitiveness and social well being will be enhanced by productivity improvements and a low carbon infrastructure. Countries with high carbon economies will be penalized by trade partners in the decades ahead. It is a metric that is normally outside the boundaries of normal fiscal and monetary policy.

Canadian policy makers could use a carbon tax as a Canadian dollar "regulator" while accelerating transition to a low carbon economy which would in the long run provide for early economic adjustment of the infrastucture. All nations are going to have to make this adjustment.

To "pay down" the "environment debt" early could simultaneously put downward pressure on the Canadian dollar, improve prospects for a high technology exports and improve long term productivity. Funds from a carbon tax could be invested in carbon reduction and capture projects that move the northern half of North America to a "atmosphere management paradigm". Carbon taxes must not be used for "consumption" and must focus on carbon efficent infrastructure investment.

The Bank of Canada is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent. Their December 8 press release lays out their public expectations.

"The Bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2 per cent target in the second half of 2011."

My view is that this is wishful thinking and part of an effort to talk down the Canadian dollar. I suspect that they are going to have to raise rates much sooner.

Employment in Canada rose by 79,000 in November, bringing the unemployment rate down 0.1 percentage points to 8.5%.

Here are the Stats Can figures.

In the U.S., the rates of unemployment are also falling and they now stand at 10.5 percent.

Government spending is expected to level off in Canada but not in the U.S. in the New Year. This may dampen the development of inflationary pressures in Canada but it may not. The key point to be made is that the two North American economies (north of the Rio Grand) are unlikely to move in sync and as a result increased pressure on the Canadian dollar is likely over the next two years and perhaps beyond depending on global demand for energy and resources.

B.C. at Copenhagen

It appears that B.C. representatives have been handing out leaflets in Copenhagen. The story

"Campbell saying that he will be in Copenhagen next week to support the federal government and also to "represent British Columbia as a sub-national jurisdiction that is taking significant steps towards addressing climate change."

Campbell's government took a difficult first step in moving to tax carbon risking a loss at the polls in the election that followed the decision. The NDP (center-left party in B.C.) argued for a cap and trade system at some indefinite future date and opposed the carbon tax. The B.C. Liberal approach is therefore already beginning the long task of shifting infrastructure over to a low carbon model where other jurisdictions have yet to step up to the plate.

The U.S. Environmental Protection Agency(EPA): "Green House Gases a threat"

The EPA has long had within its power the legal power to act to regulate greenhouse gases. The finding that green house gases are a threat opens the door to regulation should Congress not agree on legislation. It is a timely finding as the U.S. goes into negotiations in Copenhagen and is a form of checkmate on forces seeking to block climate change initiatives. It gives President Obama a big stick with which to encourage a legislative approach that would likely be preferred on both sides of the aisle.

This EPA news release describes the finding. Here is an interpretation of the finding from Davis LLP.

Moore's Law - potential barrier overcome

A new 'spintronics' technology is being developed to reduce power consumption: in present-day computer chips, where excessive heat production is a problem.

This Science Daily article covers the story.

Saturday, December 5, 2009

Global Financial Management - the Tide is Turning

In Canada, the stimulus package to deal with the global economic downturn is coming to an end in the New Year. The debt accumulated in a rush to keep employment up (and tax revenues up) now has to be paid off. The spending tap is now going to have to be throttled back.

"There is no free lunch."

Federal and provincial governments are going to have to start shrinking budgets to deal with the fall in tax revenues in the downturn and begin to start paying back the debt accumulated in the rush to boost the economy.

This is going cause a lot of screams about "insensitive" governments but the alternative of higher taxes or higher debt would in the long run lead to underperformance in the economy and both higher taxes and fewer services. Economic prudence always pays off! Local governments that saw money being thrown at them from senior governments are going to have to control expenditures or see taxpayer anger.

There are further international economic "hits" for OECD countries to deal with for a number of countries are going to default on their debts. It will probably not occur for a couple of years but the warning signs are clear.These are countries that have mismanaged their economies for a long time. They will be bailed out, of course, but its going to cost the international community and there will be social dislocation in those countries. And make no mistake, it will be the relatively well managed countries taxpayers that will foot the bill. In Europe, it will be Germany.

"There is no free lunch."

Countries that have managed down their debt and not suppressed their currencies artificially will do better in the long run. They will attract new investment and the interest on their debt will be lower which ultimately will allow them to retain social programs and deal with issues like rising health care costs associated with aging populations.

Canada after a long period of tough decisions was able to cut its debt to GDP rate after years of profligacy that had run up the public debt. Increased public debt depressed its currency. Unfortunately, the depression of its currency, while it increased exports, did not increase its long term competitiveness. The result today is that many Canadian industries are not internationally competitive because they depended on a cheap Canadian dollar, not on introducing better processes and management. It will in its relative strength have to deal with a rising Canadian dollar which is going to lead to serious adjustment problems as it shifts to industries where it can be competitive.

In the U.S. the situation is different. The downturn was deeper owing to years of bad financial management. Public and private debt were allowed to rise too high. It will be some time before the U.S. is able to start the process of paying down the debt built in the years proceeding the downturn and during the downturn to reinflate the economy (to prevent an even larger calamity.)

So the message is clear. Senior government largess in the form of public expenditures is about to end. First in Canada,then in one OECD country after another as domestic economies reinflate. A second message should also clear. There will be further economic shocks on the international financial system in the years ahead (like the secondary shocks of a large earthquake). Countries should prepare for those as soon as they can to minimize the shock on their economic and social framework.

Wednesday, November 25, 2009

President Obama to Attend Copenhagen Climate Talks

President Obama will travel to Copenhagen on Dec. 9 to participate in the United Nations Climate Change Conference.

Here is the statement from the Whitehouse

North American Currencies define North American Agendas

You may have noted that I have added a North American currency trend line to the home page of CascadiaPrime. NA Currency in the banner.

This paper, "The Dollar and the Deficits: How Washington can prevent the Next Crisis", by C. Fred Bergsten, Peterson Institute for International Economics lays out the specifics. He says "Even as efforts to recover from the current crisis go forward, the United States should launch new policies to avoid large external deficits, balance the budget, and adapt to a global currency system less centered on the dollar.

It offers advice you have heard here, and from others, and it goes on to suggest some reforms to the international currency regime. All of the above are related to North American security in the widest sense.

I have added the currency trend line because it is a defining change in North South relations and it will force significant political change in Canada. (As will addressing root problems in the U.S.)

At some point in the global economic recovery, the Bank of Canada is going to have to raise rates to stem what could be a very nasty round of inflation. (Housing prices in Vancouver are already arguable over-heated.) When interest rates rise the Canadian dollar is going to rise at an accelerated rate with serious regional consequences. Political leaders would do well to start considering next steps.

Post Carbon Economy Adjustments

The move by the world to reduce carbon emissions is going to involve some of the most challenging political problems of our times between nations, between regions in North America and within jurisdictions. The thing about policy is that it often spills over into other areas. The law of unintended consequences is going to play here as the world moves to a new equilibrum.

This paper from the Pulp and Paper Industry in B.C. points to interjurisdictional difficulties as different governments choose different policy options. Harmonizing North South and East West is a challenge for Cascadia.

On November 2, 2009, Premier Gordon Campbell announced that the Province will establish a Green Energy Advisory Task Force and a new Cabinet Committee on Climate Action and Clean Energy.

The Advisory Committee has four advisory task force groups:

• Green Energy Advisory Task Force on Procurement and Regulatory Reform
• Green Energy Advisory Task Force on Carbon Pricing, Trading and Export Market Development
• Green Energy Advisory Task Force on Community Engagement and First Nations Partnerships
• Green Energy Advisory Task Force on Resource Development

I will hazard the opinion that jurisdictions that manage this well can gain significant economic and social advantages and those that do not will do poorly. A key ingredient will be political capital. This will take the form not only of the political capital of the leaders but also the consensus or lack of it within jurisdictions.

