America's law abiding gun owners... stupid or evil?

Ah, a nice provocative blog title.

That's a HK-417, by the way.

One thing which gun owners and 2nd amendment lovers fail to understand is expressed in one of their better known arguments.

Banning or restricting guns, they say, will have no impact upon their misuse by criminals. The criminals, they say, will always have access to guns. Banning or restricting the sale or guns will only ever affect the law abiding gun owners. Is this what you want, they say? Less guns in the hands of those unlikely to misuse them while the criminal element still has theirs?

This reasoning is specious for a number of reasons.

The first is that one of the best policies for reducing illegal gun ownership is to have a gun-buyback scheme, whereby guns are turned in to police stations - with no questions asked - and those who turn them in are compensated with money. This sort of policy would work very well amongst the criminal and near-criminal class of people, as they will then have to weigh up their ownership of a weapon with the potential for financial rewards. Any successful gun-reduction policy requires a scheme that would remove illegal firearms from the people who own them, and a no-questions-asked gun buyback scheme is a proven policy used by other countries.

The second reason, however, is more sinister because it casts doubt upon the so called "law abiding" gun owners. The fact is that very few guns are manufactured illegally. There may be some people somewhere who can turn scrap metal and chemicals into a rudimentary firearm and bullet but the mass-production of firearms is conducted legally. This is important, because when manufacturers sell their goods, they sell them legally. Therefore it is logical to assume that every single firearm in America started its life off in the hands of a legal owner. So how did they end up in the hands of criminals? Why are millions of guns owned illegally when every single gun started its life off being owned legally? Simple: The legal gun community is providing the illegal gun community with the weapons that they demand, and are making money out of it. Certainly some guns are stolen by criminals, but the vast majority of illegally owned guns were sold by their legal owners to the illegal owners. So what happens if you restrict gun sales to legal owners? Eventually the illegal owners will have less weapons. Simple as that.

So are law-abiding gun owners stupid or evil?

If all of America's millions of illegal guns have come from criminals stealing them from legal gun owners, then this indicates that there are a huge amount of very stupid legal gun owners out there who just can't seem to keep their weapons secure.

Personally I don't buy that. I think it is far more likely that there exists a substantial amount of legal gun owners who make money from selling their guns onto the black market. By the way If you're a legal gun owner reading this, I'm not saying that this is you.

And also: I am not calling for the removal of all guns. I am calling for much tighter restrictions than there already are, as well as the banning of certain weapons from sale.

And such an attitude is not against the 2nd amendment. The US Constitution allows citizens the freedom to travel throughout the US, but this doesn't mean that planes, trains and automobiles aren't subject to government legislation. In the same way the 2nd amendment allows citizens the right to own firearms to defend themselves, but the government still has the power to regulate what sort of firearms can be used for this freedom. Otherwise people can own their own nukes.


Unleaded petrol and Australia's prison population

In 2007, collective eyebrows were raised around the US when a researcher made a link between leaded gasoline and crime. His argument was that the introduction of unleaded gasoline in the US in the early 1970s had the effect of reducing crime amongst present day adults who were born after leaded gasoline began to be removed. There was, he argued, a 20 year "lag" between the cessation of leaded gasoline and a lowering of the crime rate.

Naturally people (including me) were skeptical. Surely this was a classic case of "correlation does not mean causation". There was, however, something to it. The idea is that lead has been proven to cause all sorts of psychological problems in people who have ingested too much of it. What this researcher argued was that, in the days of leaded gasoline, children were exposed to higher amounts of lead, both in the atmosphere and on surfaces. Although the amount of exposure was small, it did cause some level of deformation in brain development, which meant that, when the children got older, they would more likely have behavioural difficulties and more likely to break the law and end up in jail. By removing lead from gasoline, children began to grow up with less brain deformation and were less likely to commit crime when they got older. In the United states, the phasing out of leaded gasoline took place in the early 1970s, which meant that US crime rates in the 1990s would've begun to fall. And this was so.

The 2007 New York Times article about this strange relationship can be found here.

Here in Australia, leaded petrol began to be phased out from about 1986 onwards. In the New York Times article, countries like Australia and the UK should begin to experience a drop in crime from about 2006 onwards.

Well it's taken some time, but a report out today shows that the NSW prison population has fallen by around 7% between July 2009 and December 2011.


Worldwide Food Production: still no collapse

Three months ago I posted an blog article about how there is not currently a collapse in food production. Since then, the FAO has updated their figures, including figures going back to 1981. The updated historical figures haven't changed the graph much, but there is a noticeable dip in the last two years:

Note here that the measurement I'm using is the total amount of grains produced per capita. The reason for taking world population into account is to see whether supply (of food) is matching demand (the amount of people who need food). The FAO have pointed out a few times that more grain than ever was produced in 2011, and that is true. However, in terms of grain produced per capita, nothing has yet exceeded the 1984-1986 period. We came close in recent years (as the graph shows), but it has not been sustained.

As I pointed out in the previous post, the most obvious part of the graph is the 1963-1985 period, which was when food production consistently outstripped population growth. This was known as the Green Revolution. Since the mid 1980s, however, there was a downward trend, which picked up again in 2003 and has just recently peaked.

There's no doubt that per capita production has dropped in the last few years - I use a three year average that evens out the effects of good and bad years - but grain production is still quite high, per capita.

If we take out the effects of the three-year average, the current year (2012) is around 0.358 tonnes of food per capita. While this is lower than the previous year (0.371 per capita), it is still higher than any year between 1998 and 2007.

Many have been saying that a collapse in food production is around the corner. The graph doesn't reflect this situation. Of course there might be a sudden drop in production currently underway but the FAO's estimations have not reflected a massive drop, simply a drop.

One issue at hand is food prices - what is causing the price of food to increase? As I pointed out in my previous post, high food prices might simply reflect high inflation generally and the state of the economy that these prices are being experienced in. Nevertheless one potential reason could be that some parts of the world are consuming more per capita (eg China), leaving other countries with less food - something that the graph above does not highlight.


World Population Figures: Source.
Cereal Production 1961-2010 (World total; Cereals total; Production quantity): Source.
Cereal Production 2011-2012 (estimates): Source.


20 Albums of my life

I've decided to do something personal here. I'm going to look at each decade of my life and which five albums were the most important.

Decade 1: 1970s

1. The Beatles - The Essential Beatles - 1972

The first musical memory I have, apart from my mum singing to me, is being enthralled by Yellow Submarine by the Beatles. I would listen to it all the time when I was around 4 or 5. As I got older and began to learn how to use the record player in our lounge room in Cheltenham, NSW. I naturally picked up this album and listened to it a lot. It was the only Beatles album we had and although it didn't contain Yellow Submarine almost all the songs on the album are stuck in the part of my mind that I have filed under childhood memories. The album itself was an Australia-only compilation. In the last ten years or so I have managed to buy about two-thirds of the Beatles official releases, purchased in their release order more or less. The next Beatles album I am due to buy is "The White Album".

2. Abba - Arrival - 1976

Abba were like the Justin Bieber of the 1970s. They were immensely popular yet there was a groundswell of hate towards them. In Australia Abba were hugely popular, with Fernando staying at the top of the charts for what seemed like months. I remember being in 2nd grade at Beecroft Primary School and being asked whether I liked Abba or not, only for the person asking me to say they didn't like them when I said I did. The album itself is full of songs that I remember. When I Kissed the Teacher seemed an odd song for an 8-year-old boy but I just ignored the problems posed by the song and kept going. There was something sad about My Love My Life that I felt but couldn't understand, and Tiger seemed to be a great song about a Tiger. In the 80s I grabbed my copy of Abba Arrival and defaced it with nails saying "Abba is dead", ashamed as I was to own it. These days I'm more tolerant towards "other" music but I don't listen to Abba. At all.

