Monday, January 31, 2011

Only 3% of new jobs permanent(UK)
By Simon Duke

Desperate job hunters are increasingly being told: It’s part-time or nothing.

An astonishing 97 per cent of posts created since the economy came out of recession are of limited hours.

This means only 6,000 of the 200,000 jobs to have come up in a year pay a full-time wage.

The worrying findings, by a respected think tank, raise the spectre of a sluggish recovery with legions of workers having to accept a so-called ‘McJob’ to make ends meet.

My comments:  British managers definately don't follow the Edwards Deming principles of management. One of them is to not do temporary contracts and create an environment of fear and short termism.

If someone is on a 6 month contract and probably will be working elsewhere in 7 months.. is that person going to work towards the long term improvement and advancement of the company? Are they going to be relaxed and confident in their position and willing to take risks?

Its these classic mistakes.. the victorian factory owner mentality that caused Britain to lose almost all our manufacturing companies. This kind of looter mentality works well when you are only competing against others doing the same.. but when you face an opponent like German industry where they are co-operating together and the workers feel part of the team and proud of the products, the old victorian era management style gets smashed.

The victorian era factory owner asks how can I save £1 pound an hour across 2,000 workers.. now we're talking some real money. But in the moden era of robots and engineering quality, this same mentality is dangerously out of date.

Wednesday, January 26, 2011

Technological progress versus transformative nature of applications

I generally agree the impact of technology has not been as transformative over the last 30 years compared to some eras, like the unbelievable advances with electrification and motorized vehicles and equipment.

I think the progress of technology is still going at pace, just it has to get applications that are transformative.  For example I believe we will see human level AI robots by 2040.. that would be bizarrely transform society.

Virtual reality/virtual worlds are having a large social impact already.  Sooner or later I think they will lead to a monumental transformation in society.  Already for millions of people their World of Warcraft life mean more to them than their real life.  The transformation will be when a majority of people place more importance on a virtual life than a real one.  And its coming sooner or later, as I have argued in the long run the virtual world has absolute advantages.

Health sciences is another.  There is notable achievements over the last 40 years, but certainly nothing has transformed society like vaccines, antibiotics, public sanatation, better nutrition.  However with stem cells, gene therapy, nanomedicine as these mature in the coming decades, we could see radical advances.  Like starting to rejuvinate older people to a youthful state.

Peter Thiel recently argued that there is defaults on pensions and investments going downhill because technological advance has not been as fast as anticipated 20 years ago. 

Tuesday, January 25, 2011

Is belief in progress blind faith?

Is belief in progress blind faith when you do not know exactly how the progress will be achieved?

Let me give you an example with electrical production. Most on the left were predicting the world would produce less electricity in 2008 than in 1998. Because of finite resources running out. I looked at the long term average and simply projected it forward. Is it blind faith.. I'm not so sure, if electrical production grows at 2.7% a year, year after year(even with primitivists saying it cannot go up every year, including many esteemed intellectuals).. is it blind faith to guess another 2.7% growth for the coming year?

The ways in which we will increase production are unknowable from any point in history. How will computer engineers in 2025 produce a 50% increase in performance that year? I can take wild guesses, but I do not know. But I think it is wrong to say becaue we do not know how they will increase production then, to make the jump and say therefore they will not be able to.

In 1998 world electrical production was 13,663 billion kilowatt hours. I predicted my usual, a 2.7% rise in production per year. Because that is the long term historical average. So my prediction was for 2008 production to be 17,830 billion kilowatt hours. Back then everyone I told said it wouldn't happen, because of limited resources.

The numbers are out for 2008 now, the world production was 19,103 billion kwh.

Monday, January 24, 2011

Michael Lind at article

America in the age of primitivism

And then their people suddenly got tired of modernity and tried to crawl back into the past.
On the left, technological optimists were replaced by Rousseauian romantic primitivists. In the 1970s, Green guru Amory Lovins promulgated the gospel that “hard” sources of energy like nuclear power are bad and that called for a “soft path” based on hydropower, wind and solar energy. Other Green romantics decided that even hydropower is wicked, because it is generated by dams that despoil the prehuman landscape.

My comments:  One of the best articles I've read.  How the right and left politically have lost the belief in the power of progress.  Like favoring small organizations which can't do much, versus huge bureaucratic organizations which can accomplish radical change. 

An exampleis how the modern left is reflexively against GMO foods.  Yet GMO foods would be something 1930's to 1970's New Deal liberals loved.  A way to increase yields, increase nutrition, using the power of science, leading to less hunger, cheaper food and the ability to return farmland to wild nature. 