Inexpensive green energy is going to advantage regions and industries. Existing infrastructure will alternately lever off or brake adjustments.

My impression is that public awareness of the pending changes is limited and when certain businesses fail because they cannot adapt, this will come as a great shock.

Brain Focus Mechanism Uncovered

A study at the Kavli Institute for Systems Neuroscience and Centre for the Biology of Memory at the Norwegian University of Science and Technology (NTNU) has turned up a mechanism that allows the brain to focus. Information between brain regions is carried on top of gamma waves. What appears to be happening is that lower frequencies are used to transmit memories of past experiences, and the higher frequencies are used to convey what is happening in the present.

Here is an article carried in Science Daily on the discovery. Unless I am mistaken, this could be an important breakthrough for reverse engineering consciousness (AI) for without focus the "coordination" of specialized brain regions aka specialized information processors cannot be accurately simulated. Of course, there are a variety of inter-region brain communication vehicles but this will be one more that AI researchers can add to their list to be simulated.

Tuesday, November 24, 2009

High Performance Computing (HPC) a new growth industry for Cascadia

On Wednesday, November 18, I reported on an IBM story of the simulation of a cat brain. Today, I found an IEEE Spectrum story: Cat Fight over Cat Brain that is so scathing a commentary on the announcement that I am reluctant to provide a link to it. You can do your own Google or Twitter. IBM has responded and defended the accomplishment and this should be read as well.

High Performance Computing (HPC) is however "growth" industry with lots of challenges and enormous potential. Cascadia states and provinces should be following developments there closely because in the decades ahead "giant nodes" of "intelligence" are going to dot the landscape of the planet and they might as well be here. They will represent the "future economy". And we would do well to make a point of offering uninterupted, low cost, green power to them.

This audio and PowerPoint presentation (34 minutes) provides an overview of HPC and the recent conference in Portland.

Monday, November 23, 2009

Pension Reform idea led by Cascadia provinces

The idea, being led by British Columbia and Alberta, is to create a widely accessible option beyond the Canada/Quebec Pension Plan - a broad-based, low-cost simple pension plan or plans to help the one in four workers in the private sector who have no workplace pensions and others who want to add to their retirement funds.

Here is the story

Advanced Research Projects Agency-Energy (ARPA-E) Funding High Risk High Payoff Energy Projects

Patterned after DARPA, ARPA - E the U.S. Department of Energy's ARPA-E has selected 37 projects to pursue breakthroughs that could fundamentally change the way energy is used and produced.

The breadth of the funded projects speaks to the complexity of the problem.

There are the funded projects.

Friday, November 20, 2009

Nanotechnology to boost energy conservation

About 60 percent of all the energy produced by burning fuels or generated in powerplants is wasted. Efforts reclaim that lost energy may well be given a boost by current efforts underway using nanotechnology.

This story from Science Daily describes one potential approach to reducing the global carbon footprint.

Thursday, November 19, 2009

Canada's political center of gravity shifting

Lawrence Martin, who writes in the Globe and Mail (one of Canada's top ranking newspapers) commented in a recent article about the political shift that has occurred in Canada in recent years.

"Another significant boost for conservative interests was the continued decline in influence of statist, left-leaning Quebec. Much to the chagrin of westerners, this province had set, with one Quebec prime minister after another, the Ottawa agenda going all the way back to the 1960s. But, in this decade, the focus went west, where the resource riches lay and where the population was moving. For the first time, Canadians elected what could truly be considered a western-rooted government, one highly attuned to the free-market spirit of Alberta."

"The celebrated advent of Mr. Obama made the trend line in Canada look all the more remarkable. We had customarily tacked left of America. Now that dichotomy was seemingly disappearing. The liberal rise in the United States had little or no reverberation north of the border, where the Harper Conservatives appeared to becoming more entrenched."

I take the view that without more fundamental change, in terms of distribution of powers, the east west tensions will mount. It remains to be seen how long the Harper government can straddle the East West divide in the absence of electoral or constitutional reform.

Meanwhile the Canadian dollar continues to rise adding to political pressures for reform in Canada. This site charts the steady rise in the Canadian dollar.

Wednesday, November 18, 2009

Moody’s Investors Service has confirmed British Columbia’s AAA credit rating - the cycle of virtue brings its rewards.

Here is the B.C. Government's press release. This item is a few days old but should not go unremarked. Well managed budgets mean that borrowing costs are lower and public services in the longer term can be increased while keeping taxes manageable.

Sound financial management also should help to attract investors and create jobs.

Cascadia's Salish Sea now official!

Here is the story. It is important for two reasons: it acknowledges the commonality of this ecological zone and it demonstrates a strengthening regional consciousness.

Computing Revolution gathers momentum

An exaflop, or a million trillion calculations per second, (one quintillion) will likely arrive around 2018. If you are over 50 then a decade seems like a heart beat.

Plans are afoot to take us there.

An estimated 11,000 people are gathering in Portland, Oregon for the 22nd annual supercomputing conference, SC09. Their focus is now on the next supercomputer performance goal: an exascale system.

Results of massively parallel cortical simulations of a cat cortex, with 1.5 billion neurons and 9 trillion synapses, running on Lawrence Berkeley National Laboratory's Dawn Blue Gene/P supercomputer, were presented by IBM and LLNL researchers today at the SC09 Conference on High Performance Networking and Computing.

"The simulations, which incorporate phenomenological spiking neurons, individual learning synapses, axonal delays, and dynamic synaptic channels, exceed the scale of the cat cortex, marking the dawn of a new era in the scale of cortical simulations," according to the ACM proceedings abstract.

Here is the IBM Press Release

One reference from the press release: "The long-term mission of IBM’s cognitive computing initiative is to discover and demonstrate the algorithms of the brain and deliver low-power, compact cognitive computers that approach mammalian-scale intelligence and use significantly less energy than today’s computing systems."

Mammalian = human ie. reverse engineering human consciousness....and more.

Carbon Dioxide Emissions are up by 29 Percent Since 2000

Here is the story from New Scientist.

And a dozen lesser known chemicals are acting to warm the earth. Here is the story in Science Daily.

Monday, November 16, 2009

Trade Collapse Analysis

Just in time manufacturing contributed to the radical collapse of trade

This article and related articles on this economist's site are looking at the different contributing factors to the largest slowdown of world trade since the 1930's.

Canada least corrupt in the America's

Transparency International has identified Canada as the least corrupt country in the America's. Some parts of Canada are better than others.

Here is the story in the Vancouver Sun. The location of the photo is no accident.

Transparency International does good job of focusing the bright light of international attention on the dark corners of the world. Corruption is keeping billions in poverty. Their website is listed in the Opportunities and Hopes section of CascadiaPrime.

Saturday, November 14, 2009

Emergency Climate Change Possibilities

The Royal Society is the independent scientific academy of the UK and the Commonwealth dedicated to promoting excellence in science. In September, it produced a report Geoengineering the climate - Science, governance and uncertainty that looks at the range of alternatives.

There are merits in Plan "B"s. It remains a possiblity that current forecasts of climate warming are underestimating the potential of non-linear effects (See Chaos Theory) I have added to the link to the GeoEngineering section of CascadiaPrime.

Earth's Oceans at risk creating a wider risk

We take the oceans for granted. They cover three quarters of the planet. They are vast. Yet the life within them created the earth's atmosphere as we now know it. And they are not just salt water for as Craig Venter discovered "We found at least 1,800 new species and 1.2 million new genes. This doubles the number of all other genes known on the planet. And this was in the Sargasso Sea alone. Wait until we release the data from the global sampling expedition."

Many years ago I read a novel, the Lord's Pink Ocean. I hope it is not prophetic for it envisaged a dead ocean where a "red tide" killed all life even up continental rivers. What we do not and cannot know is whether the ocean can be "stable" going forward as man depletes the biodiversity of the oceans and alters its chemical composition. The atmosphere as well as the oceans could come under threat if acid levels rise and chemicals create unknown biological impacts.