3. Hey Hey It's Daryl & Ossie - 1975

Daryl and Ossie were the stars of a 1970s Australian children's show called "Hey Hey It's Saturday" which eventually turned into a Saturday night entertainment program in the 1980s. I used to watch Hey Hey on Saturday mornings on TV. The first memory I have of watching colour TV for the first time was being entranced by the fact that Ossie's fur was pink. The songs I remember from the album include a song about purple people eaters, I Love Micky Mouse (but Donald Duck's so hard to find) and Puff the Magic Dragon. There was a song where Ossie became really sad and cried so Daryl cheered him up. The Micky Mouse song, if I remember, seemed to be a wistful reflection of lost childhood, something like Puff the Magic Dragon (and the end of Toy Story 3 for anyone who remembers).

4. Kraftwerk - Autobahn - 1974

My Dad was an engineer and probably a nerd in his day. For whatever reason he and one of my brothers began listening to electronic music. I remember listening to this album a lot when I was a kid - mainly side one, which was very much a song about a car driving along a German highway called an autobahn. I remember as a kid hearing the sounds of the car go by along with the catchy "autobahn" refrain and being hooked by the synth-riff. I was also interested in the fact that someone would make a 23 minute song that covered the first side of an LP. I bought this album as a CD about 8-9 years ago, and I also have "The Man Machine".

5. Aunty Jack Sings Wollongong - 1974

My Dad was a big fan of Aunty Jack, an ABC TV comedy in the early 70s. I was never allowed to watch the show because its contents were "A.O." as my mum used to say (short for "Adults Only", a 1970s TV rating used in Australia a lot). I was able to listen to this record though and remember songs about Fish milkshakes, some song about two people trying not to rhyme, with the winner being congratulated by someone who says "congratulations Errol, you're free and you're happy", with the loser then singing about how desperately he wants to be happy (whose name, appropriately, was Neil). I might end up getting this album again one day as a CD was released in 2005.

Decade 2: 1980s

6. Pink Floyd - Dark Side of the Moon - 1973

I never listened to the radio when I was a kid. I still don't, although there was a brief period in the late 1980s when I listened to 2MMM and early 1990s when I was a 2JJJ listener. In the early 80s, though, I spent hours upon hours poring over 1st edition Dungeons and Dragons books. The soundtrack for this period of life was Pink Floyd's "Dark Side of the Moon". I had no idea who the band were or what other records they released. I listened to it because my brother was a huge fan of the album. I also remember Mr Jones, my hippy guitar-playing 3rd Grade teacher at Beecroft Primary School ("in knowledge we grow"), having a Pink Floyd poster up in his classroom in the 1970s. While it was released in 1973, I was experiencing it most intensely around 1981-1982 (12-13 years old). For me, DSOTM was a journey. It was a confusing story told through music. It evoked images of people running through streets, or crazy people mumbling incoherent phrases; of a room full of clocks all going off at once and then, at the end, a song about heads exploding. Almost every time I listen to this album it reminds me of hunching over in my bedroom, rolling 20 sided dice, reading descriptions of monsters and paladins.

7. Keith Green - No Compromise - 1978

I became a Christian in 1982 and, as I grew older, I began to listen to Christian music. I still have a huge soft spot in my heart for this album by Keith Green. It's an album full of black and white, of anger, of cries of sadness and despair. Keith Green's best album in his short life (he died in a plane crash) he was not afraid of using his songs to cut into the lazy spiritual life of himself or others. Asleep in the Light was just as pertinent to me then as it is now. Much of my early theological understanding came from Keith Green lyrics, and infused both emotion and Bible passages together. Although one of the few Christian albums in my collection (Steve Taylor's I Predict 1990 being a notable other) I still listen to it and meditate upon the zealous knowledge it contains.

8. Petra - Beat The System - 1985

The 1980s was full of synthesizers, mullets and pastel colours. Petra, a 1970s Christian-hippy rock band, re-badged themselves for a younger audience more in tune with New Romanticism. I often describe the 1980s as "the decade that music died" and am very much convinced that popular music reached a real nadir during that period. Christian music, which reaches embarrassing nadirs pretty much every year, was no different in the 1980s - same style of music as the non-Christian world, same dress as the non-Christian world, same lack of creativity as the non-Christian world, significantly lower standard of musical ability than the non-Christian world. For about 1-2 years in the mid-1980s, I was ready to embrace Christian music and Petra's Beat The System was the best example of this. The opening track was nothing I'd ever heard of before, though, to be honest, I hadn't really heard much up to that point. BTS was big on living a Christian life in rejection of the world - an important belief that meshed with Keith Green's entry (above). Yet there was something shallow about it that I didn't know at the time. The LP is sitting somewhere in my garage, unlistened to for a long time.

I remember going to a Petra concert at the Sydney Entertainment Centre sometime in the 1980s (one of a few Christian music gigs I went to, including Randy Stonehill and Leon Patillo with his bevy of white women unbelievers as his backing band) and being very disappointed that they had a new singer who sounded nothing like Greg X. Voltz. They had a few jokes about backmasking which went down well.

9. U2 - The Unforgettable Fire - 1984

I became a huge fan of U2 in 1985 when Greg, a Christian friend of mine at school introduced me to them via a cassette of "The Unforgettable Fire". U2, I was told, were a Christian band who were making it in the non-Christian world. I remember poring over lyrics and seeing the huge influence that Christianity had over Bono's writing and thinking. Bono eventually became my hero and I grew a mullet because he looked so cool. For a while I wore tight black jeans and motorcycle boots (obviously because I had a motorbike but because it was so cool). I wrote poetry and songs and Greg and I began a writing partnership that grew into an interesting collaboration, even though no one bought the albums. Since then I've reassessed my views on whether Bono is really a Christian or not and, if he is, he's not the sort of Christian that I want to become.

The Unforgettable Fire hit me with its mellowness and lack of focus. It was like looking at a soundscape with blurred vision. Eno and Lanois put a lot of effort into creating a wall of sound filled not with loudness but with subtlety. Synth was present but not dominant, neither in the good 1970s Who-like way or the bad 1980s New Romantic sort of way. Edge's guitar echoed everywhere. How many guitars was he playing? This was the first Compact Disc I bought and is still in my collection. The original 1987 Compact Disc was what I copied onto my hard drive, so I'm not listening to any hopped up victim of the loudness war. This remains my favourite U2 album.

I saw U2 three times in 1989 during their "Lovetown tour" in Sydney. They remain the only U2 concerts I have been to.

10. Led Zeppelin - I - 1969

After leaving school in 1987 I began working as a purchasing officer for Ausonics, an Australian manufacturer of medical ultrasound devices (sadly now gone). One of my jobs was in goods inwards, where I would enter parts sent to us by suppliers onto the computer. It was a tedious job and so I began listening to 2JJJ. I also had a portable cassette player and headphones, so I began to put my LPs onto cassettes. People at work encouraged me to check out Led Zeppelin and so I did. I bought IV first and I second. While I could've included IV here (along with the songs Stairway to Heaven and When The Levee Breaks, the latter my favourite Led Zeppelin song), I include I instead because it represented everything I was trying to explore in my journey away from 80s music. Like many Christians I had been warned away from Heavy Metal and the backmasking craze convinced me for a while that Satan was using Led Zeppelin songs. God gave me a clearer head, though, and I eventually saw through this hyper-spiritual garbage enough to actually buy Led Zeppelin music myself.

Jimmy Page began I with Good Times, Bad Times, a song devoid of 80s cynicism and populated with honestly, joy and brutal guitar licks. Suddenly I no longer cared about John Farnham, INXS, Whitney Houston, Phil Collins and other 80s staples. What I needed was guitars. Loud ones. Loud guitars played by maestros. Loud guitars played by punks. Loud guitars played by weedy nerds. Loud guitars was what the world needed. Little did I realise at the time that others around my age were thinking the same thing and creating a musical revolution.

In the late 80s I saw Eric Clapton and walked away bored stiff. A few weeks later I saw Midnight Oil and realised that energy was what the Oils had and Clapton didn't.