I think the decline we are seeing in America and Britain is related to this change in belief in progress.  Like why are modern leaders pushing energy of sun and wind that humanity used in the 13th century, instead of nuclear power, the breakthrough energy technology of the 20th century.  It is primitivism.

Sunday, January 23, 2011

Coming wave of Municipal and State Bankruptcies

The New York Times
U. S. Path Is Sought For States To Escape Debt Burdens
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care.
Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

My comments:  One of America's great strengths is its bankruptcy laws.  Which allow for an orderly default on liabilities, without wrecking the integrity of the organization defaulting.  Hence how General Motors is back as a fierce competitor in autos.

The Vallejo California bankruptcy was historic and looks to me like it will be used as the precedence for the coming wave of municipal bankruptcies and state bankruptcies.  In fact likely most cities and states will go bankrupt over the next 10 years.

The judge in the case ruled that Vallejo has a duty to provide basic services to its citizens and only after that is properly paid for will remaining monies be split between the creditors.  Which he ruled a default on the pensions and for the bondholders they are likely to get between 5 and 20 cents on the dollar.

States and municipalities are notgoing to be forced to cut services to nothing while still paying pensions and bondholders.  Instead when they can no longer comfortably afford to pay both, the court system is going to let them legally default on their debts.

This is going to make a stronger and healthier America, instead of going down a downward spiral.. but obviously pensions and bondholders are ---cked.

Thursday, January 20, 2011

Internaional Energy Agency December 2010 report

It looks to me like the peak oil fear of the peak in 2005 is now clearly being surprassed.  And looking to push substantially higher through 2011.  I also believe there is near endless demand as the developing world keeps moving forward.

Global oil product demand for 2010 and 2011 is revised up by an
average of 320 kb/d
buoyant global economic growth and cold northern hemisphere
weather. Global oil demand, assessed at 87.7 mb/d in 2010
(+2.7 mb/d year

Global oil supply fell by 0.3 mb/d to 88.1 mb/d in December
, as non
OPEC output was reduced, on short
pipeline leak and a fire at a Canadian oil sands upgrader also cut
January output. Overall, 2010 and 2011 non
unchanged at 52.8 mb/d and 53.4 mb/d, respectively. OPEC NGLs
contribute 5.3 mb/d in 2010 and 5.8 mb/d in 2011.
lived outages. An AlaskanOPEC estimates are
on higherthanexpected submissions, reflectingonyear), rises by 1.4 mb/d to 89.1 mb/d in 2011.
My comments:  Natural gas liquids is a growing part of the picture.  Especially in Opec nations which are taking the gutsy decision of making the huge capital investments to bring these 'trains' online.  Non-conventional oil is where most or all of the future gains are going to come from.  Deep sea oil like in the gulf of Mexico, offshore Brazil and offshore West Africa, NGL like in the middle east, and tar sands like in Canada and Venezuela.

Number of Young American men out of work

This is Stuart Staniford's blogspot, I always learned a lot from his posts on the oildrum.

The graph above shows the employment-population ratio for men since then, broken out by age. You can see that for all the groups below age 55, employment opportunities fell sharply between 2000 and about 2003, then recovered slightly until 2007 -- but not to the 2000 level. Then they fall sharply in the great recession and have pretty much barely improved at all since then.

The one exception is the age group 55-64 who increased their participation through 2007, but we probably should see this is a sign of societal stress also - less ability for men to retire early.

Ranulf comments:  That last graph is young black men.. down to just 1 in 3 of them working. It is amazing the contrast when you think about it, older people in western societies living a great retirement on generous pensions, their house paid off, going on nce vacations and generally enjoying life. But for the younger generaton not even a job to be found, and the future is honestly a life on subsistence welfare.

But the vast majority of voters are still those older people, who the mainstream ideas are working just fine for.

Tuesday, January 18, 2011

3.7% inflation in the UK yoy

The latest figures out of the UK show inflation running at 3.7% yoy.  The UK has been diverging from the USA and the EURO currency area.  Both the USA and EURO are running below inflation targets.  In the case of the US dollar well below, even below 1% yoy in some months.  This means both the US and EU central banks have all the room in the world to print if needs be. 

But it appears the UK is not in a position to print with inflation at 3.7%.  They are still running a budget deficit of 12% of gdp, the coalition government has wisely stopped trying to cut the deficit.  Fortunately for the UK the debt to gdp ratio is still quite healthy at only 65% of gdp.  So they should have a few years left of room to maneuvre.


Monday, January 17, 2011

EU 27 car sales for 2010

From Acea:

Over twelve months in 2010, the EU* market for new passenger cars declined by 5.5%, with a total of 13,360,599 new units registered throughout the year.