The notion of "punctuated equilbrum" plays here. We may well find that stability is irrevocably lost. The biosphere needs to be managed. (Simple statement - the political equivalent of the fusion power challenge.)

Friday, November 13, 2009

Progress on the Nuclear Fusion Front

New Scientist, found in the S &T section of CascadiaPrime, reports on the progress being made in bringing commercial fusion power within sight. As CascadiaPrime has pointed out repeatedly the planet needs as many options as possible. An international consortium known as ITER is going to build a prototype in in Cadarache, France. The cost is likely to run $10 billion. If it saves the planet it will be pocket change.

In a separate article, New Scientist reports:

"After decades of effort to improve the behavior and output of fusion plasmas, scientists are discovering that nature may actually be so kind as to simultaneously allow high performance (lots of electricity!), optimal efficiency (affordable!), and high reliability (the electrical outlet will always work!) in the design of future power plants."

Research continues but there are no "sure bets" for the survival of humanity along this path.

Yet fusion power holds the promise of providing a clean energy avenue that could not only save the planet's biosphere, it could also allow mankind to move to what Nikolas Kardasev and Princeton physicist Freeman Dyson referred to as a Type I Civilization.

Wednesday, November 11, 2009 - Remembrance Day

Productivity Key to future

Yesterday, I noted that new ways must be found to boost productivity in government. The Calgary Herald carried this story on a TD Bank Report

"Canada’s lacklustre productivity -- masked in recent years by the commodity boom and then largely ignored through the financial crisis -- threatens to slow income growth and dampen living standards over the next decade, economists at Toronto-Dominion Bank warned in a report Tuesday."

As mentioned here before, Canada's richness in resources is a very mixed blessing. It provides funding for schools, universities, hospitals, highways and pensions for our seniors. At the same time the export of resources to world markets is driving the dollar up and has the potential to squeeze out start up next generations industries where most new employment will come from as robotics squeezes out many "resource based" jobs.

Modernization of government - "right sizing" it could bring productivity improvements that would allow us to increase living standards while stepping up to the costs of meeting our obligations to deal with climate change.

Tuesday, November 10, 2009

Water - Natural Capital - being exhausted globally

According to the former chief economist of the World Bank water is the biggest world risk. This article from the Telegraph provides some interesting numbers presented at the Goldman Sachs "Top Five Risks" conference.

Here is the Executive Summary of the STERN REVIEW: The Economics of Climate Change

The complete Review is available courtesy of Google books. The Stern Review and the IPCC report disagree on the costs of climate change but both "costs" of "managing the climate" seem a good deal less than the alternative - given the secondary impacts of migration and war likely to result from inaction.

This article suggests:

"The Stern Review of the economics of climate change found that extreme climate change could cause damage costing around 20% of GDP, whereas the IPCC report estimates that climate policy could cost 1–4% of global GDP. "Safe climate policy is clearly seen to be socially efficient," writes van den Bergh. "The slogan used by some environmental NGOs is surprisingly appropriate: 'the most expensive climate policy is doing nothing'."

Water shortages combined with unsustainable population growth rates in a number of moslem countries, notably Yemen, are going to create future conflict zones dangerously close to the world's principal energy supplies.

This Overseas Development Institute (ODI) presentation by Margaret-Catley-Carlson provides further insights and suggests cross impacts between energy and water. It also provides overview maps of North American water use.

The World's Biggest Problems

The Arlington Institute, a West Virgina based think tank, has a list of the worlds biggest problems:

• Economic Collapse
• Peak Oil
• Global Water Crisis
• Species Extinction
• Rapid Climate Change

The Arlington Institute's criteria for selecting these problems?

"The World’s Biggest Problems portal has a simple, clear mission: educating people all around the world about the biggest problems facing humanity. These problems have two criteria, they must be global in scope, and have the potential to rapidly escalate into severe crises.

As noted before in this blog there are a number of ways to "slice and dice" global challenges to focus attention and to provide a mental scaffolding for solutions. This is one. I don't find it appealing but then managers may not like all the things their employees are doing but one thing they need to ask: Is the herd heading west? Clearly the Arlington Institute is "heading west".

It is about Focus and Integration Funding

When countries reorganize they often spend a good deal on inward energy rather than addressing international issues and exercising leadership on global management. The European Union has organizational issues to address before it can effectively address global challenges.

Good government is about focus and how to manage the inward and outward attention balance. Clearly the U.S. personified by President Obama, but realized by the totality of the U.S. governmental apparatus, has this problem now. Is Obama trying to do too much or is this simply a measure of the times and the needs of the times. I would argue the later.

This issue of focus is a key and critical issue going forward for as North America coalesces and reorganizes a good deal of "limited attention time" will be spent internal to the continent.

This is where U.S. states and Canadian provinces can provide leadership with aid of the Federal levels of government. Harmonization efforts can be stretched out over decades as was the case with the European Union but new tools are needed.

The upper levels of government can assist this effort with a new funding vehicle. When a business changes its processes, there is an initial cost that must be borne to realize future savings. The same holds true for business mergers.

With government however it is very difficult to win public acceptance of change for the short term triumphs over long term thinking. Tax increases now for tax reductions later is seldom a proposition that sells. Add to this the resistance of elected officials and public employees who see "downsizing" and you have a recipe for "stasis" aka chronic gridlock.

The states and the provinces could tackle this "problem" by creating "Integration Funds" to be applied for by towns, cities and municipalities that would be more effectively governed in larger entities. This creates a "social innovation" that can be copied. Most innovation occurs by diffusion. These funds would have to be "applied for" and there would be no "directed quality' to this plan.

At the Federal level in Canada "Integration Funding" might make the whole proposition of "Atlantica" a good deal more saleable to the region's residents while encouraging reduction of overheads that make ongoing "Equalization Payments" a sore point in many parts of the country. Canadian Cascadia could similarly be funded perhaps starting with B.C. and the Yukon first while Alberta and B.C. continue to "harmonize" laws and standards and build "common" infrastructure.

In the U.S. a similar program might allow regions (Oregon, Washington, Idaho) to coalesce over a period of time again with the intent of increasing the effectiveness of government and reducing overheads of so many "highways departments" and legislators. For historical reference the Tennessee Valley Authority which might be seen as the progenitor of a multi-state "project" coalescing around common goals.

As someone once said as long as you keep doing the same things you can hardly expect to get different results. To achieve better results "process re-engineering" of government is essential.

The climate initiative of the Western Provinces and States was an example of a regional issue and regional leadership that has borne fruit at the national level. Similarly the TILMA initiative of Alberta and B.C. has led to real progress nationally at reducing inter-province trade, labour and investment barriers.(Note: clear opposition comes from labour groups to "productivity" enhancing initiatives.)

Leadership comes where you find it. It comes when it is exercised. "Integration Funds" are an idea whose time has come for the rate of change in North America from technological and global change is only going to accelerate. Mechanisms must be found now and built now for early adoption and adaption to change.

Monday, November 9, 2009

CascadiaPrime Reorganization

I hope that you find the new look of the CascadiaPrime Home Page pleasing and useful. This is the first phase of changes to CascadiaPrime.

Energy - Natural Gas ?

There are signs that natural gas could be a "game changer". This article from BBC News implies too that not all share this view. However, the geopolitical implications of shale gas makes it something worth tracking.

Preparing Leadership for tomorrow

The Singularity University (SU) has an Executive program designed to educate, inform and prepare executives for the imminent disruption and opportunities resulting from exponentially accelerating technologies.

SU suggests there are six fields experiencing exponentially accelerating change:

• AI and Robotics,
• Nanotechnology,
• Biotechnology and Bioinformatics,
• Medicine and Human Machine Interface,
• Networks and Computing Systems, and
• Energy and Environmental Systems.

