Tag Archives: economics

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Tunisia, Egypt… where next?

All that talk over the last few years about the ubiquity of instability? Starting to look a lot less like cynical doomsaying, ain’t it?

Via BigThink, Le Monde Diplomatique gets all brow-furrowed and chin-strokey:

Put simply, global consumption patterns are now beginning to challenge the planet’s natural resource limits. Populations are still on the rise, and from Brazil to India, Turkey to China, new powers are rising as well. With them goes an urge for a more American-style life. Not surprisingly, the demand for basic commodities is significantly on the rise, even as supplies in many instances are shrinking. At the same time, climate change, itself a product of unbridled energy use, is adding to the pressure on supplies, and speculators are betting on a situation trending progressively worse. Add these together and the road ahead appears increasingly rocky.

Chickens coming home to roost… as the West’s privileged lifestyle begins its decline, the rest of the world finally starts demanding its cut of the cake. And this isn’t a religious backlash, or even a classic left-right political clash. It’s plebs versus politicos, the governed lashing back at the governers, and the intertubes are certainly playing their part… but they’re just the conduit, not the cause:

That protests so large in scale could be organized largely over the internet and independent of Egypt’s traditional opposition, particularly the Muslim Brotherhood, should give Egyptian President Hosni Mubarak plenty of cause for concern, says Shadi Hamid, director of research at the Brookings Institution’s Doha Center. It shows the extent to which regular Egyptians are fed up with authoritarian rule, and how quickly that frustration can spread—lending it shades of the uprising in Tunisia. “It’s not an Islamist-organized protest. This really is unprecedented. It’s just everyday Egyptians getting angry,” he says. “If I was a regime official, I’d be pacing in my room right now.”

John Robb is unsurprisingly enjoying a “told you so” moment, and suggesting routes forward for this new insurgency:

For an open source revolt to be successfully formed, it needs a plausible promise.  A meta issue around which all of the different factions etc. can form (remember, most of the groups and individuals involved in an open source revolt can’t agree on anything but some basic concepts).  A generic “day of revolt” doesn’t accomplish that. What could?

Using the multi-million scale No Mas FARC protests as an example and the critical ingredient in the Tunisian protests (extreme corruption that generated an endless wellspring of anger/frustration), a potential “plausible promise” for an Egyptian open source revolt is:

No More Corruption

Not only is a movement opposing corruption something the government will find hard to oppose, it is something every Egyptian deals with on a daily basis.  It also has the added benefit of directly harming the entrenched ruling elite, who are likely to become poster children of the very thing the movement is against.

Hey, kids – can you think of any nation closer to home where citizens have to deal with corruption on a daily basis? Places where budgets are being slashed, where the quality of life is tanking, but where the folk at the top of the pyramid are doing better than ever?

Yeah, me too. Interesting times ahead.

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100% renewable energy by 2030?

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“Yeah, right,” I hear you say… and that’s pretty much what I thought as well. But a new study says that, on paper at least, an all-renewable energy infrastructure could be built within just two decades of today… and built is the operative word:

Achieving 100 percent renewable energy would mean the building of about four million 5 MW wind turbines, 1.7 billion 3 kW roof-mounted solar photovoltaic systems, and around 90,000 300 MW solar power plants.

[…]

Delucchi and colleague Mark Jacobson left all fossil fuel sources of energy out of their calculations and concentrated only on wind, solar, waves and geothermal sources. Fossil fuels currently provide over 80 percent of the world’s energy supply. They also left out biomass, currently the most widely used renewable energy source, because of concerns about pollution and land-use issues. Their calculations also left out nuclear power generation, which currently supplies around six percent of the world’s electricity.

To make their vision possible, a great deal of building would need to occur. The wind turbines needed, for example, are two to three times the capacity of most of today’s wind turbines, but 5 MW offshore turbines were built in Germany in 2006, and China built its first in 2010. The solar power plants needed would be a mix of photovoltaic panel plants and concentrated solar plants that concentrate solar energy to boil water to drive generators. At present only a few dozen such utility-scale solar plants exist. Energy would also be obtained from photovoltaic panels mounted on most homes and buildings.

