A drop in the bucket deals with water. Not just the California drought, though that will be a large part of this blog. People in the Mid-West probably don't care much about the California drought, having to deal with their own flooded homes. People in the South-East coast have to fix up again their places due to hurricane damage, for the umpteenth time. They hear about California drought a lot, but have no idea what that entails.

The average rainfall and snowfall in the USA is about 30" a year, and is neatly broken down as to where it all goes. That does not help those who could not plant their crops in the San Joaquin Valley, nor those whose homes were flooded and those whose businesses were torn apart by the hurricanes.

Neither does it address the many landscape changes in Holland from the floods and redirection of the Rhine and Meuse rivers over the centuries, culminating in the 1953 flood on the South-West islands of the Zeeland and South-Holland provinces. Nor does it help those who lost their homes and businesses in New Orleans as a result of hurricane Katrina.

Water is not just what we use it for and its purposes, but also deals with the geography it is in. There are political ramifications and cultural differences, depending on the area, history and technologies.

This is only one part. Ultimately it will become a book! As chapters become available, I will make some of them available for your review.   Sign up with your email address on the left bottom, and you will receive an email with the next blog.

www.fivecultureslater.org

Fire survivor wants GOP to debate climate change

Daily Democrat, September 18, 2015

I can feel for Jessica Jennings Pyska, losing her home in the Valley fire. I have never experienced such loss, so cannot imagine what it is like. I just started to write a book on “water”, so this subject interests me immensely. I said: “started”, so still am gathering information for the chapters on California: how water is used, how people see it, and what solutions are pursued to manage water.

I lived in California for 25 years, from 1968-1993, most of them in Woodland. During those years a common saying was, that California goes through 7-year cycles of dry and 7 (more or less) wet years. If that is true, then the current 4-year drought period, referred to in the article, is only just over half of such a cycle.  Maybe the fifth and sixth year were not very “wet” either, because upon my return to California in 2009, the reservoirs were only half full or even less; something I do not remember seeing that extensive from my 25-year period prior. Yes, the reservoirs would go half empty, but that lasted only a few years on average, as I recall.

Because of the current global warming debate, I decided to include a section about that in my book. First, I am finding out that California and Nevada, are the states with the most outdated water management laws. Frequently, water rights issued during the gold rush are mentioned. Those rights are still currently on the books, meaning that landowners with such rights can pump as much water as they want, without a required measurement history, as to how much. California has, or maybe better said: had an enormous amount of ground water, so pumping that has not been an issue, until now. Now California is depleting ground water at an alarming rate.  It will take years to replenish, but that is not fully possible, because underground water basins are caving in and might not be restored to the original size.

Growth in population, extensive expansion of farming in the Central Valley (but not only there), which has an arid climate, and increasing water use to help salmon survive and prevent salinization to creep inland, has taxed the amount of water California receives to the limit.

Enter the global warming debate. If we look at science vs. political management, most of the time science is ahead of policies to control them. For example, the increasing use of drones causing near accidents and creating privacy issues, have not been addressed yet by the legislature.  There are many more such examples, but with global warming, it is the opposite. Science has not “caught up” with politics.

I just picked up a book: “The Global Warming Debate”, a report of the European Science and Environment Forum (1996) in which Roger Bate, Director of Economic Affairs in London, Britain, starts a summary with: “Global warming is a political issue.” John Emsley, a science writer for the Department of Chemistry at the Imperial College of Science, Technology and Medicine in London, writes in the next chapter:

Most people are unaware that the predictions of global warming are based mainly on computer simulations, backed up by carefully selected evidence and special pleading.  (Pg.23) 

I just started the book, so this is just the beginning, but I am very suspicious that it will lead to what I stated above: politics is ahead of scientific research on the subject.

This does not mean that the GOP should not address the water issues of California, and for that matter the Democratic Party as well. Nor does it mean that Governor Brown should not pursue accountability for the reduction of pollution caused by human endeavors. So far he has been successful by using global warming as being caused by us humans. California has one of the strictest legislation concerning pollution, which I am all for!

In the ‘80s the Department of Forestry suggested that forest fires are a positive natural development, which has been going on for centuries.  But the GOP and the Democratic Party need to support the funding of resources and further research, to protect the homes of people like Jessica, whose husband helps to control these fires on the front lines!

                                                     FIVE CULTURES LATER

From an article by Kimberly Amadeo, we get a clearer understanding about the National Debt:

The U.S. debt is more than $18 trillion. Most headlines focus on how much the U.S. owes China, which is one of the largest foreign owners. However, the biggest owner is actually the Social Security Trust Fund, aka your retirement money. How does that work, and what does it mean?

The Debt Is in Two Categories

The U.S. Treasury manages the U.S. debt through its Bureau of the Public Debt.  It’s broken out the main categories:

• Intragovernmental Holdings, at $5.117 trillion, and
• Debt Held by the Public, at $13.024 trillion (as of December 31, 2014)

Intragovernmental Holdings - Nearly 30% of the Federal debt is owed to about 230 other Federal agencies. Why would the government owe money to itself? Some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need right now. Rather than stick this cash under a giant mattress, they buy U.S.  Treasuries with it.