I am interested in the grouping of sectors. They are all tightly interrelated with cross impacts so it is a challenge to organize them meaningfully.

They also need to be linked to financial capital, human capital, natural capital and political capital if the BIG THREE GLOBAL ISSUES are to be managed.

It would be interesting to know how many "political and governmental leaders" attend the program.

Sunday, November 8, 2009

Atlantica - Sign of the Times

You know that an idea has merit when the extreme left and the extreme right in North America are in agreement. In this case it appears to be the left that doesn't like the idea of North American Unity as expressed in the proposal for Atlantica. I haven't found any extreme right groups commenting on Atlantica but I am sure they are out there given their reaction to NAFTA.

Somehow it always amazed me that folks in the Maritimes failed to acknowledge, much less recognize, that their plethora of governments is only made possible by subsidies from the rest of the country aka "Cascadia" provinces and Ontario. (Equalization Payments) What is more they seem never to recognize that this cannot reasonably be sustained indefinitely and that somehow a suburb of Vancouver, B.C. with a greater population could have less representation than the Province of PEI at the Federal government level and that somehow this was ok for the citizens of that suburb.

And now there is Atlantica Watch.

StopAtlantica is not a large group obviously but it is representative of a group also found in Cascadia that basically are part of the far left that oppose any effort to improve productivity or any effort to resist featherbedding government unions.

They can be noisy at times though. They are actually conservatives in left clothing aka they do not like change and for the most part are still trying to come to terms with the 20th century never mind the 21st century.

G20 discuss global financial restructuring

Nature asks only one question of a design: Does it work? Nature doesn't always - in the random play of events - throw up good designs. But, in the end better designs emerge in the never ending "roll of the dice". Thus it is with global governance. Evolution plays in governance too.

Sometimes governance fails catastrophically - like the former Soviet Union or Mao's great leap forward and with the League of Nations. Sometimes governance goes through rough patches as the democracies did in the 1930's and as we are going through currently.

The G20 has (as been noted here before) been growing in global importance. It is now the premier economic governing council for the world. Unlike the G7 or G8 it includes India and China - which is really an significant step forward.

To repeat an earlier blog observation: "There are three planetary issues that require global governance. Finance is one area, safeguarding the planetary environment is another and last but not least is the control of violence - the 21st century means of violence - principally nuclear and biological weapons but also asymmetric warfare.

Nation states even the most powerful and those allied with them cannot independently manage these 21st century challenges. This is something that many have not yet wrapped their heads around both on "main street" and in the many corridors of ostensible "power". This problem requires the creation a new kind of sovereignty - a sovereignty that asks the question can you manage within your borders what has been globally agreed to by all for the good of the planet. Some states lack the political capital. Some simply have never managed all within their borders - Pakistan is an example.

The G20 is an attempt at global financal governance. This article examines some of the issues and the progress or lack of it. The issues are simultaneously very basic but also very complex given the political capital of various governments or the lack of it.

Here though is the "telling" statement from that article: "G20 countries will now submit economic plans for 3 to 5 years at the end of January for mutual assessment in April. Policy options would then be developed for leaders to consider in June with specific recommendations to be made next year."

Put more simply, since everyone has their hand on the global financial steering wheel, we better agree on some issues or we will be in the ditch again in short order. We are moving toward better financial governance.

It is why too that I believe that for global governance purposes, we need "fewer hands on the wheel" by moving to continental scale governments.

Wednesday, November 4, 2009

B.C. Economy could benefit from Independent Power Projects

Independent power projects could spur economic growth in B.C. The Vancouver Sun carries an article about recent PricewaterhouseCoopers study suggesting the independent power sector could inject $26.1 billion into the British Columbia economy by 2020.

Tuesday, November 3, 2009

Salish Sea - the Cascadian Sea - getting closer to realization

The addition of a place name to the body of water shared by B.C. and Washington State which share a common bio-region is getting closer. From tiny acorns do mighty oaks grow. Here is one of the stories on this name change.

What does this signal? It signals growing awareness in government if not the media of regional and continental commonality and community. A quick Google of the "Salish Sea" will turn up more news items.

The "Sage of Omaha" buys more of Cascadia Railroad - Burlington Northern

Warren Buffett's Berkshire Hathaway Inc is to buy the rest of railroad Burlington Northern Santa Fe Corp for $26 billion.This story suggests that Buffet is betting on coal. I think that improbable. I believe he is betting on "peak oil" and the migration of much of current heavy truck and vehicle transport to "efficient" rail.

What he is buying is low carbon "rail beds". Watch the prices for railroads go up globally for a new "railway age" is about to begin. It will prove to be one of the smartest investments Buffett has ever made. Anything related to "new" carbon emissions is going to get more expensive. It follows that "old investments" in transportation infrastructures like old rail beds are currently "underpriced".

China holds the bulk of U.S. Debt - some worry

China and the U.S. are like binary stars in orbit around each other. They both have an interest in the global survival of humanity which is in doubt over the next 50 years if appropriate global management practises are not put in place.

Many would doubt the impending environmental challenges in the decades ahead. I will give you another. North America has the largest exportable supply of grain in the world - protein. China holds U.S. dollars with which to buy this grain in times of need just as it has a strategic reserve of oil should the Middle East erupt.

Anyone with any knowledge of China's history will know that famine has stalked the land repeatedly. China has an enormous population and environmental challenges not least of which is the encroaching desert. Climate fluctuates. Food is security. U.S. dollars = food = security. China and the U.S. will work together. As the Economist's October 24-30 edition titled their issue on China and America, they are "The odd couple." China has lots of reasons to work with North America, Europe and India.

How are we going to stop global warming over the next twenty-five years?

Nuclear power is getting more play these days in the media - if only because the alternatives have serious shortcomings. This New York Times article carries some of the alternate views. Stewart Brands comment that "nuclear power will qualify for carbon credits this time, the way it didn’t at Kyoto" may well be a sea change for nuclear power globally. What many critics of nuclear do not appreciate is that the technology is rapidly evolving and that many countries do not have the low hanging fruit "efficiency" savings to pin their hopes on in the short term - they need more power to lift living standards and reduce poverty. They can't save themselves rich.

The World Energy Organization has issued its World Energy and Climate Policy: 2009 Assessment. This PDF is one of the definitive documents available if you want to understand global energy trends, issues and solutions.

Continental Think Tank Resources - few and far between

" The Woodrow Wilson Center established the Canada Institute to explore one of America's most important bilateral relationships, but one that gets far less attention in Washington than it deserves. For most Americans, Canada is—in the words of former U.S. Ambassador James Blanchard—"the invisible world next door."

There are other think tanks that focus on continental and north south relations. As time goes by I will add them to this site. Who knows, CascadiaPrime may yet be found by political science departments in North American Universities.

Saturday, October 31, 2009

North America's Ambassadors settling in to their new jobs

I have always believed that where possible it is good to go to primary sources. This speech by the U.S. Ambassador to Canada at the Economic Club should be read in its entirety.

Canada recently appointed a new Ambassador to Washington. His name is Gary Doer a former Premier of the Province of Manitoba. He hasn't yet made any speeches available on the Canadian Embassy's website. When he does I will provide a link to it.

These two men have a great responsibility. They must win the hearts and minds of the people of this continent to a continental outlook. Current media filtering is a problem.

One of the interesting numbers Ambassador Jacobson threw out: Canada is home to more than a million Americans. I expect that the same holds true going the other way for almost every Canadian family has a U.S. relative or close friend.

Bank of Canada Chairman

Without doubt the job of Governor of the Bank of Canada is one of the toughest jobs in the country.

Mark Carney, Governor of the Bank of Canada spoke to the House of Commons Standing Committee on Finance on October 27, 2009. His opening remarks are here.

I would draw your attention to this statement:

"In addition, a stronger-than-assumed Canadian dollar, driven by global portfolio movements out of U.S.-dollar assets, could act as a significant further drag on growth and put additional downward pressure on inflation."

