'Delightful' prioritisation

Writing about the Australian bushfires, Bloomberg Opinion email today carried this paragraph:

You’d think this sort of thing would be a topic of political conversation, but David writes there is bipartisan silence on the issue in Australia, and media there have taken an oath of omertà as well. The reason for this is coal: Australia exports a lot of it, and nobody wants to kill that carbon goose laying golden eggs. It’s a reminder of how hard it will be for the rest of the world to set aside short-term concerns and make any real dent in climate change.

Indians would be ‘pleased’ to see that they are not topping this chart, that Bloomberg carried along with the story.

For me, the interesting point in the ‘quote’ above is how human behaviour is enduring, regardless of technological advancement, a fact that few grasp and even fewer accept.

STCMA 8th December 2019

It has been two weeks since I blogged here. I have not lived off suitcases before but that has happened since late October or at least since mid-November. While I have been reading reasonably widely, I have not been able to translate them into posts. I did finish reading ‘The road less travelled’ by Scott M. Peck. A very good book. A good recommendation by my friend Balaji Ethirajan, Head of Human Resources at TVS Supply Chain Solutions. I have been wanting to post some key extracts from the book. But, have not found sit-down time to do so.

Anyway, here goes some key readings:

This long story in Nikkei Asia Review about Softbank’s investments in India and their mixed performance is a good reminder of how chasing growth at all costs always comes a cropper and yet investors keep repeating the same mistakes.

Raghuram Rajan’s long article in ‘India Today’ on the prescriptions for the Indian economy is about as objective and as balanced as he could be, considering his recent presentations and op.-eds., on this matter.

The story about how the keyword, ‘Mike’ in Bloomberg Terminals took terminal users to the campaign page of Michael Bloomberg is delightful.

A tongue-in-cheek story about riots boosting GDP in France is short and useful too because the riots caused France to increase public spending and the country’s Purchasing Managers’ index is doing better than that of the rest of the Eurozone.

On November 22, China’s National Bureau of Statistics quietly revised the GDP for 2018 upward by 2.1%. That it makes it easier for the country to achieve its goal of doubling GDP in a decade from 2010 to 2010 is incidental, I suppose.

Blackstone’s Private Wealth Management Division calls negative yields on sovereign debt the mother of all bubbles. Quite.

Amundi Asset Management’s Survey of pension managers on the impact of QE on their pension assets is featured in FT here. For those who want the full story, it is available in Amundi website. A few keystrokes would help you find it.

On California Forest Fires and risks of flooding in the US, check this link. The article also says that the Netherlands has addressed flooding risks well. The FT story on Sydney bushfires is worth a read. Delhi feels like a anti-haze haven! Actually, when I landed in Delhi on 3rd December evening, I was very pleasantly surprised to see how clear Delhi was from the sky. I had not experienced such a sight in several years.

If you want to see photos of the damage wrought by Australian bushfires, click this link. Apparently, Australia is experiencing one of its worst droughts in decades.

The White House has opposed a USD1 bn bank loan to China. Should not be surprised.

Martin Sandbu’s long read on how the Euro is taking on the US dollar is more a story of hope than promise or substantive reality. American Treasury officials would not spend sleepless night after reading this story.

I must learn this practice of how not to have to read books in full.

Take your pick

In May 2019, ‘The Economist’ wrote thus:

Global meat-eating is on the rise, bringing surprising benefits: As Africans get richer, they will eat more meat and live longer, healthier lives [Link]

Fast forward, more than six months later,

How much would giving up meat help the environment?: Going vegan for two-thirds of meals could cut food-related carbon emissions by 60% [Link] – ht: Saurabh Mukherjea of Marcellus Investments

Law of unintended consequences

A long New York Times article on the ‘chaos’ created by ordering from home which is about avoiding the chaos of shopping in real brick-and-mortar shops. Quite apart from the emptying out of High Streets in many cities, this has other costs too, as the article says. So, in the end, who bears the costs? Consumers actually pay less for their product. But, who pays for the associated costs. They are externalised. Neither party to the transaction bears it but the society. What is the answer? Collect more taxes from both?

Africa has lots of land and let us plant trees there. It will absorb global CO2. That is the thought process. Is that really correct? Another instance of unintended consequences or the road to hell being paved with good intentions. Article here (ht: my former student Arjun Aathish)

Theatre of the absurd

The title of this post refers to the Climate Change Summit held recently in New York coinciding with the annual session of the UN General Assembly. As a former Minister (Amanda Vanstone) in the Howard (Australian) government wrote, it is even politically incorrect to write against the manufactured outrage. It was theatre. See her piece here.

Of course, agreeing with her comment on the meaning of the protest speech by Greta Thunberg does not mean that one has to agree with her on the relative contributions of nations to carbon emissions.

A timely publication by Deutsche Bank Research puts the global challenge in perspective:

Possibly, the key elements of the climate action package are a fairly accurate reflection of the German public’s attitude towards climate protection. It is illusory to believe that a rapid “grand transformation”, the maximum demand of some climate activists, would be supported by a democratic majority in Germany.

