Sunday, August 2, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Bad Deal Math: I have a Product, But Please Don't Buy It

Posted: 02 Aug 2015 10:49 PM PDT

How often do you hear a car manufacturer (or any other manufacturer) tell people to "not" buy their product because they lose money if you do?

I highly suspect this is nothing more than a purposely calculated publicity stunt, but please consider California Has a Plan to End the Auto Industry as We Know It.
Sergio Marchionne had a funny thing to say about the $32,500 battery-powered Fiat 500e that his company markets in California as "eco-chic." "I hope you don't buy it," he told his audience at a think tank in Washington in May 2014. He said he loses $14,000 on every 500e he sells and only produces the cars because state rules re­quire it.

So who's forcing Marchionne and all the other major automakers to sell mostly money-losing electric vehicles? More than any other person, it's Mary Nichols. She's run the California Air Resources Board since 2007, championing the state's zero-emission-vehicle quotas and backing Pres­ident Barack Obama's national mandate to double average fuel economy to 55 miles per gallon by 2025. She was chairman of the state air regulator once before, a generation ago, and cleaning up the famously smoggy Los Angeles skies is just one accomplish­ment in a four-decade career.
Spare Me the Sap

Automakers could just as easily price this crap at a point where they make a profit. They don't, because they want the publicity.

Here's the bottom line: Companies don't beg consumers to "not buy" a line of their products, unless they think favorable publicity will make up losses elsewhere.

Moreover, I highly doubt companies (counting tax breaks) are losing what they claim they are. Can we see full cost accounting, please?

Bad Deal Math

Even if this is a bad deal for the automakers, please don't assume it's a good deal for consumers.

Government adds inefficiencies in everything it does. It's quite likely that energy mandates are a lose-lose proposition for everyone involved.

  • Corporations Lose Money on Product Sold
  • Consumers Overpay vs. Gasoline Pump Savings 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Prolonged Drought and Wildfires? Massive CA Fire Jumps 20,000 Acres Overnight; Water Outing Website; 240-Year Drought?

Posted: 02 Aug 2015 01:56 PM PDT

Water Outing

Restaurants in California are not supposed to serve water unless asked. Will that make much of a difference?

The answer is no, but what about car washing, sprinklers, etc.?

To pressure citizens to not waste water, California Launches "Drought Shaming" Website.
California is launching a website that lets residents tattle on water wasters, from neighbors with leaky sprinklers to waiters who serve water without asking.

California has multiple restrictions on water use, including banning washing cars with hoses that don't shut off and restricting lawn-watering within two days of rainfall. But enforcement varies widely across the parched state.

Residents can send details and photos of water waste at www.savewater.ca.gov. Complaints are then sent to local government agencies based on the address of the offense.

Tipsters wary of being outed as the neighborhood snitch can remain anonymous. The site went online Thursday as the latest conservation initiative.
Massive Fire Jumps 20,000 Acres Overnight

MarketWatch reports Massive California Fire Jumped 20,000 Acres Overnight.
A wildfire that has been raging in northern California since last Wednesday jumped 20,000 acres overnight, and has now charred 47,000 acres and is threatening 6,300 homes. Fire officials say the massive blaze, called the Rocky Fire, in the Lower Lake area north of San Francisco is only 5% contained. Already it has destroyed 24 homes and 26 outbuildings.

California Fires Map

Google Maps and CAL Fire created this California Fires Map.



There are 21 active fires as of 3:00PM Central.

No Running Water At All

California's drought is so bad that Thousands Have No Running Water.
Thousands of people in California's Central Valley are feeling the drought much more acutely, because water has literally ceased running from their taps. The drought in these communities resembles a never-ending natural disaster, says Andrew Lockman, manager of the county's Office of Emergency Services.

What do you mean by "no running water"?

No water is coming through the pipes, so when residents turn on the tap or the shower, or try to flush the toilet or run the washing machine, water doesn't come out.

Who doesn't have running water?

While a handful of communities across the state are dealing with municipal water contamination and shortages, the area that's hardest hit—and routinely referred to as the "ground zero of the drought"—is Tulare County, a rural, agriculture-heavy region in the Central Valley that's roughly the size of Connecticut. As of this week, 5,433 people in the county don't have running water, according to Lockman. Most of those individuals live in East Porterville, a small farming community in the Sierra Foothills. East Porterville is one of the poorest communities in California: over a third of the population lives below the federal poverty line, and 56 percent of adults didn't make it through high school. About three quarters of residents are Latino, and about a third say they don't speak English "very well."

If they don't have running water, how do they function?