What the Governor did not mention was that the impact on the country could be very regional in nature. (See my October 29, 26 and 24 Blogs) The Governor is between a rock and a hard place.

I am reminded of an old story:

It seems a man was brought before King Soloman for some offense punishable by death. He said "please great king, if you spare my life, I can teach your horse to talk." King Soloman said, "very well..you have one years reprieve.Teach him."

The mans friend remarked, "why did you promise him that? That's crazy!"

The man said, "yes, but in that year, I may die, Soloman may die, the horse may die... or the horse may learn to talk" I suspect Carney is hoping for the best and bidding his time hoping against hope that the slide of the U.S. dollar against the Canadian dollar will magically go away - that the horse will learn to talk.

It will be interesting to see if he has anything like an exit strategy from the unsustainably low interest rates that currently prevail in the country. Perhaps he is counting on a slow U.S. recovery to provide a buffer.

Insights from the Bank of Japan

It is good every once in a while to look elsewhere for a different perspective. The Deputy Governor of the Bank of Japan, Kiyohiko Nishimura, in his closing remarks of a recent speech offered a Japanese perspective on some major global trends.

"For the Japanese economy to attain growth that raises people's standard of living amid drastic changes in the world economy, Japanese firms need to address medium-to-long-term changes in the world economic environment. I would like to point out three key changes.

The first change, potentially, is a decline in the sustainable growth rate of the world economy. As mentioned earlier, given that the asset bubble lasted for a long time and spread globally, we may have to wait for some time longer than a typical short-term business cycle until the necessary adjustments are completed. Firms need to respond to this possibility from a long-term perspective.

The second change is the aging of the population, which is developing in every advanced economy including Japan. In an economy where the population is decreasing due to aging, growth in consumption will inevitably slow and the structure of consumption will also change, with the relative importance of consumption by the elderly rising. China, which is enjoying high growth, is also likely to become subject to the effects of an aging population before long, although this issue is seldom discussed.

The third change is tighter constraints from limited irreproducible resources and the ecological environment. Global warming is not an issue for a single country but literally for the entire globe."

Nishimura's changes focus on global financial management and safeguarding the planetary environment. To those I would add the third and that is control of the 21st century means of violence. This are the three drivers of global governance. The era of the nation state controlling events in its borders has been superceded by a new world. Nishimura's talk is not about Japan...it is about the world.

Insights from the Bank of China

The Governor of the People's Bank of China, Zhou Xiaochuan puts forward six scenerios for dealing with the current global imbalances. It is a subtle presentation one that deserves close study. Again China is caught up in the global matrix. No one controls the play. It is interesting too to see the scenario planning techniques originally developed by Shell used so effectively to expound upon what is really a very complex series of global puts and takes over time.

Friday, October 30, 2009

More Progress toward reverse engineering of the human brain.

This press release is rather more complex than the average reader can cope with but the direction is clear.

"The HRL team's ultimate goal is to build a low-power, compact electronic chip combining a novel analog circuit design and a neuroscience-inspired architecture that can address a wide range of cognitive abilities—perception, planning, decision making and motor control."

A quick review of the press release suggests they are making very good progress.

Thursday, October 29, 2009

Energy Storage - the unsolved problem of our time

According to researchers at Los Alamos, the world uses about 17 trillion joules of energy per second, and that rate is likely to double by 2050. This is partly a good news story for poverty is inversely related to power production and utilization.

The problem with the move away from shrinking, unsecure global oil and gas supplies and the movement toward solar, wind and tidal power is that the peaks of energy output do not coincide with demand. (and it is a lot more expensive, and land extensive)

Nuclear, the other low carbon emission technology, does not have this problem since it runs seven - twenty four - three hundred sixty five and can ramp power production up and down to maintain electrical power grid integrity. Moreover it does not litter the landscape and disturb the ecosystems of whole regions.

In North America, about one-third of our energy goes toward heating homes and buildings, one-third goes towards producing electricity, and one-third goes towards transportation.

When you burn an entire tank of gasoline, you free up about 250,000 kcal of energy—a billion joules. It is a very intensive energy form. However, only about 20 percent of gasoline energy is used to move a car, the rest is lost to heat and drive train friction. Electric cars are much more efficient.

Unfortunately, the best battery today has an energy density of around 0.4 kcal/gm. If we want an electric car that performs as well as a gasoline-powered vehicle we need to develop an electrical storage device that has roughly five times the energy density of our best battery. This is going to require a good deal of basic science and a good deal of time.

Global Power Realignment

Energy sourcing and use can be viewed as the defining element of economic and political power and hence the values that will tend to dominate. The British Empire that spanned the globe was built first and foremost on naval technology (harvesting wind energy) This allowed the Empire/Commonwealth to be created and sustained. It was seconded by the agricultural revolution and the industrial revolution both of which were largely about increasing and effectively harvesting available energy. The Empire brought with it concepts like the rule of law and democracy.

The movement away from oil and coal, the chief risks to human civilization on the planet both via the atmosphere and the integrity of life in the oceans, will not be economically and politically neutral and the global climate regime put in place will advantage some regions and disadvantage others. The coal regions in North America, China, India, Europe and Russia will lose.

Countries and regions that put in "Cadillac" green energy systems will lose economically, socially and politically.

One "country" aka region of Europe that appears to be likely to win significant advantage is France. If it can maintain its present nuclear course it is going to possess the lowest cost energy for its industries. It doesn't have much scale but it will be a good deal better off than its nuclear averse neighbours.

My current thinking is that China and India will combine low nuclear energy costs with enormous internal markets and relatively inexpensive labour costs to challenge the OECD countries in the decades ahead. The OECD countries have older populations that frankly have no notion of what is occurring in terms of the energy related power shift occurring. The net result is that public sentiment blocks or substantially delays almost every new power project even when it is "green" like "run of the river power". The net upshot is going to be a very high cost energy structure that is going to damage us economically, socially and politically in the decades ahead. To paraphrase Pogo: "I have found the problem and the problem is us."

Wednesday, October 28, 2009

Copenhagen Climate Talks

Perhaps one of the most important events of this century will be happening December 7 to 18 in Copenhagen.

Negotiators from more than 180 countries are working on a framework for a new climate-control agreement to be signed at the United Nations Copenhagen conference.

As is so often the case, there are really only a few players that count: India, China, the European Union and the U.S. If this seems strange then get use to it. This is the new millenium. "Mom and pop" countries do not count.These economic units are where the vast bulk of energy consumption and CO2 emissions occur and will occur over the next fifty years.

Even if the U.S. and the EU agreed to sharp reductions in carbon it would have no impact on global warming unless China and India are brought on board.

The U.S. has already signed a major agreement with India for the transfer of nuclear power know-how that will help stem the flood of CO2 that will emerge from India as it proceeds to develop lifting untold millions out of abject poverty.

China needs to sign up for firm targets something they and India are not bound to by the Kyoto Treaty.

And the U.S. needs to be weaned of its coal dependency and make progress on the nuclear front if reasonable CO2 targets are to be met. Solar and biofuel and unproven CO2 sequestration are not going to cut it.

This is perhaps the most important global deal-making we will see in our lifetime for nothing less than the future of humanity is riding on these negotiations. And the rules that are laid down will have a major impact on geopolitical power distribution in the next fifty years.

World's fastest computer

Roadrunner the world's fastest computer does over 1 million billion calculations per second, that is 1 followed by fifteen zeros or expressed another way a petaflop. It is ranked number one among the worlds computers clocking 1.105 petaflop/s per second. This is the kind of research that Roadrunner us being used for: modeling the human cortex's vision.

Moore's law sees a doubling of computing capacity every 12 to 24 months.