Decade 3 - 1990s

11. The Stone Roses - The Stone Roses - 1989

It was in 1990 that I left home after my parents decided to take a year off and live in Scotland. I moved in with a bunch of guys from my church in Carlingford, NSW. It was an interesting time, as I had not yet mastered the ability to cook properly or look after myself. Pete and Simmo were the two guys I remember most. They climbed cliffs, took me to Pogues concerts, cooked curries, made me drink me  flaming sambucca with coffee beans and, above all, introduced me to The Stone Roses. At the same time I had dumped 2MMM and began listening to 2JJJ as both the guys I lived with and the guys at work listened to it. Those were the glorious pre-national days of 2JJJ, when it was a Sydney only station and had not been taken over by more corporate minded individuals.

I have to say at this point that I did not like dance music. Yet here was a band that played music you could dance to. Fool's Gold - all 10 minutes of it - should've been a song for me to dislike. But I didn't. Other songs on the album had loud guitars, notably I am the Resurrection and You are the One, so I was happy. Yet Fool's Gold intrigued me. Why did a song that was so obviously intended as a dance song become a song that I liked? I suppose it had something to do with the fact that the band were actually playing the instruments, that there was no 80s synth, and that you could pretty much vibe out to it.

Like Shaun from Shaun of the Dead, I liked "Second Coming". I thought the guitars were brutal on that album.

12. Pixies - Doolittle - 1989

Living with Pete and Simmo in Carlingford also exposed me to some bands I'd never thought of listening to. One day after work I walked into a record store and, on a whim, purchased Doolittle by the Pixies. I don't remember listening to them before that point, but I knew they were an indy band worth having. Joey Santiago's guitars made this loud guitar lover very happy, and Pete and Simmo took every chance they could get playing the CD at our Carlingford house. But there was something I found disturbing, namely the lyrics. Black Francis was no Bono. Instead of singing about El Salvador or Irish massacres or whatever the feck Bono sang about, Black Francis sung songs about... what exactly? Wave of Mutiliation was not about mutilating anything; Monkey's gone to Heaven was not about a monkey who managed to attain eternal salvation. Suddenly I was exposed to songs which didn't actually mean anything. Since then I've developed a theory that Black Francis simply threw a whole bunch of themes together to form songs, so that a song might contain multiple themes or ideas rather than a single theme or idea. A song might have elements of Black Francis' Pentecostal experiences, UFO experiences, university experiences, relationship experiences, the Spanish language and others. Another song may have the same experiences but using different phrases. Whatever it was, Black Francis created music that was simultaneously meaningful and meaningless that touched me a way that mainstream pop songs simply didn't. He also screamed and played a mean guitar. That helped.

In 1991 I travelled to Scotland to spend a few weeks with my parents. On the way there I stopped off at LA and managed to see the Pixies at the Universal Amphitheater. They weren't too good (they were in the about-to-break-up phase of their existence) but at least I can say that I saw them live. The auditorium was only half full and the LA people I spoke to seemed fairly ambivalent about them. When I reached Scotland the first young adults I met were enthusing about the Pixies. This experience was interesting because, as Pixies fans know, they were much loved in the UK but ignored in the US.

13. Soundgarden - Superunknown - 1994

It was during Bible College in 1992 that I discovered that music was going through a radical change. Suddenly Metallica had a hit single. How did that happen? Nirvana had Smells Like Teen Spirit which I loved too. 2JJJ also began playing a song called You Can't Touch This by MC Hammer which I surprisingly enjoyed, along with Mr Dobalina. and the Red Hot Chili Peppers song Give It Away. Musicians were no longer constrained by their genres and were making new ones. Grunge, especially, had a huge impact on me. As I pointed out before, I loved loud guitars. What I didn't say was that I hated Glam metal. On my visit to LA I picked up a free music newspaper and discovered that every second band in LA had big hair and spandex, with ads even promoting hair extensions for metalheads. When Nirvana came along, they were basically a bunch of "weedy nerds playing heavy metal". They punished their guitars like Pete Townshend while poking fun at the establishment like Johnny Rotten. In 1994, just after I got married, a friend named Pete from church (not the same Pete that I lived with, but a Pete with really long hair and a dedicated metalhead) lent me Superunknown by Soundgarden. He assured me that they were just as good as Nirvana. I listened to it and was hooked. I had heard some of their songs on 2JJJ and especially liked Spoonman. I was already a Zeppelin fan so hearing the screams of Chris Cornell was fine in the light of Robert Plant. This was the first grunge band and album I really liked. For a few years Soundgarden had replaced U2 as my favourite band.

14. Nine Inch Nails - The Downward Spiral - 1994

I have an interesting tale about meeting Trent Reznor from the band Nine Inch Nails. Back in the early 90s my girlfriend (she's now my wife by the way) introduced me to some friends at a party in Sydney's North Shore. Among them was a musician by the name of Trent Reznor. Reznor had taken a break from recording after his first album (this was probably around 1992 or 1993) and spent a bit of time in Sydney resting. While there he had attended a Gospel meeting by a Christian mission and had been converted to Christianity. At the party we were all listening to "Pretty Hate Machine", quite a BIT different from the Christian music most of the people have been listening to. When asked about the lyrics (especially the ones pertaining to God), he replied that that was basically him questioning God at the time, and that he was different now that he had become a Christian. He started going out with a Christian girl as well. Then one day Trent disappeared. He had stolen some goods from a friend of ours. His girlfriend was beside herself. Together this friend and the girlfriend contacted the US record company to find out what was going on. The record company pretty much told them that Reznor was not just in America, but had been in America the whole time. When asked about whether Reznor had maybe gone back to New Zealand, his birthplace, the record company replied that Reznor was not from New Zealand but from Ohio. Moreover, he was not of Maori descent either. In short, we had all been duped by some New Zealand guy who claimed to be Trent Reznor and who faked being converted to Christianity in order to mess with the people he was with. It was obviously horrible for the people involved, but I was secretly amused by it all.

Based upon that experience I purchased CDs from Nine Inch Nails. It was full of loud guitars and electronic music that I had heard from my days as a child listening to Kraftwerk. I loved it. At the time that it was released, "The Downward Spiral" was probably not the sort of album that good Christians should be buying, but I did anyway. After ignoring those terrible, horrible, no good cuss words from the song Closer, I discovered that Reznor was pretty much using a persona to write from which, as a poetry/song writer myself, was an interesting technique. The album is full of self-loathing and anger. Reznor subverted the 80s synth and meshed it with sampling and recreated Industrial music. It subverted the whole dance song by having danceable synth beats alongside dark lyrics, angry singing and of course, loud guitar. Nine Inch Nails remains my second favourite band to this day.

15. Ride - Going Blank Again - 1992

While working at Ausonics in the late 80s and early 90s I subscribed to the Australian edition of Rolling Stone magazine. For a while I was enamored with an Australian band called Ratcat who sold a huge amount of EPs entitled Tingles, which were full of proto-grunge fuzzy-pop songs. In Rolling Stone magazine one day I read of a Perth concert in which Ratcat had been supported by a British band called Ride. The RS commentator spoke disparagingly of the crowd of mainly teenagers who were enthused about Ratcat but had no idea that they had been supported by a band that was two or three times better than them. The RS writer had obviously been infected by the British press' assessment of Ride at the time, which was that they were the next big thing. A few years later I read another Rolling Stone article lamenting the band's breakup and their awful final album.

One day in 1994 in Merrylands I passed a second hand record store and purchased my first Ride CD: "Smile" I found out later that this was a compilation of the first two Ride EPs from 1990. Like a lot of new music in the early 90s, Ride was confusing and compelling. On the one hand they seemed to be playing guitar-laden rock heavy with feedback and wah wah pedals, but mixing it with a very muted, almost submerged, vocal track. It was like listening to Ian Brown from the Stone Roses singing for a grunge band. In fact I was simply convinced that Ride were a British grunge band. I lent "Smile" to Pete my long haired friend from church and he returned it saying that it was great.

I moved on to buy a second hand copy of the album "Going Blank Again". The opening synth beat of the song Leave Them All Behind was more like The Who and nothing like Duran Duran. then the rhythm section came in - drums and bass playing along with the synth beat. You could almost hear the fingers being hit against the strings. Then the twin guitars come in. Not like Jimmy Page. Not like Grunge. These guitars come in like blurry angels, drowning out the rhythm section with so much feedback and distortion that you can't work out whether there are two guitars, or just one, or ten thousand, being played. The song went for over 8 minutes.