Of course, the technological plausibility of an all-renewable energy economy has always been theoretically understood. So why does it seem so unbelieveable?

The pair say all the major resources needed are available, with the only material bottleneck being supplies of rare earth materials such as neodymium, which is often used in the manufacture of magnets. This bottleneck could be overcome if mining were increased by a factor of five and if recycling were introduced, or if technologies avoiding rare earth were developed, but the political bottlenecks may be insurmountable.

Ah, yes – the p-word. Might’ve guessed that’d crop up in there somewhere. The saddest thing of all is the lost opportunities for political solutions that pushing for even a quarter of this vision would create: massive building programs would create loads of jobs and envigorate flagging economies, at the same time as removing major sources of atmospheric pollution and the incentive to go to war over increasingly scarce fossil fuel resources. Pretty much everyone would stand to benefit… except that tiny percentage of people currently profiting from the status quo, of course.

But were I to suggest that they were involved in spending millions of dollars on obfuscatory political chicanery and misiniformation campaigns to prevent the status quo from shifting, why, I’d be some sort of rabid conspiracy theorist! After all, everyone knows the real conspiracy is being masterminded by neoMarxist extremists masquerading as climate scientists, right? Right?

[ I really shouldn’t need to point out that the last few sentences there are meant to be read with a tone of extreme sarcasm, but – what with this being the internet – consider this a disclaimer to that effect. And to pre-empt the other obvious objection, I strongly suspect the 100%-by-2030 projection is ludicrously optimistic, even were global agreement and cooperation toward that aim within grasp; however, the underlying point is that the technology exists right now, and we’re not using it to even a fraction of its potential. ]

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Toward the New Middle Ages

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If I were to say “the 21st Century could end up looking politically very similar to the 12th Century“, you’d probably think it a fairly grim prediction. But it’s actually more optimistic than it looks at first glance. Take it away, Parag Khanna [via MetaFilter]:

This was a truly multi-polar world. Both ends of Eurasia and the powers in between called their own shots, just as in our own time China, India and the Arab/Islamic community increasingly do as well. There is another reason why the metaphor is apt. In medieval times, the Crusades, and the Silk Road, linked Eurasia in the first global trading system […]

Now, globalisation is again doing much the same, diffusing power away from the west in particular, but also from states and towards cities, companies, religious groups, humanitarian non-governmental organisations and super-empowered individuals, from terrorists to philanthropists. This force of entropy will not be reversed for decades – if not for centuries. As was the case a millennium ago, diplomacy now takes place among anyone who is someone; its prerequisite is not sovereignty but authority.

Some see contrary trends in the light of the financial crisis. But given the power of the forces pushing a new medievalism, it is too simple to speak of a “return of the state” evident in the bail-out of Wall Street and the stimulus packages of governments. Far more revealing about the future is the crumbling of most of the post-colonial world from Africa to the Middle East to South Asia, where over-population, corrupt governance, ethnic grievances and collapsing infrastructure are pushing many states towards failure.

[…]

The only missing piece, of course, is America. The Middle Ages was pre-Atlantic. Yet today we have the legacy superpower of the US, located in the new world. If the European Union today plays the part of the Holy Roman Empire, then the US is the new Byzantium, facing both east and west while in a state of relative decline. The Byzantines lasted for many centuries beyond their material capability, through shrewd diplomacy and deception rather than by force.

This new world will mean huge challenges, for the west in particular. But if the US applies a genuinely Byzantine strategy, it has a good chance of stopping a slide into conflict. And remember that, despite its bleak reputation, the Middle Ages was actually an era of great invention and discovery – and one which eventually gave way to a great Renaissance too. As we witness today’s great power grievances mount and fear another world of war, we must remember the same is possible today.