VW Group:  2,831,000
PSA:  1,805,000
Renault/Nissan:  1,777,000
GM Group:  1,166,000
Ford:  1,082,000
Fiat/Chrysler:  1,057,000
BMW:  724,000
Daimler:  651,000
Hyundai/Kia:  604,000
Toyota:  567,000

That is 10 groups selling large volumes in Europe.  It shows how diverse the European auto market is.  I would say this market will consolidate over time.  If you think about it, this is a lot of duplication of effort on the engineering front.  And then there is rationalization of the factories.

Wednesday, January 12, 2011

Human disadvantage versus automation

One underlooked factor in the man vs. machine debate is 'uptime'.  A computer server or an industrial robot may have an uptime of for arguments sake 99%.  A week has 24*7=168 hours.  But a human being only works 8*5=40 hours.  And with 5 weeks vacation a year, 1 in every 10 days they are not there.  Sick leave adds another 2 weeks off a year.  Then there is maternity leave, and a growing issue is long term disability leave.  And I almost forgot statuatory holidays.

Finally a big time business leader I read said the average worker, 'works' 3 hours out of the 8 hour shift. 

So say a big box grocer is installing automatic checkout machines.  Its not just replacing one worker.  The store may be open 7am-10pm, 7 days a week.  That is 105 hours a week.  And would take at least 2.5 full time workers to cover.  And more like 3-4 once you count all the factors I mentioned.

An added and even less appreciated factor is the reduction in management costs to deal with this.  There is accounting, human resources and layers of management needed, to administer human related issues.  When you replace enough workers, you can also get rid of a great deal of the administration above them.

Humans also require facilities, such as more washrooms, office space, parking space, security systems and so on.  All of this can be reduced as the workforce gets reduced. 

Monday, January 10, 2011

How money get to people in the modern economy

Historically the free market was the mechanism by which money got into the hands of 'the masses'.  A worker worked on a mass assembly line with thousands of other workers, and the compensation from that job was enough to pay all the expenses for that worker.  All the food, housing, medical care and so on for him and his family.  And enough extra money to have some disposable income and help drive the economy.

Your average man stood on his own in many ways.  He was valueable to the production, and got a percentage of the value he added.  And a key point is because there was an overall shortage of workers in the economy through history, firms had to pay more than the firm down the street to attract and keep workers.  This shortage kept the pay of the worker as a large percentage of the value he was adding.  Of course it was never 100%, as there had to be room for the profit of the owners of the firm. 

But by 2010 that mechanism is breaking down in western nations.  There is a severe and growing oversupply of labour.  The firm does not have to pay wages higher than the firm down the street, it only has to pay the legal minimum wage.  The connection between the value being added and compensation has broken down.  You see workers who are fabulously productive, enabled by modern production technology, yet the wages are declining.  So you have situations in industries where pay of new workers is falling like 20% over the last decade, yet productivity at least doubling.

It is so bad that even with the huge productivity gains, now your average man could not mke enough money at the average job to support a family, and cover all the costs, housing, food, medical care, cars, appliances, utilities, dental care, etc.  People tried to keep up by first sending the wife to work, which delayed the crisis.. and then over the last decade going deeper into debt.

But even with that more and more it is the state which is picking up the bills.  The health care costs, housing, food stamps, pension costs, workers insurance and so on.  The state can do this far easier than most pundits realize, because the wealth is really there.  The wealth is the productivity increases which have been so powerful over the last few decades. 

In the USA in the last decade government combined local, state and federal has grown from under 35% of gdp, to 45% of gdp.  And looks set to grow each year now.  For more and more people they exist because the state pumps money their way.  And I believe this trend will continue, until the vast majority of people get the majority of their income from the state.. sometime mid century.

There is no other way, because few people are now needed in modern production.  And that number goes down each year.  And the same computing and robotics technology is moving into warehousing and eventually will go into retail.  It is also in the process of replacing most of the white colar workforce.  But back to that key point I mentioned, automation doesn't need to replace everyone to change the game.  It only has to create a permanent slack in the workforce, in order to destroy the bargaining position of workers.  Once that is done, the link between compensation and production is broken.  And at that point it requires the state to come in with stimulus money, in order for 'the market' to get enough money to buy said production.

Saturday, January 8, 2011

What 1% population growth means

Investments that might not make sense now, like a barely viable business on the outer suburbs can become incredible businesses in time with sustained population growth.  The same with land that is currently on the fringe of a city, if the city doubled in size, it may be on prime developable land.  This is how a lot of families have become very rich through time.