It was only in the late 1990s when I got the internet connected that I discovered that Ride were at a forefront of a short-lived musical genre called Shoegazing, and had more in common with Britpop than Grunge, while predating both. Ride remain my favourite band and Leave Them All Behind is my favourite song of all time. I even made a music video using images from Stanley Kubrick films. I run the Last.fm Ride group and have published an interview at this blog with the bass player. I have never seen Ride live, one of my disappointments.

Decade 4: 2000s - today

16. The Charlatans - The Charlatans - 1995

Back in the early 90s I saw the music video for The Only One I know. The Charlatans appeared to be The Stone Roses plus a Hammond Organ. I bought their first album and then for about ten years pretty much ignored The Charlatans. Then one day on Rage in about 2000 I saw a music video showing very much that the band was alive and well. Over the next few years I bought albums and discovered that their original organ player had died.

It was in about 2005 when I bought the self-titled album The Charlatans. Bought ten years after it was released I became aware very quickly the reason why the album went to number one in the UK. The only song that stands out to me is the opening Nine Acre Court (and remains my favourite Charlatans song with Toothache) but the whole album just seems to mesh together really well. The guitars aren't loud but every song just seems to have a place in the order. My brain was often filled with earworms from the album. In the mid-late 2000s I would sometimes play the album in its entirety to my annoyed family.

17. The Brian Jonestown Massacre - Methodrone - 1995

Another album I got myself into long after its release, Methodrone introduced me to the work of The Brian Jonestown Massacre and its eclectic founder Anton Newcombe. I discovered this album in around 2007, soon after I joined last.fm. After spending the early 2000s bereft of any knowledge of what was going on in the world of music, last.fm gave me the opportunity to discover old and new music. Intrigued by the Shoegazing genre and its link to Ride, I was able to download the entire album for free from Anton's website. I loved it enough to eventually buy the CD.

The BJM don't have the loud guitars but Anton does use shoegazing often in his songs. Post-Methodrone albums are more like listening to what the Rolling Stones could've achieved if they decided to follow their path of psychedelic rock instead of the path they ended up choosing. I have quite a few BJM albums but none of them hit me as hard as Methodrone, and only Ride's song Leave Them All Behind hits me harder than the BJM's Wisdom, which is a most enjoyable earworm to have when you're driving around Tasmania and is one of the greatest songs in the history of the universe.

The Brian Jonestown Massacre have inspired a huge amount of creative talent over the years with bands like Black Rebel Motorcycle Club, The Warlocks and The Lovetones being created by former members. Other bands to have their work inspired by BJM/Anton are Dead Meadow, Singapore Sling, Darker My Love and, of course, The Black Angels...

18. The Black Angels - Passover - 2006

I can thank Last.fm for this one. Last.fm allows subscribers to listen to music online, and one of their features is to type in the name of the artist and see what sort of music comes out, the idea being that not only do you have your own unique streaming radio station playing you music from the band you selected but music that is closely associated with the music you selected. So one day I selected "Black Rebel Motorcycle Club" to see what would come out. Two bands immediately hit me. One was The Warlocks, the other was The Black Angels.

Let me say this now - The Black Angels sounds like a darker version of The Doors. This is helped especially by the lead singer Alex Maas who sounds very much like Jim Morrison. If you transported yourself back to 1970 and armed with the Passover LP by The Black Angels and presented it to some pirate radio stations at the time, they would probably be convinced that Jim Morrison had joined an acid rock band. In other words, the album sounds like it could've been released in 1970, not 2006.

This is one of those bands whose career is not as great as I hoped it would be. They definitely need recognition. Here is a video of them playing on the roof.

19. Joy Division - Unknown Pleasures - 1979

Put simply I became a Joy Division fan in 2007. Wonderful music. Again thanks to Last.fm because I heard She's Lost Control for the first time and I was hooked. I'd heard Love Will Tear us Apart so many times (I was a 2JJJ listener after all) that I had been inoculated against Joy Division, but Last.fm again changed my mind.

And watch Control. Brilliant movie with some of the best acting I have ever seen from three individuals (Sam Riley, Samantha Morton and Toby Kebbell).

20. The Eagles of Death Metal - Peace, Love, Death Metal - 2004

This album surprised me. The Eagles of Death Metal are neither a Death Metal band nor do they sound like The Eagles. Instead it is a combination of inane, adolescent lyrics, an unashamed pop beat, high pitch singing and a fuzzy garage guitar. It works somehow. The drums are played by Josh Homme, who is the guitarist for Kyuss, Queens of the Stone Age, Them Crooked Vultures and about a dozen other bands. Homme is credited with being a pioneer of Stoner Rock and yet the EODM do not play Stoner Rock. The other dude in EODM (it's a two man band) is a bearded nobody named Jesse Hughes who plays guitar, sings and is a rabid Obama-hating Republican.

Every song on their debut album was crafted perfrectly. The two musicians, especially Hughes, interject in the songs with funny lines: in one song Jesse Hughes begs Homme to slow down because he's finding it hard to keep up, while in another song he sings the same refrain so many times that he loses breath and states that he's lost his breath and needs to sit down for a while, all while the song continues around him. There's a real playfulness and fun being projected by the two musicians. They don't take themselves seriously, or their songs seriously, and yet they come up with an album that is enjoyable to listen to and which is quirky enough to remain out of touch with the mainstream. Watch I Only Want You.


Let's end this nonsense: Reagan's military buildup did not cause the Soviet Union to collapse

Let's put this to rest now. The idea that Reagan caused the Soviet Union to collapse has been said so many times over the years but the facts just don't back it up.

The idea goes something like this:

Ronald Reagan increased US military spending. He introduced the "Star Wars" technology to protect the USA against enemy missiles. In response to this, the Soviet Union increased military spending dramatically which, in turn, caused the collapse of the Soviet Union.

No, Sorry. Wrong.

Of course Reagan DID spend up big, no doubt about that.

And he DID introduce the "Strategic Defense Initiative" (SDI) which created some huge problems for the Soviet military and the politburo

But did the Soviets increase military spending? The data says no.

The above graph comes from Arming America: Attention and Inertia in US National Security Spending by James L. True (1998). Link here. Graph is on page 17 of 42 of the pdf file. (Edited 2015-08-14)

. Things to note:
  • This graph measures spending in comparative dollars. Since the US had a larger economy than the Soviets, we can assume that if a 1:1 comparison between the two was made in terms of percentage of GDP, the Soviet Union would have a higher result. If you compare 1985 levels, for example, the US is probably spending around 6-7% of GDP on defence while the Soviets were spending around 13-14% of GDP.
  • The Soviets passed the United States in the early 70s and peaked  around 1982.
  • The US increased spending dramatically under Reagan, with a peak around 1985 and greater than the USSR.
  • Soviet defence spending plateaued between 1981 and 1988.
  • Soviet defence spending collapsed from 1989 onwards.
  • Much ink has been spilled over the years by economists and defence analysts in trying to determine reliable Soviet defence spending figures. If you want to complain about the standard of Soviet data, remember that experts have been dealing with this for decades. In short, if your argument against my position involves attacking the reliability of the statistics in question, please complain to the thousands of experts over the past few decades who have made it their business to work out reliable stats. Appeal to authority? You bet.
The graph clearly shows that, in real terms, the Soviets did not increase military spending much in response to Reagan. In fact the opposite appears to be the case: Reagan was responding to the Soviets. Soviet defence spending in the 1970s was pretty big and Reagan obviously did spend up big in response. But did the Soviets respond to Reagan's spending by increased spending? No they didn't.