Although 61% of Germans voice concern about climate change, according to a recent survey conducted by the Allensbach Institute, “only” 33% are willing to pay higher energy prices for climate protection. And just 21% are in favour of a CO tax. The respondents either prefer further incentives to stimulate behavioural change over financial burdens, or they are pinning their hopes on technological progress towards climate-friendlier products. Moreover, a majority of Germans (rightly) believe that Germany and Europe by themselves can do little to mitigate climate change. [Emphasis mine]

Source: Germanyʹs climate action package – Foul compromise or a reflection of society? Deutsche Bank Research, 25th September 2019 (www.dbresearch.com)

That is right. Everybody thinks that everyone else should pay for mitigating climate change. Also, a vast majority of those who claim to be immensely worried by the havoc that climate change is wreaking and could wreak are unable to make meaningful changes to their lifestyles. That is what Deutsche Bank research says.

This paragraph is even better:

These survey results fit in well with actual human conduct: Private transport continues to rise more or less steadily, the average house size per capita is edging up, demand for electronic consumer goods is increasing across all generations, and consumers are only gradually becoming aware of how much food is actually being wasted. Moreover, fossil fuels still account for 79% of primary energy demand in Germany. The upshot is that the average citizen is not (yet) prepared to drastically reduce every-day consumption, even though more and more Germans claim to have cut down on their consumption in some areas for climate protection reasons.

The climate doomsday train left the station long ago. A chart in ‘The Economist’ published in 2012 showed how much humans have compressed economic activity into a very short time-span. If one is unable to understand the full import of the chart, then, there is no way to understand the time for redemption is long gone. I cannot reproduce the chart here lest I am accused of copyright violation. Here is the URL.

Over 23% of all the goods and services made since 1 AD were produced from 2001 to 2010, according to an updated version of Angus Maddison’s figures.

That is more output than the first nineteen centuries combined.

The 20th century alone produced 55% of all output since Christ (since 1 AD). If we remember that the first half was marked by two world wars, an economic depression and hyperinflation, then bulk of that 55% must have been produced in the second half of the 20th century. Therefore, humanity has produced output in the sixty years to 2010 many times more than the rest of the 1950 years combined.

No wonder that climate, environment and whales are protesting and wish to be restored. It is too late, methinks. Here is one proof:

Forest and land fires burning in Indonesia have released 360 million tonnes of carbon dioxide since August, said Singapore’s Minister for the Environment and Water Resources Masagos Zulkifli on Thursday (Sep 26) [Link]

Economic growth amidst sinking cities

A story in Mint on my way to the Mangalore airport from Bekal last Sunday caught my attention. Kerala has borne the brunt of extreme rains last year and this. More importantly, human non-response or even callousness has compounded it. It is one thing not to be prepared for climate change and its fury. It is another thing to put ourselves in a disadvantageous position. See this:

In sharp contrast, in another corner of the state, public protest is preventing the state from tearing down four urban apartment complexes near Ernakulam city, as ordered by the Supreme Court on 6 September. The court found that the flats are built in a no-construction zone, close to ecologically fragile backwaters. It set a deadline of 20 September, but the occupants of these flats, including movie star Soubin Shahir, are fighting the order and garnering public sympathy and support across the political divide. [Link]

On the same day or next, I picked up the story of Bangkok and Jakarta sinking and the plans of the Indonesian President to shift his country’s capital out of Jakarta.

The developing world does not have the luxury of not minding the climate as it minds economic growth and prosperity. As they try to live like the West did – without worrying about the environmental consequences- they are coming up against the fast deteriorating climate caused by the actions of their developed country ‘seniors’. Not fair, one might say.

It is also used as a clever weapon to keep the prosperity gap between the two – Developed and Developing – wide. Stories such as this and this (ht: Arjun, my former student) leave me with mixed feelings. They are too tough on developing countries and it involves a growth penalty on them. This is another one of the ladders being kicked away by the developed world.

Well, climate change (extreme weather, rather) and its consequent impact on the environment are realities.

Developing countries have three tasks: (1) they have to do what needs to be done to save their cities and lives. (2) They have to find the money for it. (3) They have to keep up the moral pressure on the developed world to finance them. But, will it pay off? I doubt. Those guys in the West have lived profligately and do not have money to pay for their own unemployed and the elderly. It is a tough road and, to me, looks like a dead end, at least for now.

See here for a news-report on India’s demand for climate finance pledges made by the developed world to be met. The story also has the link to a discussion paper that India had released prior to the Climate Change summit held this week on Monday.

Exceptions apart, for the most part, the world will bicker over who will finance the battle against climate change induced calamity while it continues to cause havoc. On top of it, humans will continue to focus on short-term prosperity goals and not long-term sustainability.

Monsoon forecasts

The June 2019 Monthly Bulletin of RBI has an article on the accuracy of monsoon forecasts by India’s Meterological Department and Skymet, a private forecaster. The conclusion of the paper is sobering:

There is no significant correlation between the projected rainfall (IMD and Skymet) and actual rainfall in India. While none of the forecasts are close to the actual, the performance of the IMD’s SSLRF is better than FSLRF and Skymet. Both IMD and Skymet have failed to predict drought and excess rainfall in most of the cases. Nevertheless, the SSLRF nailed down the 2015 drought and its probability of predicting near-normal monsoon has been reasonable and higher than FSLRF and Skymet. In contrast, the predictive power of the international agencies, viz., BOM and NOAA in forecasting extreme rainfall (which generally coincides with the El Nino and La Nina conditions) is much better than that of the IMD. The comparative assessment of all forecasts suggests that for generating macroeconomic forecasts, the use of IMD’s SSLRF and the predictions of international agencies like NOAA and BOM in conjunction may be appropriate as the preliminary forecasts of IMD (FSLRF) and Skymet released in April appear to be noisy. [Link]