Lets look at the 4 big anglo-saxon nations and their population growth and what it means long run.

Canada:  34 million  (1%)
Australia:  22 million (1%)
United Kingdom: 62 million (0.5%)
America:  310 million  (1%)

Total:  428 million

In 2100, 90 years from now what the populations would be on this course:

Canada:  83 million
Australia:  54 million
United Kingdom:  97 million
America:  759 million

Total 2100:  993 million

Friday, January 7, 2011

US auto sales 2010 has a great monthly series where they track all the brands auto sales in the US.  This is their year end report.

The estimate is new car sales came in at 11.6 million units for 2010.  Up 11% from the depth of the recession in 2009.  The thought is 2011 could see 12.5 million to 13 million units sold.

GM: 2,215,000 (+6%)
Ford: 1,935,000 (+19%)
Nissan: 908,000 (+18%)
Chrysler/Fiat: 1,085,000 (+17%)
Honda: 1,230,000 (7%)
Toyota: 1,763,000 (-0.37%)

Hyundai/Kia:  894,000 (22%)

Together these 7 mass manufacturers accounted for 86% of the US auto sales.

China car market year end numbers coming out

Honda: 646,000 (+12%)
Ford: 582,000 (+40%)
Hyundai/Kia: 1,100,000
GM: 2,350,000 (+28%)
PSA: 375,000 (+38%)

Still to come among the mass manufacturers, Toyota, Nissan, VW.

Edit January 8th,

VW:  1,923,000 (+37%)
Toyota:  846,000 (19%) 

Edit January 10,

Nissan:  1,020,000 (+36%)

And the total for China for 2010 is in:  18,060,000 cars, up 32% for the year. 

Thursday, January 6, 2011

Supercomputer projections from top500

This is the projected performance chart from the top500.  They track the top 500 supercomputers in the world, releasing the list every 6 months.  It has taken just about 4 years for every 10x increase in performance.  But even if it slows down to every 5 years, we are still talking rapid increase in performance.

In 2016 we would see a 20 petaflop system.  That is over the 10 petaflops the pharmacuetical companies said they need to do timely biological simulations at the cellular level.  Although the first system would be very expensive.  20 petaflops is the estimate that Ray Kurzweil has guestimated for the speed of the human brain.

In 2021 there would be a 200 petaflop system.  And in 2026 a 2 exaflop system.  Some of the major nations are already rumored to be aiming for an exaflop system by 2020.  Surely by the mid 2020's a 10 petaflop system would be relatively cheap for the pharmacuetical companies.

Tuesday, January 4, 2011

Computing will drive future electric growth

The supercomputer in the picture is MareNostrum, installed in an old chuch in Spain.

An interesting example is to look at the growth of supercomputing power consumption.  The biggest supercomputers in the world 10 years ago used about 500kw of power.  Today they are up at the 5 megawatt level.  At the current pace in 2020 they will be at 50 megawatts and by 2030, 500 megawatts. 

A modern nuclear reactor is about 1200 MW, a wind turbine 2 megawatts.  As the supercomputers grow in computational power they have more applications that we want to use them for.  The big pharmacuetical companies have estimated that they need 10 Petaflops of performance in order to do timely and useful simultions of biological interactions.  These are companies with 5 billion dollars a year in research budgets, so when it becomes useful they will not have a problem spending what it takes.

But right now the biggest 3 supercomputers in the world have just surpassed 1 Petaflop of performance.  But in under 5 years we should see 10 petaflop computers installed. 

Of course supercomputers are only one part of the world computing useage..and in 2010 a quite minor one.  There is hosting servers, datacenters, carrierhotels and cloud services.  And in the home there is more and more computing devices.  An estimate I saw said computing is already 20% of US electric demand and is growing at 10% a year.  That means just computing would cause a 2% growth in total US electric demand, all else being equal.

And 2% is a non-trivial amount for one year in a nation with 1,000 GW of installed capacity. That would require 20 gigawatts of new capacity to meet 2% demand growth.  Or 20 nuclear reactors.  (or 10,000 wind turbines).

Monday, January 3, 2011

Prediction for China car sales 2011

Production in millions units from wikipedia.  Passenger and commercial vehicles combined.  Growth over previous year in brackets.

1992:  1.0
1999:  1.2
2000:  2.07 
2001:  2.33  (12.6%)
2002:  3.25  (39.5%)
2003:  4.44  (36.6%)
2004:  5.07  (14.2%)
2005:  5.71  (12.6%)
2006:  7.28  (27.5%)
2007:  8.88  (22.0%)
2008:  9.35  (5.3%)
2009:  13.83  (47.9%)

Last year I predicted 2010 sales would grow to 17.5 million unit.  I simply took the last 9 year average of 24.2% growth and added that to the 2009 total, which came to 17.2 million units.  Then because I was bullish I added a little bit. 

According to Xinhua sales for the first 11 months of 2010 were 16.4 million units.  That puts them on pace for 17.89 million units in 2010.

2010:  17.89(est)  (29.4%)

So that brings the 10 year average growth rate to 24.7%.  So I will guess 24.7% growth for 2011, which would bring 2011 sales to..

2011:  22.31(my guess) 

Sunday, January 2, 2011

World added 15 UKs over decade for electricity.

One thing that amazed me is the increase in world electric production over the decade of 5,440 billion kwh, was the equivalent of adding 15 United Kingdoms(361 billion kwh) in electrical production.

I've been trying to find statistics to relate to people how broad this global economic growth is right now. 

Saturday, January 1, 2011

World Electric prediction for the decade

In 1998 world electrical production was 13,663 billion kilowatt hours.  I predicted my usual, a 2.7% rise in production per year.  Because that is the long term historical average.  So my prediction was for 2008 production to be 17,830 billion kilowatt hours.  Back then everyone I told said it wouldn't happen, because of limited resources.

The numbers are out for 2008 now, the world production was 19,103 billion kwh.  The United Kingdom produced 361 billion kwh in 2008.  Or ~1.89% of world output. 

My prediction for the 2018 numbers which will be out in 2020.. is simply an annual 2.7% increase from now.  Or 24,929 billion kwh.  That growth if it happens will be like adding 16 United Kingdoms.

How unemployment creeps up

The 2000-2010 decade was the first decade in American history where the country went out the decade with less jobs than it went in.  The population grows by about 1% a year, the population grew by somewhere around 28 million people over the decade.

In the year 2000 America had 280 million people and about 140 million active in the labour force.  For a labour force participation rate of 50%.  In the year 2010 America had ~310 million people, but the labour force had declined to 138 million.  If the labour force participation rate had remaned at 50%, there would be ~155 million active in the labour force.  So this difference amounts to 17 million jobs.  In fact because the country grows by about 3 million each year, at a 50% labour force participation, about 125,000 new jobs must be created each month to stay even.  17 million jobs is 12% of the current labour force of 138 million.

That works out to 1.2% of jobs lost each year.  For a random economically active individual, the chances of you becoming out of work this year are 1 in 100, if things continue at this pace.  And it probably isn't even that high.  Corporations and governments usually reduce their workforce through attrition.  As people retire they do not replace the person.  As people leave for other opportunities, they do not replace the person.  When people die or become disabled, they do not replace the person. 

So where we are really seeing the unemployment is the young, coming out of school.  And in many western cities the unemployment rate among 18-25 year olds not in school is catastrophically bad.  It was reported in New York City, the rate was 50%. 


Growing unemployment from tecnology

One of my main fascinations at the current time is the rising unemployment across most of the developed nations.  My contention for years has been that automation is the primary driver.  At some point technology begins replacing jobs faster than the same technology creates new opportunity for people.

If you look at many of the big jobs of the post war era, jobs that could support families, ones like auto workers, steel workers, port workers, rail and electrical workers, most of these fields have seen a huge reduction in the number of workers needed.

Today steel needs less than 1/5th the workers that it needed in the 1960's to produce 1 tonne of steel.  So you get the strange situation of old steel towns which appear as ghost towns, and the assumption is that the mill has shut down.  But in actuality the mill is still operational and producing the same output as it was 50 years ago.

In addition to physical automation there has been vast automation for white colar workers.  Even in the 1980's there was armies of clerks at all the major corporations who were managing information.  Filling out invoices, filling out forms, getting signatures, filing copies, keeping track of accounts and so on.  This is why every morning tens of millions of people travelled from their homes into city centers and worked in office buildings.  Each worker working in a cubicle, with hundreds of other cubicle drones on his floor, and a building tens of stories high.

But today most of the information is handled electronically with computers effortlessly updating accounts, and effortlessly filing the information.  So you have a few people working in a server farm out in suburbia.  This is a big reason why the downtown centers of cities have hollowed out. 

In some of my coming posts I will look into what it means for our society and economy with tens of millions of these middle class jobs permanently disappearing.  That is something to realize, these jobs are never coming back.  For decades after farm automation took over during the 1930's, politicians tried to revive the 'farm economy'.  But they never were able to get the rural economy going, they were not even able to stop the loss of jobs from continuing in the farm sector.