Of course the idea that Reagan defeated the Soviets has been around for years. This 1994 article in The Atlantic - only three years after the collapse of the USSR - already contains the facts I am re-stating here:

The Soviet Union's defense spending did not rise or fall in response to American military expenditures. Revised estimates by the Central Intelligence Agency indicate that Soviet expenditures on defense remained more or less constant throughout the 1980s. Neither the military buildup under Jimmy Carter and Reagan nor SDI had any real impact on gross spending levels in the USSR. At most SDI shifted the marginal allocation of defense rubles as some funds were allotted for developing countermeasures to ballistic defense.

If American defense spending had bankrupted the Soviet economy, forcing an end to the Cold War, Soviet defense spending should have declined as East-West relations improved. CIA estimates show that it remained relatively constant as a proportion of the Soviet gross national product during the 1980s, including Gorbachev's first four years in office. Soviet defense spending was not reduced until 1989 and did not decline nearly as rapidly as the overall economy.

So what did cause the USSR to collapse? In short: the economic stupidity known as Perestroika, a policy so bereft of common sense that it caused factories to produce less and less industrial goods. From 1987 onwards, the economy of the Soviet Union began to collapse with severely reduced output and hyperinflation. The downturn was so severe that birthrates declined - an indication of the personal stresses that Russian households were being subjected to. The economy shrunk significantly for around 4 years before communism was abandoned and the economy collapsed even further. By the mid-90s GDP was probably half of what it had been in 1987. There are more details about this in a previous post I have written.

Some horrible/interesting graphs


Sources: FDHBFIN / GDP

Sources: FYGFDPUN, / POP

Sources: FDHBFIN / POP



Sources: GDPC96 / POP


What caused the Soviet Union to collapse?

I'm writing this as an adjunct to some fascinating study I did recently into the Soviet Union. It's not often I do historical studies here at my blog, but I think I have discovered the reason for the economic collapse of the Soviet Union in the late 1980s. This collapse, in turn, was followed by the collapse of Communism itself and a period of about ten years when Russia collapsed even further. David Christian, my Russian history lecturer at Macquarie University, mentioned that Russia lost about half of its Gross Domestic Product in this period.

At present I'm only going to focus on the economic issues involved. Gorbachev, when he instituted Glaznost, essentially created a monster that turned the Russian people against the Communist party. The collapse of communism in Russia itself may have been prevented had an economic collapse not preceded it.

What we need to remember is that in the years before communism collapsed, the Soviet economy collapsed. Economic output decreased alarmingly and inflation turned into hyperinflation.

The first inkling I had of this problem was when I looked at Russian/Soviet birth and death rates from this article at Wikipedia:

What you can see here is that birthrates in the USSR dropped dramatically before the collapse of Communism. It was only after the collapse of Communism that death rates shot up and the population began to shrink. But certainly in the period before 1987, birth and death rates were healthy.

So the question is, why did birth rates drop so drastically from 1987 onwards?

Economic conditions do affect birth rates. Birth rates dropped considerably during the Great Depression. While a 1:1 causal relationship does not exist, a sudden change in birth rates are always the result of some change occurring in society. It's well proven that the experience of continual hardship amongst animals results in lower birth rates, and humans are actually no different in that regards.

So the seeds of destruction were sown in 1987. What happened?

I was inspired to write this article because I read the 1991 IMF working paper Forced Savings and Repressed Inflation in the Soviet Union by Carlo Cottarelli and Mario I. Blejer. In that article, written before the collapse of communism, the two authors analyse the economic situation of the Soviet Union in the 2nd half of the 1980s. Their conclusion was that the Soviet Union was experiencing what is known as Monetary Overhang, a peculiar economic situation experienced historically only by communist states. Monetary Overhang meant that there was not enough goods and services for the economy to purchase for the money available, which led to ever increasing levels of savings. This, in turn, led to hyperinflation. In a market economy, an overabundance of savings has a deflationary effect but in a communist command economy it has an inflationary effect. This is because the flow of money is not determined by a market made up of many independent actors, but by the determination of bureaucrats acting as part of central planning. This meant that as production dropped off, income remained the same. Enterprises that were producing less goods and services were still receiving government money and paying their employees their wages.

But enough of the monetary conditions - what was it that caused a drop in production? Something happened from 1987 onwards which led to Soviet Enterprises producing less goods and services - and not just a small drop, but a considerable drop which led to scarcity and social and economic hardship amongst ordinary Russians.

It is popular to assume that the collapse was due to Soviet inability to cope with American rearmament under Reagan. The idea behind this was that the Soviets increased military spending and military output whilst simultaneously reducing the production of consumer items and things such as food. Certainly there was an increase in military spending by the Soviets in response to Reagan's military spending increases, (edit 2017: this was actually not the case, see my follow up article) but such an increase in production would not have led to monetary overhang. This would be because any change in production (moving from consumer goods to military goods) would have had a neutral effect upon the money supply. Certainly if such a huge swing had occurred the Russian people would've suffered, but they would've suffered without the effects of a monetary overhang. The presence of a monetary overhang indicates beyond doubt that from 1987 onwards, the total production of goods and services in the Soviet Union dropped. Military spending may have increased, but total levels of production changed.

I believe the cause was due to an edict made by the Supreme Soviet of the Soviet Union in June 1987 - the Law on State Enterprise. Under the short reign of Yuri Andropov, the Supreme Soviet had been radically altered to include younger, more reform minded individuals. By 1987 and with Gorbachev leading the forefront of reform, a decision was made to further improve economic performance. In hindsight, this State Enterprise law caused a drop in production, an economic collapse and, subsequent to it, conditions ripe for another revolution.

I'll let Wikipedia say it for me:

The law stipulated that state enterprises were free to determine output levels based on demand from consumers and other enterprises. Enterprises had to fulfill state orders, but they could dispose of the remaining output as they saw fit. However, at the same time the state still held control over the means of production for these enterprises, thus limiting their ability to enact full-cost accountability. Enterprises bought input from suppliers at negotiated contract prices. Under the law, enterprises became self-financing; that is, they had to cover expenses (wages, taxes, supplies, and debt service) through revenues. No longer was the government to rescue unprofitable enterprises that could face bankruptcy.
From an economically liberal point of view you can see what the Supreme Soviet was trying to do: It was trying to use market forces as a way for enterprises to determine output and encourage surplus production. Moreover it would be assumed that these enterprises would have to, at the very least, be capable of paying its own expenses rather than having them covered by the state. Laudable, yes. But the reform was fatally flawed for one very good reason: prices were still determined by the state. As each enterprise began to reform itself to become more profitable, costs needed to be covered. Since it was likely that the enterprise could neither retrench its workers or reduce their pay, the only choice they had to become profitable was to spend less on purchases. This meant that enterprises, with no other solution available, were forced to buy less materials for their production. Because the law applied all over the Soviet Union, one enterprise's decision to stop buying goods resulted in a reduction in another enterprise's demand which, in turn, forced that enterprise to reduce supply even further. Obviously these enterprises were not even meeting targets set by the Supreme Soviet, which was problematic, but, forced to balance their own books (which was failing), Soviet industrial production entered what could be termed a negative feedback loop: any attempts to solve the problem ended up making it worse.

By 1991 the economy had collapsed. Conditions were ripe for a revolution, and one arrived. It's only been in the last few years that Russian household wealth has returned to pre-collapse levels.

What I have learned from this? Simple. An economy will experience inflationary decline whenever production drops before demand does. As a corollary, an economy will experience deflationary decline whenever demand drops before production does. My views on Monetary policy thus remain fixed upon the idea that stable prices are essential whatever condition the economy is in, and that other policy tools need to be used by governments to boost economic growth and/or reduce debt levels.

We can also assume that inflation will be the norm whenever supply problems in an economy persist, and will be experienced by Peak Oil, as well as food production once Climate Change begins to bite.

Additionally, you could argue quite easily that economic collapse can lead to political and social collapse.


Message for Minarchists

Of course the response to this from free market advocates is likely to be a rehash of what occurred in the Soviet Union, but such an argument misses the point, which is that good government is an essential and irreplaceable adjunct to an efficient and productive market economy, and that an efficient and productive market economy is an essential and irreplaceable adjunct to good government. Moreover, such a government should have some influence in the marketplace beyond simply the enforcement of legal limits, and should be involved directly in producing goods and services when necessary and when efficiency is superior to, and total cost of production is lower than, that provided by the market economy.