Something to chew over, especially for those who still talk of the US in terms of global political leadership. You can choose to play for all or nothing, or you can play for a place at the table… and the same applies for everyone else.

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Hackers could skim microtime cream from stock markets

As if I needed more reasons to mistrust the wild and wacky world of high-frequency trading [via SlashDot]:

High-frequency trading networks, which complete stock market transactions in microseconds, are vulnerable to manipulation by hackers who can inject tiny amounts of latency into them. By doing so, they can subtly change the course of trading and pocket profits of millions of dollars in just a few seconds […]

[…] the root of the problem is the increasing speed of networks; as they get faster and faster, our ability to actually understand events taking place within them isn’t keeping up. Network monitoring technology can detect perturbations in network traffic happening in milliseconds, but when changes occur in microseconds, they’re not visible, he says.

Basically, if you can exploit these tiny differences in latency, you can make your trade before your rival, and get a better profit. For doing, y’know, sweet f*ck all.

Given that the above article comes from an IT news source, this problem is being framed as a hack or exploit; I dare say there’s a lot of trading firms who’d see it as more of a “competitive edge”.

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Goldfacebookman: bubblenomics ahoy!

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So, Goldman Sachs is investing in Facebook. Lots of furore in the media: Facebook’s worth US$50billion, you know! Well, given recent events, I’m not sure I’d trust Goldman Sachs to accurately value anything other than their own scaly skin, but there you go. My cynicism is largely uninformed and instinctive, but smarter folk than I are looking beyond the gloss:

… you can look at the economics and note that Goldmans is buying under 1% of an illiquid stock, thus valuing the whole 100% at $50bn, and that to justify such a valuation at maturity (at say c 5x revenue valuation, like Google) would imply revenues of $10billion. Given that it already claims c 500m users (1/8th of the world’s online population, because as we know, there are no false accounts on Facebook) it is hard to believe much more than a doubling of users, so say 1 billion users. So, $10 bn over 1 bn users is $10 per user per annum (vs c $4 today), or say $1 / month. Sounds possible, except you have to remember that many users hardly use the system, and social media ads tend to have CPM in the fractions of pennies, so you are having to believe they can ship hundreds of thousands of Ads to each person each month, or can sell online goods – ie demi-freemium funding – but that typically only attracts c 5% of users, so you are looking at $20 per month per paying instead.

My take – Don is right, the good assets are expensive, but $50bn is a valuation based on a microstake. Goldman Sachs are not fools, but this is basic bubblenomics – and bubbles are built on the Bigger Fool Theory, ie there will be bigger fools who will buy these shares from Goldman. When you see private Facebook shares being sold to the “Man on the Street” its time to run for the hills.

Here’s the kicker:

The one sure thing you can tell from this is that Facebook clearly can’t self fund itself enough for what it needs, even on $2bn turnover a year.

And here rephrased by Ian Betteridge:

A web site which has 500 million users, 1/8th of the entire population of the Internet, doesn’t have a business model capable of supporting itself.

Ouch. More interesting still is that Goldman are inventing some brand new voodoo finance stunts specifically for this gig:

What Goldman Sachs is proposing to do is create a $1.5 billion, so-called “special-purpose vehicle” — a term that could only have been conjured on Wall Street — that would allow its high-net-worth clients to invest in Facebook.

The participants in Goldman’s Facebook “special-purpose vehicle” would not be considered Facebook owners “of record,” but rather “beneficial” owners. In other words, for the purposes of the Securities Exchange Act, Goldman’s Facebook “special-purpose vehicle” would constitute one owner “of record,” no matter how many Goldman clients participate.

Thus, it would appear that Goldman Sachs and Facebook are attempting to avoid SEC disclosure rules and allow Facebook to remain private for as long as possible, but still make it easy for Goldman’s rich clients to invest in the company.

The SEC is apparently keeping an eye on things, but you’ll forgive me, I hope, for not taking that as an assurance that some seriously shady shit won’t go down anyway. Are our memories really so short? Ooooh, look – shiny!