This effectively transfers their excess cash to the general fund, where it can be spent. Of course, one day they will redeem their Treasury notes for cash. The Federal government will either need to raise taxes, or issue more debt, to give the agencies the cash they will need. 

To expand on this: Social Security has lots of money,... on paper. From this explanation it is clear to me how Social Security gets funneled into the General Fund and can be used for whatever. So far, Social Security is receiving more money than it needs to pay out. The question is, for how long? As thousands of Americans are added to the retirement list, more money will be needed to pay out. So, when will the government pay itself back? And from where does the money come, to do that? As in the last sentence of the quote: The Fed either needs to raise taxes or issue more debt! In other words, it is not money (liquid, like cash) that is available to pay out, because it is already spent! So new taxes will have to be levied or more money created "out of thin air."  So the problem is not that Social Security is broke, but that Social Security funds have been re-allocated, used elsewhere, and ultimately cannot meet its obligation to pay it out. Let's look again at the article:

Why Does the Federal Reserve Own Treasury Debt?

As the nation's central bank, the Federal Reserve is in charge of the country's credit, so it really doesn't have a financial reason to own Treasury notes. So why did it double its holdings between 2007 and 2014?

That's when it ramped up its open market operations, purchases of Treasuries. This Quantitative Easing stimulated the economy by keeping interest rates low, escaping the grips of the recession.

The Fed's been criticized for simply monetizing the debt. The Fed purchases Treasuries from its member banks, using credit it created out of thin air. This has the same effect as printing money. By keeping interest rates low, the Fed helps the government avoid the high-interest rate penalty it would usually incur for excessive debt.

The Fed ended QE in October 2014.  As a result, interest rates on the benchmark 10-year Treasury note rose from a 200-year low of 1.442% in June 2012 to around 2.17% by the end of 2014

By monetizing the debt, interest rates can be held low. Since the credit is created out of thin air, the low interest rates being the consequence, are also created out of thin air. The low interest rates, form then the incentive for people to buy bigger houses than they can afford in the first place, in order to "get the economy going." So, is the government trying to get the economy going out of thin air,  the logical conclusion?

Is the GDP increasing for the right reasons?

The next example for the GDP formula:

FIVE CULTURES LATER

NATIONAL DEBT IS NO BIG DEAL, OR IS IT?

It is not easy to understand GDP when we read about it in the newspaper or an article online. If you are like me, it makes you suspicious. "What does the writer want?" or: "Who paid this economist to write this article?" or: "Which politician is behind this?"

Let's look at the answers to the questions I posed to you on last week's blog. Remember the equation?

Under that, were six statements and you were to identify under which part of the equation they fit, if any. Having studied that for some time now, I get the picture and I want for you, the reader to understand it as well. You read stories like, "We should buy all-American products to improve our economic situation and get every able American to work again."

The first statement to identify was: Khan Academy employs a new software engineer and pays him $100k.  How does that affect the GDP? Let me remind you: GDP stands for Gross Domestic Product. This makes me think a bit of dissecting a sentence in English class. We are looking for the subject, which is Khan Academy. What is Khan Academy? It is an American (domestic!) non-profit organization. What is Khan Academy trying to do? It is hiring, in the USA, in order to provide a better service to its clients. That falls under the "I" of the equation, because by definition, the I means investment, referring to labor, buildings, tools, equipment, etc. needed to produce a new "widget", or to increase production. If I goes up, GDP increases. So, this is a positive answer to: "buy all-American" from an economic standpoint.

The second statement: Accenture earns $10m by building a new IT center for California. Again, let's break down this sentence: Accenture is the subject, an American company. "Earns", the verb indicates income for Accenture, which probably adds somehow to the GDP.  California is an important word: it is a state, so building something for the state indicates Government. Bingo, it is built for the government, so comes as an increase under "G"!  We see articles justifying government to "spend more money" to help "create jobs", especially in economical down-turns. This may be good or not so good. After the big depression in the early 1930's, it was a good move. Roads and dams were built and America came out of the depression. How about the 2008-9 recession? Not so sure it did much. Jobs are created slowly, but mostly in the private sector, and it is fairly slow; even now (in 2015) we are still trying to come out of it. The government is trying to "help" by: reducing interest rates, but that also cuts into retirement account rates for people who can barely make ends meet. On top of that, salaries have not been growing, while housing prices are steadily increasing again, so a larger % of income has to be allocated to housing.

Let's look what Dr. Housingbubble has to say in his latest blog:

While Los Angeles County is a majority renting county with over 50 percent of households renting, San Francisco is a hardcore renting city with only 36 percent of households owning.  We should also take note that in California, housing booms and busts in regular intervals.  We are already seeing price appreciation slow down in San Francisco:

Question:  What do you think should happen?