Minarchists are one step away from Anarchism because they see it as an evil that must be destroyed or a tumour that must be excised. Minarchists who would argue that my point of view has a rosy and naive view of government have, in turn, a rosy and naive view of what society would be like without government.

By all means let us complain about and seek reforms to both government and market, but let's not pretend that the only two options available are Minarchism or Communism. The argument has always been about how much power one sector should have over another. Arguing that one sector should be destroyed or reduced to slavery is the hallmark of radicalism.


US Labor Force as percentage of population: 1952-2012

This is a different metric to, say, the Labor force Participation Rate.

Although there has been a marked decrease in recent years, the most salient part of this graph has to be the 1962-1990 growth period, whereby large amounts of people entered the workforce. This reflects the growth of women choosing to work in the workplace rather than remaining at home. I'm sure that birthrates during this period would also reflect a downward trend.

And although productivity is certainly a important feature in GDP growth, this graph should also prove that GDP growth between the 1962-1990 period was also driven by an expansion of the available workforce. Similarly, any discussion about how GDP growth in recent decades has been lower than the previous ones should also take into account the plateau from 1990 onwards.

Note also that the 1981-1990 period grew at a slower pace than the 1964-1980 period. Reaganomics?

The 1952-1962 period is interesting in that the population grew faster in proportion to the workforce. In a word: Baby Boomers. By 1962, the eldest Baby Boomers were 17 and ready to go to work.

The post 1990 period corresponds with the tech boom, the housing boom and the GFC.

As the population ages and more people retire, there will be a fall in the above graph. I'd love to look at a graph for Japan, considering their population is aging and now in decline.

Sources: CLF16OV, POP.


Worldwide food production: no collapse yet

This is a result of some number crunching I did, comparing the amount of cereal grains produced to world population level:

I chose a three year average because the original had huge yearly swings while this gives a reasonably good idea of where things have been heading. It also takes into consideration the fact that cereals can be stored over the long term, which means that high production one year can help service demand the following year.

I chose cereal grains since these are a staple food and indicates generally the potential for future famines (as production decreases).

What it shows is that, so far, there have been no significant negative impacts on world food production in the past 50 years. There was a marked decline between 1985 and 2003 that needs to be explained, but production since 2003 has risen quickly.

The reason for looking at per capita figures (tonnes of grain produced divided by world population) is to see whether or not production levels are exceeding population: It's all well and good for cereal production to increase but it is another thing altogether if population is increasing faster than cereal production.

You can see the effect of the "Green Revolution" between 1963 and 1986.

I created this spreadsheet and graph to see whether or not Peak Oil and Global Warming had affected global food production. So far the answer is that they haven't yet.

A few years ago there were various food riots around the world tied to increasing prices. See here and here. It seems that, in hindsight, these problems were probably a result of local issues arising out of the Global Financial Crisis.

It's also true that grain prices have increased and this is due to increased demand from developing countries like China. Notwithstanding these facts and the consequences of them (richer people increasingly consuming more of the available food than poorer people) worldwide cereal production is still better now than at probably any other time in history.


World Population Figures: Source.
Cereal Production 1961-2010 (World total; Cereals total; Production quantity): Source.
Cereal Production 2011-2012 (estimates): Source.


The Three Spheres of Society

  • People
  • Business
  • Government

What happens when Conservatives get convinced by Climate Change?

They don't stop being conservatives, they start advocating a carbon tax:
Taking stock of our conservative principles and America’s energy and climate challenges, E&EI believes that the solution is an energy policy which:

  • Eliminates all subsidies for all fuels;
  • Attaches all costs to all fuels;
  • and Ensures revenue neutrality to prevent the growth of government

A sensible solution is a revenue-neutral tax swap, accompanied by a phase-out of all energy subsidies. A tax swap would, dollar for dollar, ratchet down anti-growth income taxes and shift the tax onto carbon pollution: Tax the bad, quit taxing the good, and let the free-enterprise system deliver the fuels of the future.
Despite my position on the left hand side of the political spectrum, I have always believed that a number of conservative beliefs are worth keeping. The solution proposed by E&EI is probably not enough to solve the whole problem of global warming, but it is a healthy start, and one that comes from a side of politics that seems all too willing to deny science.


No Peak Now?

Monbiot has given up on Peak Oil:

The facts have changed, now we must change too. For the past 10 years an unlikely coalition of geologists, oil drillers, bankers, military strategists and environmentalists has been warning that peak oil – the decline of global supplies – is just around the corner.


Peak oil hasn't happened, and it's unlikely to happen for a very long time.

A report by the oil executive Leonardo Maugeri, published by Harvard University, provides compelling evidence that a new oil boom has begun. The constraints on oil supply over the past 10 years appear to have had more to do with money than geology. The low prices before 2003 had discouraged investors from developing difficult fields. The high prices of the past few years have changed that.


There is enough oil in the ground to deep-fry the lot of us, and no obvious means to prevail upon governments and industry to leave it in the ground. Twenty years of efforts to prevent climate breakdown through moral persuasion have failed, with the collapse of the multilateral process at Rio de Janeiro last month. The world's most powerful nation is again becoming an oil state, and if the political transformation of its northern neighbour is anything to go by, the results will not be pretty.

But The Oil Drum says that the Harvard study is flawed:

So, there now comes an Energy Study from Harvard which boldly states that this is rubbish - that by 2020, global production will be at 110.6 mbd and these concerns that most of us have at The Oil Drum (inter alia) are chimeras of the imagination.


The amount of oil in the region tapped by the well is finite, and when it is gone it is gone, whether from a vertical well that shows gradual decline with time, or from the horizontal well that holds the production level until the water hits the well and it stops. I am not sure that the author of the report understands this.


The report further seems a little confused on how horizontal wells work in these reservoirs. As Aramco has noted, one cannot keep drilling longer and longer holes and expect the well production to double with that increase in length. Because of the need to maintain differential pressures between the reservoir and the well, there are optimal lengths for any given formation. And as I have also noted, the report flies in the face of the data on field production from the deeper wells of the Gulf of Mexico.


The Limits of Biochar

I recently did some basic equations about Biochar. If Biochar were the sole way that carbon is removed from the atmosphere, how much land would be needed to store the stuff? The calculations ended up being very pessimistic indeed. Armed with these calculations I sent off an email to the boffins at Real Climate. NASA scientist Gavin Schmidt responded and pointed out that I had wildly overestimated the amount of anthropogenic carbon in the atmosphere but, when taken with carbon that had been sequestered into the ocean, the final figure ends up being 400 billion metric tonnes - an amount that doesn't take into account future emissions.

How much Biochar can be used as a soil amendment? According to this, the amount is around 23.2 metric tonnes per hectare. It was just a matter of then dividing the amount of anthropogenic carbon by 23.2 and see how much land is required to sequester Biochar. The result is very depressing:

In short, 23.2 metric tonnes per hectare is not enough. Even if every single hectare of above ocean land mass is sequestered with 23.2 metric tonnes of biochar, the result is not enough to remove anthropogenic carbon. In reality, sequestering of biochar could not be achieved over the entire earth's surface, so I've given figures there for 10% of the earth's surface as well as 5%, which would require a Biochar sequestering of up to 23 times what is recommended.

So, the questions are:
  1. What amount of sequestered Biochar is too much? At what point will it turn from being a soil amendment and become toxic to plant growth?
  2. What would be the effects of deep Biochar sequestering, whereby Biochar is sequestered up to 10 metres underground rather than just existing within the 1-2 metres?
  3. Is it viable to use carbon as a resource to replace current commodities such as iron, aluminium, glass and so on?
The good news, I suppose, is that a cylindrical storage container 50 metres high and 18.25 kilometres wide could effectively store all 400 billion metric tonnes of carbon (at 2.267 grams per cm³ = 90,680,00 km³, volume of cylinder = πr²h) if necessary. NOTE: My spreadsheet let me down in its maths here. The real figure would be 500 metres high and 7600km in diameter: Not good news.