Urban planners simply have no way of factoring into their planning the overall effects of Moore's Law and the Singularity since almost by definition they are unpredictable. As a result the physical infrastructure for human communities are out of date before the first sod is turned. Discussion rages about traffic calming and reduction of car transportation and the issue of robotic vehicles is not even a matter of public discussion.

Most of what we know is obsolete - even universal's are about to change as transhumanism now nascent takes hold and human capacities are manifoldly expanded and enhanced. The Lifeforce Revolution, the reverse engineering and reengineering of life itself is accelerating.

Monday, October 26, 2009

Central Canada Elites on an inexorable path to the hard reality of the 21st Century

The steady rise of the Canadian dollar is putting Central Canada elites between a rock and a hard place. The continuing fall of the U.S. dollar and the rising demand for the resources of Western Canada will put increasing upward pressure on the Canadian dollar which the Bank of Canada and the Government of Canada are powerless to stop - except for "the unthinkable" - North American Monetary Union (NAMU).

A strong Canadian dollar will improve the competitiveness of the Canadian economy - up to a point. Beyond a certain point it will differentially affect industries and regions and kill 21st century industries.

This pithy opinion piece in the Globe and Mail lays out the case for NAMU and some of the threats that face us. The comments on the article take on a highly predictable tenor. Of course this happens when we have a 95 cent dollar.

Observers should ask themselves what would be the effect of a 130 cent dollar. Central Canada will have to pack up its kit bags and ride the rails to the tar sands because unemployment will hit rates not seen since the 1930's.

This could lead of course to another rape of the oil patch and Western Canada under the guise of equalization and fairness. The results of another round of "energy policy" would end Canada is we know it.

Economic power and population have been moving west for decades yet constitutional reform to reflect this has been blocked by Quebec and "Atlantica". Recent attempts to reform the allocation of seats in Parliament do not appear to be going anywhere any time soon. Eastern elites refuse to acknowledge 21 century power shifts.

The rise in the Canadian dollar is going to accelerate the power shift from east to west. It is also going to force Central Canada and, of course, the "man in the street" to release many cherished illusions about Canada and how the world of the future is going to be organized.

First there will be denial, then anger, then mass confusion then slow acceptance then acceptance. We are entering a period of tumulteous change. Expect a good deal of hysteria as events unfold.

Manitoba, Saskatchewan, Alberta and B.C. would be well advised to prepare for a coming storm both economic and political. British Columbia could be hard hit by a serious rise in the Canadian dollar for lumber, pulp and paper and tourism depend on currency parity with the U.S.

These governments should begin planning now on how to take a lead on this issue for they cannot look for leadership from Central Canada which remains hidebound in a 20th Century mindset. Only concerted leadership from the PNWER provinces will help to moderate the coming crisis.

Friday, October 23, 2009

NAMU in the News

North American Monetary Union (NAMU) is again up for discussion. This Globe and Mail Opinion piece sets the tone for what I expect will be a hot topic over the next year or so. It should at the very least be entertaining to listen to the ostriches of the ancien regime defend the status quo as the sands of time run out.

Significant New Brain Discovery - Time Neurons

This story is a reminder to those who tend to discount discontinuous change that we are on the cusp of reverse engineering the brain and mounting it on silicon. The "timing" mechanism of the brain has been located.

The "time stamping" "neurons are located in the prefrontal cortex and the striatum, both of which play important roles in learning, movement and thought control."

Global Governance - Finance

"National governments need to make way for international authorities to play a greater role in governance, particularly when it comes to finance and trade, says Kenneth Rogoff, a Harvard University professor and former chief economist at the International Monetary Fund." This is the opening line of a Financial Post article by Alia McMullen.

Kenneth Rogoff's comments are among the most cogent I have read in the last year. If you take the time to read his remarks you may come to share with me, the view that the world will go through another boom bust cycle of a similar or larger dimension than the one we are currently going through. The scale of the unaddressed global financial structural problems remains enormous and it is hard to be optimistic about the probable outcome. Wise governments and individuals should pay down debt to prepare for the "lean years" that are sure to come after another burst of unbridled growth set off by "over exuberant" monetary policy across the world and the tidal waves of technological change now building.

The globe's financial problems are less technical than they are political. Economists know, for the most part, the basics for creating the conditions for sustainable economic growth. Political forces frequently lead though to short sighted "national" decisions that are not sustainable and that lead to negative long term impacts on other nation states.

There are three planetary issues that require global governance. Finance is one area, safeguarding the planetary environment is another and last but not least is the control of violence - the 21st century means of violence - principally nuclear and biological weapons but also asymmetric warfare. Nation states even the most powerful and those allied with them cannot independently manage these 21st century challenges.

Global governance is one of the key challenges of our time for if we cannot achieve effective global governance with the sanction of force then the future of the planet will be very bleak indeed.

Wednesday, October 21, 2009

GM part of the global solution

A report by Britain's Royal Society says the world faces a "grand challenge" to feed another 2.3 billion people by 2050 and at the same time limit the environmental impact of the farm sector. It states: "The world needs genetically modified crops both to increase food yields and minimize the environmental impact of farming."

This puts it in direct opposition to Greenpeace and other "well fed" "green" groups' received wisdom on genetically modified crops. Hunger currently stalks a billion people on the planet. The solutions to hunger are complex. GM crops are but a part of the solution.

What many people have not realized is that a "solar economy", including agriculture is a land intensive/extensive economy that will if we are not careful reek havoc with our biosystems and our oceans. To paraphrase one critic, we can build windmills the length of the Allegenys or expand one nuclear power station...what is it to be? Biofuels - same problem. Solar power same problem....whole regions will be blanketed in solar cells and the water requirement for a "solar economy" is going to be enormous in areas that are often short of water.

"We have a problem Houston" - math error biases climate negotiations

"Current carbon accounting, used in the Kyoto Protocol and other climate legislation including the European Union's cap-and-trade law and the American Clean Energy and Security Act, does not factor CO2 released from tailpipes and smokestacks utilizing bioenergy nor does it count emissions resulting from land use changes when biomass is harvested or grown."

The story

I am not very optimistic about the current CO2 negotiations.

I think to that we need to put nuclear on the table if we are going to make any progress with CO2 and that indeed we should pass legislation that mandates it if we cannot meet defined benchmarks in the decade ahead.

We need also to avoid the trap of solving the CO2 problem and covering vaste areas of the landscape with alternate energy "solutions" that make more serious the other eight global environmental threats to humanity on the planet.

Monday, October 19, 2009

Global Financial Management steps known but tough to manage

U.S. Federal Reserve Chairman Ben Bernanke's comments today reinterate what has been known for some time: the U.S. needs manage down its deficit, it needs to increase domestic savings rates, China needs to allow the yuan to float higher and encourage consumption over savings.

Bernanke states:"To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows". The "unsustainable" reference needs to be underlined and repeated.

Global Governance

What many do not yet fully understand is that a global economy requires global governance that has a "political" foundation. The era of the autonomous nation state is in decline. It means to begin with that the era of the "mom and pop state" aka almost all the nation states in Europe is over. Also read - Canada. States of one billion plus, matching economic scales and a standard working language will flourish. Continental scale and legitimacy provided by democracy is what is required. This is what the 21st century is all about. This imperative flows flows from a great deal more than economics.

It flows from the nine planetary boundaries that will limit human habitability of the planet in the century to come. These boundaries flow from requirement to manage: the stratospheric ozone layer, biodiversity, chemical dispersion, climate change, ocean acidification, freshwater consumption and the global hydrological cycle, land system change and nitrogen and phosphorus inputs to the biosphere and oceans.

There are other factors of which more soon.

Wednesday, October 14, 2009

Falling U.S. Dollar a good thing

For all the handwringing in various capitals and financial centers the fall of the U.S. dollar and the rise of many other currencies is good news for the U.S. dollar is moving in a controlled manner to where it should be.

Be assured that the Obama administration is on course to cleaning up the mess left by its predecessors. This is but one of a number of big items that must be addressed. It will also have an impact on U.S. energy consumption for imported oil is going to get more expensive there.

The fall of the U.S. dollar will cause readjustments in countries like Canada and Japan and in Europe but the U.S. balance of payments deficit is not sustainable and was not good for the world.

The rise in the Canadian dollar should bring with it forces for constructive change for it will drive up productivity by forcing the inefficient out of business and by reducing the cost of capital equipment. It will not be without dislocating social changes and political pressures. Ultimately though this change will produce higher standards of living on the North American continent and greater geopolitical security.

It will be interesting to see if the issue of a North American Monetary Union (NAMU) comes up in the current climate. I suspect that there needs to be more "pain" north of the 49th after the saga of U.S. economic woes of the last 12 months. The U.S. economic and political upheaval has created major doubts about the ability of the U.S. to manage its financial affairs and political affairs.

This wikipedia entry nicely sums up some of the financial challenges facing the U.S. in the decades ahead. Among other items of interest it contains a detailed list of which countries are the foreign holders of U.S. public debt. It should unsettle those who think that management of U.S. debt both public and private is not worth sacrificies.

Canada spent a long time digging itself out of debt and reducing budget deficits. I expect the same will hold true in the U.S. It is to be devoutly hoped that Canada gets back on the cycle of virtue of paying down debt as soon as possible.

Despite the current debacle there is growing economic and social alignment north south in North America as gaps in standards of living and social programs are closed. Geopolitical pressures will increase mutual interest and awareness in the decades ahead - 2030 will be a critical year for China's GDP may well surpass that of the U.S. and the Singularity will be upon us.

NAMU is however certainly something that should be on the North American Agenda between the two governments. Here are several papers on the subject.

Overcapacity a looming problem

Global overcapacity is a looming problem for central bankers have cut the cost of new capital investment and command economies like China have been in overinvesting to achieve economic targets and to avoid the political fallout of economic correction at a time of rapid urbanization.

Overcapacity inevitably leads to deflation and stagnation while demand catches up.

Globalization means that overcapacity is no longer national and affects everyone - witness global overcapacity in the pulp and paper market which is wreaking havoc in the communities of Cascadia.

Overcapacity may well come from a new source in the years ahead. Currently we have overcapacity brought on by the logistics revolution. Cheap labour (over capacity) in Asia has supplanted labour in the OECD countries. Automation (part of the logistics revolution too) has also facilitated rapid supply growth.

In the years ahead the impact of information technology on the supply side is going to create yet more capacity growth of unpredictable dimensions. It is not clear to me that central bankers and economists are giving this much weight as they consider money supply growth. (The current global crisis has them busy.) Robotics are making rapid strides as processing power follows Moore's law and as artificial intelligence algorithms crack one "problem set" after another. The labour dislocation is going to grow and social innovation is going to be needed to weather the coming storm.

Thursday, October 8, 2009

Cancer breakthrough wrought by information technology

This blog (perhaps oddly to some for a website focused on a reordering of North America) has continued to focus information technology and related breakthroughs medical developments.

Here is one of the latest:

"For the first time in history, BC Cancer Agency scientists in British Columbia, ... have decoded all of the three billion letters in the DNA sequence of a metastatic lobular breast cancer tumour, a type of breast cancer which accounts for about 10 per cent of all breast cancers, and have found all of the mutations, or "spelling" mistakes that caused the cancer to spread." The Press Release The paper announcing the results was published in the prestiguous scientific journal Nature.

As the journal Nature put it: "The flow of human genetic information is growing into a deluge: from fully sequenced human genomes to genome-wide association studies (GWAS) to personal genetic tests."

Over the next two decades we are going to see not only the decoding of diseases we are going to see major revisions in world views based on our very different understanding of what it means to be human.

Public health issues that currently render north south political realignment "moot" are going to fall into the background as the revolution in medical affairs gathers momentum and the reverse engineering of the human brain now underway (See Big Brain The Origins and Future of Human Intelligence by Gary Lynch and Richard Granger as a starter) begins to bare tangible fruit.(The Singularity)

North American political unit realignment is not going to seem nearly as "radical" by way of comparision.

Monday, October 5, 2009

Personalized Medicine - ruffling traditional health cares sub-routines

The Human Genome Project sequenced the first genome at a cost of roughly $1 billion. Biology is now an information science. IBM is targeting to achieve that for under $1000 and eventually for under $100.

Here is the New York Times article.

The global health care debate is about to enter a new phase.

Monday, September 28, 2009

Changes in Borders

TED Talks frequently provide serious food for thought. There are aspects of this TED talk by Parag Khanna with which I disagree. I think that his China comments and Russia comments are correct. Borders that are fixed and immutable are problematic for technology, economics and demographics constantly build new "natural" boundaries. Khanna acknowledges this and observes that change is not a "bad thing". Some countries need to divide and others need to be merged.

Scale has always played in infrastructure that supports economic activity and political and military power. As players like China and India emerge on the global stage then lesser players will of necessity need to "scale up" to play in the game. Europe is scaling up through economic and political integration. North America needs to do the same.

Khanna's talk entirely missed North America, South America and India. It also missed the central driver of global integration "Planetary Space for Humanity Defined" (see my September 25 blog) which is a dimension not discussed in traditional geopolitical analyses.

Saturday, September 25, 2009

North American Integrative Forces building

This Calgary Herald article,"U.S. Climate Debate why the U.S. needs more Canada", states the obvious: the U.S. has only one stable supplier of energy - Canada - and 60 percent of its supplies are external to it.

This will in time encourage the U.S. Senate and U.S. House of Representatives to get literate on the north half of the continent and to spend more than a nano-second on North American affairs.

If you agree with this basic assertion and you are a citizen of the U.S. then email your representatives with a link to this blog.

Of Tea Parties

Canada is essentially gridlocked due to an immovable constitutional framework. The thing about the world is that "Things Change" whether you, or the powers that be, want them to change. The laws of physics command it. Things change smoothly or they change abruptly. There is no other way. Pressures denied are pressures building for abrupt change. The collapse of the Soviet Union and the Iron Curtain came suddenly - gradual change is to be preferred.

Canada's gridlocked power structure has ignored steady demographic and economic changes for a long time. Pressure has been building for reform. Now a rather clever "loop hole" has been found - a method and an argument for reform is brewing - growing the number of seats in Parliament. (God knows we have too many powerless Members of Parliament now, but it may be worth the price.) (Power is still overwhelmingly concentrated in the Prime Minister with almost no checks and balances.)

This Globe and Mail article lays out the avenue of pressure release.

This is a non-trival power shift that is building.

Canadian politics and policies have been dominated by Quebec for a very long time and the Western provinces in their values and interests have become estranged despite Central Canada's strangle hold over public and private media through control of the legislation, agencies such as the CRTC, Federal spending, tax power and grant power.

If there was to be legislation changing the Canadian constitution to accommodate the West there would be screaming headlines. What may occur is a back door shift of power that is needed to avoid the inevitable "Boston Tea Party" as on the ground reality shifts.

As political power moves west, north south relations will intensify for the West places more value on the individual than on the collective - a sharp distinction from most french speakers from Quebec and Ontario. (caveat : new immigrants sometimes have collective biases and we have many.) A North American approach to governance will shift the levers of power to the center of the continent away from current power centers and closer to the West.

One way or another, on the ground democratic power is going to be reflected in governance in Canada.

Planetary Space for Humanity Defined

This overview begins the process of laying out imperatives requiring global governance. All governance decisions in the decades ahead must begin with these safeguards for humanity.

Adult illiteracy highest in Canada's political center of gravity

The Canadian Council of Learning has produced this online map of illiteracy in Canada. Canada's political center of gravity is in Ontario and Quebec and the Maritimes (Atlantica). The map speaks for itself. This caveat: most advocacy organizations overstate their case.

B.C. has the lowest illiteracy rate in Canada and it continues to invest heavily to reduce illiteracy.

Nearly $1 billion has been invested in literacy and literacy-related initiatives since 2001, which includes over $154 million in new literacy initiatives to support preschool aged children, K-12 students, and adult learners. The Facebook story here

Wednesday, September 2, 2009

The Planet is getting hotter

A new report finds that unless future efforts to reduce greenhouse gas emissions are much more successful than they have been so far, additional action in the form of geoengineering will be necessary if we are to cool the planet.

The story here

Saturday, August 29, 2009

Canadian Trade Deficit

"Falling exports to the United States caused Canada’s current-account deficit to swell in the second quarter to a record high of 11.2 billion Canadian dollars ($10.4 billion), cementing expectations that the economy contracted in the quarter."

The New York Times article here.

According to the Globe and Mail: "The value of Canadian imports exceeded that of exports for the first time in more than 30 years in the second quarter, a humbling blow for a trading nation that reflects the country's dependence on U.S. consumers.

The Globe and Mail article,

Energy Security

The powder keg that is the Middle East suggests that North American security in the decades ahead demands action on making defense forces energy secure.

The Brookings Institute Foreign Policy Paper Series, Number 17, authored by Jerry Warner and Peter W. Singer suggests that "The DoD should set a clear and measurable target to reduce the baseline total consumption of energy in the Department of Defense by 20 percent by 2025 and to be a net-zero energy consumer at its bases and facilities by 2030."

I am a strong believer in setting targets. The Canadian military should be setting similar targets.

Thursday, August 27, 2009

Bank of Canada Jawboning

A Financial Post story carried in the Vancouver Sun, quotes a senior Bank of Canada official that the bank would use quantitative easing if the Candian dollar rose further.

Malarky! The dollar fell but there is no way the Bank of Canada will intervene to arrest the rise of the Canadian dollar.

B.C. Revenues Plummet

Plummeting revenue is going to make for difficult public policy decisions in B.C.over the next while.

Friday, August 23, 2009

Synthetic life perhaps as close as one month from now

As reported in New Scientist:

"Genome-sequencing pioneer Craig Venter and his team have devised a way of smuggling an "alien" genome into unwitting bacterial cells. The new technique takes the scientists one step closer to their goal of creating novel microorganisms with entirely synthetic genomes."

Venter hopes this biological milestone will be possible in just a month or so. Venter's quest for synthetic life is aimed at creating purpose-built organisms that can carry out specific roles, such as producing biofuels or hydrogen.

His goal is to solve the problem of global warming, to win energy independence from petroleum producers and end global poverty.

Ventor, who first cracked the human genome, outside of the then existing publically funded effort earned him the enmity of many on the left.

Ventor

AI and the human body

The human body is almost infinite in its complexity, which is to say, it is beyond the human mind to "remember" all the interrelationships between its piece parts. It follows therefore that only "machine intelligence" will be able to fully comprehend, mend, maintain and enhance individual human beings with surity. This process has begun.

Buffet warning to U.S. leadership

The Sage of Omaha Warren Buffet has issued a warning about the rising U.S. debt. The United States has a deficit of $1.8 trillion or 13 percent of gross domestic product this year. The U.S. needs to cut expenditures and increase taxes. This message needs to be absorbed by American voters and it is time for business and social leaders to deliver this message forcefully to U.S. voters. It is called quite simply "living beyond ones means".

The absence of voter and therefore congressional consensus on economic management imperatives imperils the U.S. and the whole world.

We live in "One World", and when the world's largest economy is not well managed then everyone in the world will suffer.

The U.S. in the last twelve months also ran a negative $639.5 billion trade balance which is also not sustainable and a threat not only to the U.S. but to the global economy. The U.S. dollar needs to fall if the U.S. balance of payments is to return to healthy levels.

The current global "economic crisis" remains a crisis as long as the U.S. cannot build a consensus around debt reduction. A deficit represents future taxation. It means saddling our children and grandchildren with taxes in a unpredictable world where increased taxation may not be supportable.

Eliminating energy dependency, a long term project, is at the very core of ensuring that North American economic and social progress continues and that North America remains pre-eminent in the century to come.

Robotic Health Care

Cost containment of rising health is front and center in all OECD countries. A new survey suggests nurses are open to the idea of robots.

It follows that if fighter pilots can have "heads up displays", then following Moore's Law, nurses will see more and more of portable information technology that can give them "situation awareness" on a ward.

And if soldiers can be provided with exoskeletons to carry heavy equipment then nurses will be provided with similar devices to move patients. The process has begun but "the mindset" for innovation here remains nascent.

Vancouver Sun Editorial on controlling health care costs

Some messages deserve repeating. Health care costs need to be controlled. In one of its better editorials the Sun noted:

"Catastrophizing, online psychologist John M. Grohol once explained, is an irrational thought a lot of us have in believing that something is far worse than it actually is. A more cynical definition might be that it is making others believe something is far worse than it is."

The editorial takes the New Democratic Party "out behind the woodshed" and gives it the "public hiding" it so richly deserves.

Health care spending accounts for 42 per cent of total government spending in B.C. Health care expenditures are up 5.8 percent. Innovation is what is required for, in a time of reduced government tax revenues, we cannot expect to spend our way to better health care.

If you keep doing the same things, you cannot expect to get different results. Health care managers need to find different ways of doing things and all health care practitioners need be part of the push for innovation - too many are "change resistant".

Too many do not understand that they are "part of the economic system" as well as health care providers. When you take 42 percent of all tax dollars you are part of the economic system. Get over it.

Wednesday, August 5, 2009

Bioengineering Proceeding apace

We are in the midst of a sea change.

The biological sciences are producing one breakthrough capability after another. Tooth regeneration has just taken a giant leap forward.

This item, courtesy of Science Daily, reports on the regeneration of teeth in mice.

Brain Research - psychopaths' brains are different

This report from Science Daily further unmasks the physical causes of mental illness, strengthens science's causality chain and undermines a number of ideological paradigms on both the left and the right on the causes of human behavior.

Synthetic Genomics coming to a factory near you soon

Life as we know it is being transformed. We can now read genetic sequences directly into computers, where the code can be replicated exactly, manipulated freely, and translated back into living organisms by writing the other way. (See NYT TierneyLab)

"We can program these cells as if they were an extension of the computer," George Church announced, and proceeded to explain just how much progress has already been made.(See Edge)

Electric Cars and North American Utilities

Nissan is introducing an electric vehicle in 2010. The initial data looks impressive in terms of affordability and practicality for a significant share of the market.

The crunch will be on for hydro electric companies to deal with this new demand for power. Fortunately it will be for off-peak power.

BC Hydro is preparing for the growth in electric cars. Nevertheless, like Apollo 13, it should be issuing a call "Houston, we have a problem". It is a capacity problem.

Megawatt: B.C. Renewable Energy Blog

The law firm of Clark Wilson has a blog that comments on renewable energy issues in B.C.

It is not clear that the BC Utilities Commission legislation up to date with the current global imperatives. This is what the Megawatt blog had to say about the recent BCUC decision on BC Hydro's 2008 Long Term Acquisition Plan which shocked the BC renewable energy industry and energy observers.

New Energy Report

A recurring theme of this blog is the importance of energy independence.

"With a sustained national commitment, the United States could obtain substantial energy-efficiency improvements, new sources of energy, and reductions in greenhouse gas emissions through the accelerated deployment of existing and emerging energy technologies, according to America's Energy Future: Technology And Transformation, the capstone report of the America's Energy Future project of the National Research Council."

The report is available here

Three Laws of Responsible Robotics Rewrite

Issac Asimov's three laws of robotics have inspired a generation.His novels however deal with problems where the laws did not work. The human mind and the robotic minds currently under development and patterned after the human mind are more complex.

The three new laws are found here.

I expect that as deconstruction of the human mind proceeds over the next decade and as robotics growth accelerates we will see further elaboration of these laws.