Of the roughly 1,200 Tulare homes reporting dry wells, about 1,000 of them have signed up for a free bottled water delivery service coordinated by the county. Homes receive deliveries every two weeks; each resident is allotted half a gallon of drinking water per day. The county has also set up three large tanks of nonpotable water, where residents can fill up storage containers for things like showering, flushing toilets, or doing dishes. Portable showers, toilets, and sinks have been set up in front of a church in East Porterville.

The free water programs are open to residents regardless of citizenship, but myths still prevents some from taking advantage of the services. When the portable showers were first installed in front of the church, says Lockman, many people suspected they were an immigration enforcement trap. Some parents haven't been sending their children to school, having heard that child welfare services would take away kids from families that don't have running water.

Are farmers taking the water?

Yes, but it's hard to blame them. Tulare County is among the biggest agricultural producers in the country, growing everything from pistachios and almonds to grapes and livestock. "If you were to just look at the landscape, it's very green," says De Anda. "You wouldn't think we were in a drought." The industry brings in nearly 8 billion dollars per year, employing many of those individuals who currently lack running water. Permits to drill new wells have skyrocketed—just this year, nearly 700 irrigation wells have been permitted, compared to about 200 domestic wells. (Wells permits are issued on a first come, first served basis.) "It's like one big punch bowl that's not getting refilled but everybody's been slowly drinking out of it and now we have a thirsty football team at the same punch bowl as everybody else," says Lockman. "Do we have sustainability problems? Oh yeah, absolutely."
Seven Things that May Surprise You

Truthout reports Seven Things That Might Surprise You About California's Drought.
1. Almonds Are Not to Blame

In terms of nuts, almonds don't use the most water: it takes 4.9 gallons of water to grow one walnut, three-quarters of a gallon of water to grow one pistachio, and one gallon of water to grow one almond.

"The whole thing is completely ridiculous," says Richard Howitt, an agricultural economist at the University of California at Davis. "Overall, almonds take about 10% of the state's water but they produce a tremendous amount of value, jobs, income, and a healthy product. So why they became the bad guys I don't know."

[Mish response: Perhaps because some of us believe it makes no sense to water the desert, and deplete the water table just to grow onions, nuts, lettuce, alfalfa. When the ground table is depleted, it's gone for good, and it's vanishing at a very fast rate.]

2. California Is Sinking

In parts of California, notably the San Francisco Bay Delta, and the San Joaquin Central Valley, the land is actually sinking, the result of so much water being pumped from the ground.

According to an NBC news interview with Michelle Sneed, a hydrologist with the U.S. Geological Survey in Sacramento, one area of the San Joaquin Valley is sinking about a foot a year, due to accelerated ground water pumping.

[Mish response: add that to the reasons not to pump water to grow nuts]

3. Big Ag Doesn't Use 80% of California's Water

That 80% figure is only partially true. Take a look at this graphic from the Northern California Water Association, and you'll see that just 41% of water goes to "irrigated agriculture." That 80% figure includes "wild and scenic rivers," which account for 31% of California's water.

4. Desalinization Isn't a Solution

Desalinization involves technology that is extremely expensive, so most water officials don't see it as a major player in improving water supplies. Still, in the city of Carlsbad, close to San Diego, what will be the nation's largest desalinization plant is expected to begin operating next year. Producing 50 million gallons of water per day, it will be the largest such plant in the Western Hemisphere. That sounds like a lot, but actually is just 7 percent of the county's total water needs, and at a cost of $1 billion, it seems unlikely that desalinization will provide a primary solution to the drought.

5. Water Rights Are No Longer Sacred

You may have read recently how those holders of water rights dating back over a hundred years are immune from anything Governor Brown can order. That used to be true, but not any more. Last month, California water regulators ordered farmers and others with some of the oldest water rights in the state to stop pulling water out of California's rivers.

[Mish comment: So instead they deplete groundwater. They will do so until it's all dried up.]

6. California Lawns Are Disappearing

On July 15, the California Water Commission approved strict limits on the amount of water that can be used on landscapes surrounding newly constructed buildings, such as houses, businesses and schools: grass may only be about 25% of a home's combined front, back and side yards.

7. It's Not the First Time

It's true that the past four years are being labeled the driest period in the state's recorded rainfall history. In 2013, California received less rain than in any year since it became a state in 1850.

But that's not the worst of it.

Scientists who study long-term climate patterns say the state has been thirsty for much longer stretches before it became a state in the US. They've been busy documenting several droughts over the past 1,000 years in California that lasted 10 or 20 years in a row. By studying tree rings, sediment and other natural evidence, researchers have discovered a 240-year-long drought that started in 850 and, 50 years after the conclusion of that one, another that stretched at least 180 years.

Is California in for another megadrought? Optimists have begun talking about the mega El Nino, which could change everything. However, while this weather system looks fairly certain, we don't know exactly where it is headed. It could bypass California altogether.
Megadrought?

Point number seven should be very scary. And what about all the water used in fracking?

Let's return to point number three. Here is the chart.



Counting rivers as a "use" for water rather than a source of water seems ridiculous. Saying agriculture "only" uses 41% is seriously misleading.

Nonetheless, let's state this in a way no one can dispute: irrigation uses 4 times the amount of water as all urban use combined.

Can Things Get Worse?

National Geographic reports If You Think the Water Crisis Can't Get Worse, Wait Until the Aquifers Are Drained.
We're pumping irreplaceable groundwater to counter the drought. When it's gone, the real crisis begins.

Aquifers provide us freshwater that makes up for surface water lost from drought-depleted lakes, rivers, and reservoirs. We are drawing down these hidden, mostly nonrenewable groundwater supplies at unsustainable rates in the western United States and in several dry regions globally, threatening our future.

Groundwater comes from aquifers—spongelike gravel and sand-filled underground reservoirs—and we see this water only when it flows from springs and wells. In the United States we rely on this hidden—and shrinking—water supply to meet half our needs, and as drought shrinks surface water in lakes, rivers, and reservoirs, we rely on groundwater from aquifers even more. Some shallow aquifers recharge from surface water, but deeper aquifers contain ancient water locked in the earth by changes in geology thousands or millions of years ago. These aquifers typically cannot recharge, and once this "fossil" water is gone, it is gone forever—potentially changing how and where we can live and grow food, among other things.

A severe drought in California—now approaching four years long—has depleted snowpacks, rivers, and lakes, and groundwater use has soared to make up the shortfall. A new report from Stanford University says that nearly 60 percent of the state's water needs are now met by groundwater, up from 40 percent in years when normal amounts of rain and snow fall.

Relying on groundwater to make up for shrinking surface water supplies comes at a rising price, and this hidden water found in California's Central Valley aquifers is the focus of what amounts to a new gold rush. Well-drillers are working overtime, and as Brian Clark Howard reported here last week, farmers and homeowners short of water now must wait in line more than a year for their new wells.

In most years, aquifers recharge as rainfall and streamflow seep into unpaved ground. But during drought the water table—the depth at which water is found below the surface—drops as water is pumped from the ground faster than it can recharge. As Howard reported, Central Valley wells that used to strike water at 500 feet deep must now be drilled down 1,000 feet or more, at a cost of more than $300,000 for a single well. And as aquifers are depleted, the land also begins to subside, or sink.

Unlike those in other western states, Californians know little about their groundwater supply because well-drilling records are kept secret from public view, and there is no statewide policy limiting groundwater use. State legislators are contemplating a measure that would regulate and limit groundwater use, but even if it passes, compliance plans wouldn't be required until 2020, and full restrictions wouldn't kick in until 2040. California property owners now can pump as much water as they want from under the ground they own.

California's Central Valley isn't the only place in the U.S. where groundwater supplies are declining. Aquifers in the Colorado River Basin and the southern Great Plains also suffer severe depletion. Studies show that about half the groundwater depletion nationwide is from irrigation. Agriculture is the leading use of water in the U.S. and around the world, and globally irrigated farming takes more than 60 percent of the available freshwater.

A recent Kansas State University study said that if farmers in Kansas keep irrigating at present rates, 69 percent of the Ogallala Aquifer will be gone in 50 years.

Scarce groundwater supplies also are being used for energy. A recent study from CERES, an organization that advocates sustainable business practices, indicated that competition for water by hydraulic fracturing—a water-intensive drilling process for oil and gas known as "fracking"—already occurs in dry regions of the United States. The February report said that more than half of all fracking wells in the U.S. are being drilled in regions experiencing drought, and that more than one-third of the wells are in regions suffering groundwater depletion.

Saudi Arabia, which a few decades ago began pumping deep underground aquifers to grow wheat in the desert, has since abandoned the plan, in order to conserve what groundwater supplies remain, relying instead on imported wheat to feed the people of this arid land.

Managing and conserving groundwater supplies becomes an urgent challenge as drought depletes our surface supplies. Because groundwater is a common resource—available to anyone with well—drilling equipment-cooperation and collaboration will be crucial as we try to protect this shrinking line of defense against a future of water scarcity.
When it's gone, it's gone. Does it make that much more sense to grow almonds in the California desert than the Saudi desert?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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