Balancing Economic Benefits

The Australian Government agency CSIRO has recently won a court battle in the US to protect wi-fi technology patents it set up in 1996. The case was very clear - the CSIRO made the patents and the technology industry failed to compensate the agency for their work. As a result, the CSIRO will gain a lot of money which it will presumably use to invest in more technology.

One of the problems that Americans have with this ruling is that the agency is owned by the Australian government. As a citizen of Australia, therefore, I am a shareholder in this organisation and I am proud of its achievements throughout the decades in developing high technology. Yet at the same time I also realise that I will not see any financial benefit from this court case - despite being a part owner of the CSIRO I will not see a penny of this financial windfall.

But then a part of me is also concerned that such a windfall may end up benefiting the world less than if the technology was made free. The enforcing of this patent will ensure that the cost of wi-fi services around the world will increase - though obviously at a level not noticeable by the average consumer.

The idea that an economic entity (a business or individual) should reap financial reward for its work (whether in the form of labour or in innovation) is not in question here. Instead I am questioning two related issues:
  1. Whether the amount of of financial reward is appropriate.
  2. Whether the financial reward should be factored directly in to the price of the labour or technology in question.
Within the free market system these two issues are moot. An entity's financial compensation for its work is determined by market forces and is a result of the price the market is willing to pay for it. This is economics 101.

Now while I'm not advocating a communist system here, whereby supply, demand and price for all goods and services are determined by bureaucrats, what I am pointing out is that maybe some parts of the economy are better off and more efficient if some level of planning and government intervention exists.

It is a well known fact amongst economists that the supply and sale of certain goods and services does not  have a zero sum effect upon the economy, but can vary. A few years ago a UK think tank determined that hospital cleaners created ten times more wealth than it cost to employ them while waste recycling workers were twelve times more valuable than their wages. This was determined by how much an economic effect such workers had upon the broader economy, with cleaners and waste recycling workers providing a service that, if forsaken by modern society, would result in greater costs overall. The study also concluded that certain workers in the financial industry actually destroyed value in the economy (this was measured after a recession so the numbers are a bit skewed).

In the same way, think of the CSIRO and their wi-fi patent. The money that was spent developing this technology was paid for by the Australian taxpayer rather than by market forces. But as a result of their discovery, millions of people around the world have easier access to the internet - something which ends up having a positive economic effect far greater than either the amount of money spent by taxpayers like me and even by the increased cost of wi-fi brought about by the patent lawsuit.

Nevertheless I ask the question again - what would be the eventual economic benefit to the world if the CSIRO forgoes the money due to it via this patent lawsuit? The CSIRO may lose $200 million per year in funds but what if the net effect of making it free was greater than the CSIRO's windfall? If the patent was open and free, low cost tech companies the world over could provide cheaply manufactured wi-fi hardware and software that ends up lowering the cost of wi-fi throughout the world. If this is the case then perhaps the CSIRO should rethink its actions.

Now let's extend this idea beyond the CSIRO and the idea is not so radical. Roads, obviously, provide huge amounts of economic benefits beyond what it costs to make them but there is no direct method of paying for them to be built and maintained (apart from the occasional tollway) - instead they are reliant upon tax revenue and government decisions. The police and legal system are funded by the state too and the effect they have in maintaining a peaceful society brings about huge economic benefits.

But let's extend this further. Think of the pharmaceutical industry and the profits they reap on patents. Having a patent for a successful drug allows Big Pharma to sell the drug at a premium price because they control the drug's production. But what would happen if the patents they hold were free? Would the financial loss incurred by the pharmaceutical company in no longer having a patent be more than made up for by the financial benefits of cheap supply of the drug to the market by generic pharmaceutical manufacturers? Of course one criticism of this approach would be the survivability of big pharma in making better and better drugs if there is no funding for them to do it - and to which I respond by pointing out that maybe, just maybe, the funds for research and development could come from taxpayers. In the real world this would result in pharmaceutical companies getting government funding to develop patent-free drugs, or else the government could purchase the patent (either through agreement or by eminent domain) and open it up for the generic industry to produce.

Of course I'm only using Big Pharma here as an example and I'm in no way going down the route of demonizing them as others have done (I think there are huge problems with Big Pharma, but I recognise the benefits as well). Think about the effect of open agricultural patents, with companies like Monsanto forgoing their litigation campaign and getting on with developing new strands of vegetation without having to worry about how the consumers are using or misusing their product (since, of course, they receive their funding from the state).

Or even think about JK Rowling. What if Rowling made the Harry Potter series public domain? Sure she would lose all of her income but the effect would be very cheap Harry Potter books available from every conceivable book publishing company, thus lowering the price of reading her books for families and schools. Would the resultant economic effect of cheap Potter books be greater than the economic benefits Rowling receives? (She does, after all, have more than enough money to live off).

There are plenty of other examples I could use here. I'm certainly not saying that every conceivable example would work or should even be initiated even if they did work - the long term certainly needs to be taken into account and economic entities need revenue to survive and continue providing goods and services and labour to the economy. Slavery, whether hoisted upon the individual or upon companies, is not what is being described here, though some level of constraint is being presented.

By way of closing let me just say that much of capitalism's history has proven right in that the price the market is willing to pay labour and innovation has pushed society forward. I'm not saying that communism should be reintroduced. Nevertheless I am questioning whether the market-only attitude is the sole paradigm we should operate in. Maybe it would be better for all if government diverts tax revenue to certain areas of the economy because the overall economic benefit outweighs the market/price benefit to the producer.


There will be another economic crisis in 2012. It will be bad. These are the economic lessons we should learn from it.

I'm breaking my recent silence not just to reiterate my previous predictions but also (in one of those slightly snarky, arrogant ways) to propose a solution for those in the future who may be reading this.

First of all, consider this graph:

Regular readers (whoever you people are) will recognise this graph as being part of series of posts I have made in 2011 predicting another economic downturn in 2012. This is based upon a study of Real Ten Year Bond Rates (Bonds minus annual inflation) averaged over a three month period. The methodology I use and historical graphs can be found here. Basically the conclusion I came to was this:
While recessions can occur without negative real interest rates, whenever negative real interest rates do occur, they are always followed by an eventual recession.
This conclusion is based upon the fact that every instance of negative real interest rates (which I define here as negative real 10 year bond rates) there is an eventual recession. This occurred in the following periods:

  • In March 1957, rates went negative. A recession followed in October 1957. (Rates also went negative during the recession)
  • In October 1973, rates went negative. A recession followed in January 1974.
  • In November 1978, rates went negative. A recession followed in April 1980.
  • In January 2008, rates went negative. A recession followed in April 2008.
  • In June 2011, rates went negative. I'm therefore predicting a recession to occur in 2012.
So that's what I'm predicting. I'm going to modify my superannuation exposure to conservative as a result because I see no reason why this coming recession won't be a big one and lead to another credit crisis and market crash.

Okay. So that's all that. So now let's assume you're reading from the future and the recession I predicted occurred and thus you feel somewhat interested that someone before the recession predicted it and was able to prove it in an empirical manner based upon data. Either that or you're guffawing at me for getting it wrong. However since I have little to lose and a lot to gain by making this prediction I'm obviously going to go ahead and make it.

Well then. You're from the future. You're now looking back at actions that could've prevented the recession. Had the powers-that-be the knowledge that One Salient Oversight has, what would they have done differently? In other words, what steps could've been taken to avoid the 2012 economic downturn? This is basically the reason for this post.

So in order for the downturn to be potentially avoided, there needed to be a watch placed upon negative real bond rates - in the same way as a watch is placed upon an inverted yield curve. So let's say that occurred. What would've happened?

The statistics show, as I have pointed out above, that June 2011 saw the rates go negative. From the graph above we see that in the six months leading up to that event, the following occurred:
  • 10 Year Bond Rates hovered around 3.4%, with a high of 3.58% in February 2011 and a low of 3.17% May 2011.
  • Annual inflation in that period averaged 2.4%, with annual rates increasing steadily each month from 1.1% in November 2010 to 3.1% in May 2011
After that period, from June 2011 onwards, Bond Rates have averaged 2.3%. This has occurred as a result of financial turmoil arising from the Euro crisis. Inflation has averaged 3.5% though.

The Euro crisis started in July 2011. A minor event during that time was also the US government debt ceiling crisis, whereby the market began to get riled by chances of a default (which nevertheless didn't affect US government bond yields).

But the stats show that it was inflation which increased, and this occurred between December 2010 and September 2011. So what was it that caused such an increase in consumer prices? Let's look at oil, courtesy of FRED:

There's no doubt that oil was involved in the inflation, however we don't see any real price hit until March 2011 and inflation began growing in December 2010.

So what was it that caused the inflation of 2011 Q1 and Q2?

It was QE2 - the second round of Quantitative Easing.

QE2 was an unconventional form of monetary policy that the Fed under Ben Bernanke introduced in December 2010. It involved creating money by fiat and using it to buy back government bonds. Its purpose was to increase liquidity and act as a loosening of money supply. It was enacted because the limits of conventional monetary policy had been reached, namely that the Federal Reserve Rate was essentially at zero and could not be lowered further.

Thus QE2 was a defacto lowering of interest rates.

There were fears from many, me partly included, that QE2 would result in uncontrollable inflation. This was certainly not the case as inflation since then hasn't been too high. Nevertheless, these were my own views at the time:
(All) this goes back to whether the money supply should be increased. While US inflation is low (currently 1.14%, year on year) deflation is hardly a problem just yet. Deflation hit the US economy very hard in late 2008 when the credit crisis hit, but since then prices have stabilised somewhat. Paul Krugman and others would argue that the US should actually target 4% inflation as a goal rather than as a limit, in which case Bernanke's policy is heading in the right direction. Interest rates have certainly bottomed out, but where is the deflation that can't be influenced by conventional monetary policy?

And this therefore calls to question the reason for quantitative easing. Is Bernanke aiming to stimulate the US economy or is he simply trying to maintain price stability? If it were the latter, then Bernanke is crazy since the US doesn't have a problem with price stability at the moment (unless you adhere to absolute price stability like I do, of course, but that's another topic!), which means that QE2, as an inflationary policy, is being implemented when prices are not in danger of deflating. This can only mean that Bernanke is aiming to stimulate the US economy, and this is problematic.
To be fair, at that time I was not seeing QE2 and the resulting inflation as a way of creating another recession. That was because my study of real ten year bond rates and their historical relationships to recessions had not yet been realised. I did point out that the Fed's dual mandate was problematic (I believed then, and still do now, that central banks should focus solely upon price stability, while governments should focus upon policies to encourage economic growth. This is an increasingly unfashionable belief in this day and age, though).

As for Quantitative Easing as a policy, I had and still have no real problems with it. In fact I wrote this article at the time in which I propose a more complete form of QE that could potentially replace the use of interest rates in future monetary policy. What I questioned then whether it was needed since prices weren't exactly unstable at the time.

In retrospect, however, it seems that QE2 actively caused the next economic crisis. I didn't know about real ten year bond rates at the time, but now that I do I can see what happened. QE2 pushed inflation up, created negative real ten year bond rates and, as a result, created the trigger for the 2012 downturn.

There's no doubt that many will blame the Eurozone crisis for the 2012 downturn. There's no doubt that it made conditions worse (it probably resulted in a flight to US bonds which, in turn, depressed yields) but the simple fact is that the Eurozone crisis began after rates turned negative. Here is proof:

These are screenshots taken today (2012-02-26) from Bloomberg, showing government bonds in Greece and Italy. The Greek bonds are here. The Italian ones are here.

What these unequivocally shows is that the Euro crisis had begun in July and continued apace as the year progressed. However real 10 year US bonds went negative in June, the month before the crisis began (and remember these are three-month averages). There's obviously going to be arguments as to which was the chicken and which was the egg, but there's no doubt that the problem began in the US before anything bad happened in Europe. In fact I wonder whether we could blame QE2 for the Eurozone crisis too? I'll refrain from that at the moment but I will say that I was never a fan of Europe's lax fiscal attitudes.

There's a number of implications to my argument that QE2 caused the (yet to happen) 2012 downturn.

The first is that price stability is obviously important and that a lid must be kept upon even benign levels of inflation, even in the face of high unemployment and low growth. Because unemployment had gone so high after the 2008 crash, and because GDP had declined so precipitously, the majority view eventually rejected "inflation hawks" like me. The Fed and luminaries like Paul Krugman argued that higher levels of inflation can be sustained because there was so much slack in the economy caused by the GFC. This may have a kernel of truth, but the fact remains that inflation ended up exceeding 10 year bond yields and triggering another downturn. The irony is that policies designed to improve the economy actually ended up making it worse.

The need for price stability even in the aftermath of a damaging recession certainly challenges prevailing views, especially about the nature of inflation. In the logic presented here,  12% bond rates alongside 11% inflation are to be preferred over 2% bond rates alongside 3% inflation. While my own views on inflation are unique and unlikely to be taken seriously by policy makers for some time, what this current situation does show is the need to read more into inflation than merely consumer prices -  namely that market investment decisions may be such that even "acceptable" levels of inflation (eg the 4% touted by the Fed and Krugman) may be too high if the market is ploughing too much of its funds into government bonds. Any policy that would've maintained positive real interest rates either on the inflation side (ie not initiating QE2) or on the investment side (eg substantially increasing bond issues to push rates higher) would've been better than what actually transpired.

A second implication involves the behaviour of the Fed. This is not the first time real bond rates have turned negative. the last time it happened was prior to the GFC. It looks like we've been fooled twice by the Fed on this one:

There we have it. The green line tells the story. August 2007 seems to be the key here: despite being faced with an increase in inflation (the blue line), the Fed refuses to increase the Funds rate. Inflation increases, the bond rate falls and suddenly we have negative real bond rates. A recession then hits in late 2008. The same conditions beset the US during the 1970s, though during that period inflation was far higher - as were bond rates. Twice in a row inflation exceeded bond rates and twice these conditions were followed by recessions. This behaviour was stopped, of course, by Paul Volcker and his inflation busting recession of the early 1980s and created the conditions for what is now disparagingly called "the great moderation". Certainly the recessions of the early 90s and early 2000s weren't prevented by positive real interest rates, which indicates that there are more to recessions than simply this particular trigger. Nevertheless it cannot be written off as mere chance that recessions follow negative real bond rates as clearly and as predictably as the negative yield curve.

So will we be fooled again by the Fed even after the 2012 downturn? Only if the new boss is the same as the old boss I suppose.

(By the way, the governor at the Fed in 2007 who made this decision is the same governor now who made the decision again)

As far as unemployment is concerned, I'm not changing my original prediction:
Unemployment will also likely peak between 12.1% and 18.7%, with a result around 16.9% the most likely.
You can imagine what this will do to US government debt.

I'll just finish by predicting that this downturn is likely to also change our understanding of the inverted yield curve. With the Federal Funds rate at zero there is no way that the yield curve can invert. (Of course we might be tempted to think that recessions have been solved and that we'll all experience a golden age because zero rates prevent an inverted curve, but recessions are unlikely to worry about things like this). Obviously the only thing that will change the Fed's ZIRP would be an outbreak of uncontrollable inflation. While this is still a possibility my belief is that the yield curve will end up simply becoming a straight horizontal line: Government bond rates will approach zero. This implies a huge flight into government securities, which in turn implies a market correction rivaling and maybe even exceeding that experienced in late 2008. Perhaps the 2012 downturn will be a mixture of both credit crisis and inflation.

Now the reason why I'm talking about the yield curve here is that if there is a recession then the yield curve will invert (ie turn into a horizontal line), and we know there will be a recession because real bond rates are negative, so the yield curve will become horizontal. And that's why I'm going to get my superannuation funds and other savings placed into as conservative a position as possible.

I'll just end with this graph for a laugh: