The Savvy American Media

A scene where American voters are engaged in a panel discussion with the savvy American Media on TV represented by Bill O’Reilly (host of the FoxNews Soap opera), Rush Limbaugh (President of Club Ditto-Heads), Wolf Blitzer (Ring Leader of CNN’s 24/7 Soap programming), and the moderator – Jon Stewart (host of the Daily Show and the only sane person in the I. I. A: Insane Infotainment Asylum).

Jon: Let’s start by asking a simple question: Are American voters going to be able to decide wisely in November?

Bill: What kind of a question is that? Of course they are. Many of our viewers can tell you right now who is ahead in the pig race. It’s Palin.

Rush: Same goes for my listeners. They are better educated and more knowledgeable about the main issues – Palinmania and Palintology.

Wolf: At CNN, we focus on giving Americans the facts repeatedly, over and over again, so that eventually they’ll be able to draw the right conclusions.

Jon: Really? How many of your young viewers can find Iraq or Afghanistan on a map?

Bill: A large number I suppose.

This is echoed by Rush and Wolf.

Jon: The facts are as follows, gentlemen. Six out of 10 young people (ages 18 to 29) could not find Iraq or Afghanistan on a map. And only two out of five Americans knew that we have three branches of government and could name them. So it doesn’t appear that young voters are smart today.

Bill: I don’t know where you are getting these numbers from. Young people are smart and pay a lot of attention to the news.

Jon: By reading newspapers?

Rush: Heck no. They get better quality news by listening to my talk show.

Wolf: No, I think they get all their news from my Situation Room.

Bill: C’mon guys. You know as well as I do that young people are smart because they get their news from Fox, and Facebook and the Internet.

Rush: Let me ask you, Jon. Do you know what Palintology is?

Jon: No. I don’t have a clue.

Rush: See, that’s what I meant. If you listened to my show you would know that Palintology is the advanced study of Sarah Palin and how she sees the world – especially Russia – she can see it from her back yard – in fact when she IMs Putin she says: “Can see u grilling Vlad, ur pork chop is burnt – lol.” Oh-Bama could never engage in such neighborly diplomacy.

Jon: Thanks Rush. Since you brought up the issue of pork, what’s going on about this Lipstick on a Pig issue?

Rush: This election is all about Lipstick. Senator Oh-Bama made it a central issue by calling Sarah Palin a pig.

Wolf: I don’t think he called her a pig. I think it was a remark made about McCain’s policies.

Bill: McCain who? He is no longer relevant to the Republican campaign.

Jon: But that’s a common phrase that has been used many times before. All it means is “making the unattractive superficially attractive” – by saying that this remark was made about her, are you admitting that Sarah Palin is unattractive? Let’s get some viewer input.

Call-in from a viewer: This is for the panel – Women have always applied lipstick to decorate their faces – starting with the ancient Indus Valley civilization. Isn’t that the main issue for female candidates?

Jon: Who wants to take that?

Wolf: The caller is absolutely right. In fact, that’s the reason CNN dissed Hillary Clinton during the primaries – because she never touted her lipstick. The reason the polls have shifted dramatically towards the Republicans is because of lipstick.

Call-in from another viewer: How crass is that analysis? The facts are as follows. Lipstick can also be applied by males – it’s called manstick. And a female pig is called a sow – to get the gender equality correct – the phrase should be “lipstick on a sow” or “manstick on a pig” – as it stands now, lipstick on a pig should not really be an issue.

Rush: I’m sure the caller is an intellectual, highfalutin liberal boar. Don’t you know that our listeners and viewers – even the educated ones – are not savvy enough to get into this level of analysis – they just listen to what we tell them – and if we repeat ourselves over and over again – well, then that becomes the central issue of the campaign.

Jon: We have to stop now. Thank you gentlemen. And thank you to our viewers, who have become guinea pigs of the infotainment industry.

The Biofuels Debate: What Would Bachchan Do?

In this blog I’ll give you some cricketing perspective of my childhood friend, “Lambu, mera bachpun ka dost Bachchan.” No, I am not talking about Amitabh Srivastav who “Bollywooded” himself into Amitabh Bachchan, but about Gulbir Singh Choudhury who transmogrified himself into Gulbir Bachchan.

Like the one-eyed Nawab of Pataudi who never took his eye off the ball (or off Rinku), Gulbir Bachchan never takes his eye off the ball on the cricket field. In fact, I do not recall Gulbir ever being bowled out or L.B.W. (leg before wicket); invariably he would attempt a square cut and be caught at third slip or gully.

And why do I bore you with this perspective? Because in today’s world, keeping one’s “eye on the ball” is extremely important as you read various reports on the biofuels debate, based largely on distorted facts.

One June 2, 2008, Secretary of Agriculture Edward Schafer said in a speech on food security at the U.N. Food and Agricultural Organization in Rome that biofuels contributed 2 to 3 percent of the overall increase in global food prices in the past year. These remarks were made because ethanol and biofuels are being criticized by foreign leaders (and members of Congress) as the main causes of skyrocketing food prices which threaten to spread malnutrition and hunger in the poorest nations.

Fact or fiction? It turns out that the Secretary’s statement contained a spinning googly which batsmen like Gulbir Bachchan would have easily spotted. Ten days later in testimony before the Senate Energy and Natural Resource Committee, Joseph Glauber, the chief economist of the USDA, said that biofuels contributed as much as 10 percent of the overall increase in global food prices.

Mr. Glauber had looked at the overall impact on food prices of corn-based ethanol and soybean-based biodiesel. Mr. Schafer looked at the impact of only corn ethanol and should have used the word “ethanol” instead of “biofuels” in his statement. Not only was this not an errant googly; Schafer used the word “biofuels” nine times in his statement.

The reason this makes a difference is because last year, the price of soybeans, one of America’s largest crops, has soared. Why? Because more of the beans were used for biodiesel and fewer acres of beans were planted to accommodate more acres of corn.

Why are things like this allowed to happen? The 2007 U.N. Intergovernmental Panel on Climate Change report states that because of global warming “by 2020 agricultural production, including access to food, in many African countries is projected to be severely compromised.” America’s first mandatory policy to reduce global warming emissions is its biofuels mandate. This mandate was based on the notion that agriculturally-based alternative fuels were purported to have lower global warming emissions than the petroleum-derived gasoline or diesel fuel they displace [1].

Thanks to the 2007 energy bill signed into law by President Bush, the U.S. is now required to mix 9 billion gallons of such fuels into the gasoline supply in 2008, up from less than 3 billion gallons in 2000. This mandate is mostly met by corn-based ethanol.

Before the mandate, corn was priced at $2 a bushel; today it is well above $5 a bushel. Wheat and soybean prices are also up, partly as a result of fewer acres being planted in favor of corn. Corn-related foods such as corn-fed meat and dairy have also increased in price [1].

The problem with the global warming policy is that it is more harmful than global warming itself! Clearly the policy is not based on sound science. David Pimentel, Professor of Ecology at Cornell University, published a paper in 2005 in which he states:

“In contrast to the USDA, numerous scientific studies have concluded that ethanol production does not provide a net energy balance, that ethanol is not a renewable energy source, is not an economical fuel, and its production and use contribute to air, water, and soil pollution and global warming” [2].

The Agriculture Department’s own longtime chief economist, Keith Collins, who retired in January, warned them that ethanol was the “foot on the accelerator” of corn demand, and that the mandates would build a “tremendous increase in demand that is going to feed into food prices.”

A Purdue University study [3] estimates the annual food cost increase for 2007 as $22 billion, of which $15 billion is related to the demand to use crops as fuel. In the U.S., this amounts to an additional $130 per household in 2007, and considerably higher in 2008 (an increase of 53 percent from 2007 in the first three months of 2008).

The reports from agri-businesses such as Archer Daniels Midland use the 2 to 3 percent figures cited by Schafer and state that the record demand for corn is being met with record supplies and that there is no shortage of corn. What they don’t tell you is that fewer acres of other crops such as soybeans and wheat are planted and that ethanol production using corn grain requires 29% more fossil energy than the ethanol fuel produced from it [2].

Notwithstanding all this data, the word from the National Corn Growers Association is that “lack of infrastructure, access to capital, and other issues are the more likely causes of hunger – not scarcity of food.” Their conclusions are based on measures like GDP (Gross Domestic Product) and PPP (Purchasing Power Parity).

Here’s where Gulbir Bachchan’s “eye on the ball” comes in handy. Big-picture statistics form the basis of almost every discussion about “the economy.” But is there such a thing as “the economy?”

The statistics report a blended average and that number is treated as if it applies to an entire population. There is a Blackberry economy and an iPhone economy that generate revenues of billions of dollars. But this is not the same economy that is seeing rampant foreclosures in the last 8 months. Similarly, the “global economy” may produce some data that one can measure, but it would be wrong to derive conclusions based on those measurements.

The projected increases in crop prices would have the most serious impact in poor countries. Both Thomas Friedman (The World is Flat) and Fareed Zakaria (Post-American World) describe how the middle classes in India and China are “rising” based on GDP and PPP.

But these metrics do not paint the complete picture. There are at least 1 billion people at risk for hunger and malnutrition who live on less than $1 a day. These people cannot be “averaged” out with the incomes of the wealthiest 400 individuals who have a net worth of over $1 trillion. For these poor people, even a small increase in the prices of grains and vegetable oils determines whether they get to eat once a day or once in two days.

This reality is what prompted India’s finance minister, Mr. Chidambaram, to remark, “When millions of people are going hungry, it’s a crime against humanity that food should be diverted to biofuels.”

A couple of months ago I caught up with Gulbir who now lives in Texas. He told me that he had recently become a millionaire. I congratulated him and asked him when he was going to take me out for dinner. In his drawly voice he replied, “Aaray Prabhu – kya hua na – I accidentally went into a room where Bill Gates was giving a talk – at that moment, the statistical average income of everybody in the room exceeded one million dollars. That’s my story, yaar.”

It looks like Gulbir Bachchan still has his eye on the ball.

References

[1] Ben Lieberman, “Ethanol and other Biofuels: A Global Warming Solution worse than the Problem,” The Heritage Foundation, May 2, 2008. http://www.cs.iastate.edu/~prabhu/gmonpolitics/Lieberman.pdf

[2] David Pimentel and Tad Patzek, “Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower,” Natural Resources Research, Vo. 14, No. 1, March 2005. http://www.cs.iastate.edu/~prabhu/gmonpolitics/Pimentel.pdf

[3] Corinne Alexander and Chris Hurt, “Biofuels and their Impact on Food Prices,” Purdue University Tech Report, Sept 2007, http://www.ces.purdue.edu/extmedia/ID/ID-346-W.pdf

Reasons for the Oil Hike: Supply-Demand Economics or Energy Index Funds or Individuals Like Moi?

The price of a gallon of gas crossed the $4 mark in Ames, Iowa this weekend. Many pundits are predicting higher prices as the price-per-barrel of oil is expected to reach $150 by the end of the summer. Each barrel produces 42 gallons of oil but there are taxes and surcharges added which raise the end-price per gallon for the consumer.

What is driving this exorbitant price of gas? I looked up some textbooks on economics and here is a brief summary of some of its basic principles. Equilibrium occurs at the intersection of a commodity’s market demand curve and market supply curve. Ceteris paribus, the equilibrium price and the equilibrium quantity tend to persist in time. An increase in demand causes an increase in both the equilibrium price and the equilibrium quantity. An increase in market supply causes a reduction in the equilibrium price but an increase in the equilibrium quantity. The opposite occurs for a decrease in demand or supply.

Let’s look at some data to which we can apply these principles. In 2006, the U.S consumed 20.7 million barrels of petroleum per day of which 9.3 million barrels per day went towards motor gasoline. In 2007, the average consumption of petroleum was 20.7 million barrels per day and in 2008 the numbers for January through May are not significantly different from the earlier years.

The total world consumption over the last three years has remained steady at about 86 million barrels of petroleum per day.

So the demand for oil has not changed significantly at all. And very surprisingly, the OPEC supply has in fact increased this year. Therefore, economic theory should predict a reduction in the equilibrium price. There has been no significant change in the oil market demand and supply over the last three years to warrant the skyrocketing prices in existence today.

Why then has the price of oil gone up so dramatically? The answer lies in the number of hedge funds in the energy markets over the last two years. Today, more money is flowing into commodities as a hedge against the falling value of the dollar and as an investment alternative to a volatile stock market. These funds are not traditional speculators but index speculators who have heavily influenced oil prices.

In simple terms what’s happening is the following. The OPEC countries are overcrowded with super tankers chartered by oil-producing governments to hold inventories of oil they have pumped but cannot sell. There are fewer buyers for this oil cargo at today’s prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year.

Sound familiar? This is exactly the bubble that burst in the home foreclosures that occurred earlier this year. Nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for financial derivatives that allowed investors to bet on the future value of these bonds.

We are headed towards another financial meltdown in the coming months. There are now 634 energy hedge funds, out of which 210 are strictly energy commodity funds trading oil or oil futures, as opposed to the stocks of traditional energy companies like ExxonMobil. Large financial institutions like Goldman Sachs, Morgan Stanley, and Merrill Lynch have stepped up their participation in the energy markets.

The price of oil, therefore, is not being fueled by supply-demand economic factors, but by the value of the dollar and the interest rates in the oil markets. The investment in index funds has grown 20-fold from $13 billion to $260 billion during the last five years.

Upon further analysis, a new reality begins to emerge. I am as guilty in causing the hike in oil prices as anyone else. Why, you may ask? Because my pension fund and corporate and government pension funds and university endowments¹ are all managed by the large financial institutions, which are allowed unlimited speculation in these markets. The Commodity Futures Trading Commission has allowed loopholes in its regulations that exempt investment banks from reporting requirements that are required of other investors.

Do I like the high price of oil? NO (Politically correct answer).

Do I like a high return on my pension fund? YES (Personally correct answer).

Certainly it is in my self interest that my pension fund does well as I approach retirement.

Notes

1. The financial geniuses at Iowa State University see good economic sense in sending out their Parking Division SUVs into every lane of half-vacant parking lots to issue $15 tickets to about a dozen or so illegally parked vehicles per day while spending about $500 per day or more on gas and salaries. Unfortunately, such expenses come from the taxpayers instead of the university’s lucrative endowments.

Why it is Imperative to vote for a Democratic President

On the basis of polls conducted across various groups of voters, many columnists have expressed the view that Barack Obama can lose the Presidential election in November in a year in which the Democrats are heavily favored to win many seats in both houses of Congress. The most important factor in this loss is attributed to the Clinton voters that Obama may not be able to win over in uniting the Democratic party.

I offer a compelling reason as to why such voters should vote for a Democratic President.

The two most important legacies left by a President are the consequences of war and the appointments of justices to the Supreme Court. Congress has an important say in whether or not to authorize a war, thus providing “checks and balances” of the Founding Fathers so that “no one man can run the government the way he sees fit.” The fact that this was not fully adhered to in the Iraq War will be a matter for historians and constitutional scholars to debate in the future.

But the appointment of justices to the Supreme Court can have a long-standing effect on the rights of all citizens.

John McCain has said, “For decades now, some federal judges have taken it upon themselves to pronounce and rule on matters that were never intended to be heard in courts or decided by judges.”

President Bush has often expressed contempt for judges who “legislate from the bench.” But Bush expressed no contempt whatsoever against the Supreme Court justices who legislated from the bench and put him into office as President with a 5-4 margin in the 2000 elections. His contempt for activist judges occurred after that ruling.

John McCain has gone on record stating that John Roberts and Samuel Alito have “met my high standards” for a Supreme Court justice. Roberts and Alito join conservative justices Antonin Scalia and Clarence Thomas who in the last three years are moving the Supreme Court in a direction opposite to that of the Court’s history under Chief Justice Earl Warren.

Jeffrey Toobin writes in the May 26, 2008 issue of The New Yorker:

“. . . the Roberts court has crippled school desegregation efforts; limited the reach of job-discrimination laws; and made it more difficult to challenge the mixing of church and state.”

Justice Stephen Breyer’s assessment of his new colleagues is very disturbing to say the least: “It is not often in the law that so few have so quickly changed so much.”

The next President will most likely have one certain appointment when 88-year-old Justice Stevens retires and possibly another if 75-year-old Justice Ginsburg decides to retire. It is very clear in which direction McCain will take the Supreme Court.

Therefore it is imperative that ALL Democratic voters check their “emotional baggage” at the door and let their heads rule in November in voting for the Democratic Presidential nominee. Failure to do so will cause lasting damage to the progress that has been made in civil and individual rights over the last fifty years.

Diamonds Are a Guerrilla's Best Friend

The debate about how to combat poverty in the developing world has been fueled in the last couple of years by two New Yorkers. On one side of the argument is Professor Jeffrey Sachs of Columbia University and author of “The End of Poverty.” On the other is Professor William Easterly of New York University and author of “The White Man’s Burden.” Both are excellent, well-researched books that should be by your bedside.

Into this debate, there now enters another white man, Paul Collier of Oxford University and author of “The Bottom Billion.” If Sachs’s book appears too optimistic and Easterly’s too pessimistic, then Collier’s book does an excellent job of capturing the middle ground. Its analysis of the causes of poverty is compelling and the remedies it offers are more reasonable.

Collier argues that with the phenomenal growth in Asia, the world will soon consist of a top one-sixth (one billion) of rich people, a middle two-thirds (four billion) who are O.K., and another one-sixth (one billion) who will be poor. Collier refers to the bottom one billion as people living in “trapped countries, clearly heading toward what might be described as a black hole.”

He suggests that there are four traps into which really poor countries tend to fall: internal conflict or civil war, possession of natural resources, landlocked with bad neighbor, and bad governance.

It’s the second trap that provides the motivation for this article. Collier is the one who first came up with the phrase “diamonds are a guerrilla’s best friend.” A substantial part of his book concerns itself with this “resource curse.” As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that “resource rents make democracy malfunction”; they give rise to “a new law of the jungle . . . the survival of the fattest.”

In resource-rich countries there is little pressure for government accountability, and hence fewer checks and balances.

Looking back at the last eight years, it seems like the U.S has had fewer checks and balances and almost no government accountability. Halliburton and a few select owners of “resource diamonds” have become “fat” and while democracy is not malfunctioning I am not sure whether it has functioned the way the Founding Fathers intended it to.

Regardless of your views on the candidates running for the Democratic Presidential nomination and their fairly contentious campaigns, you should NOT make the mistake of continuing the present “guerrilla leadership” under John McCain. If you do so, then we may find ourselves headed toward the same poverty black hole like many other bottom billion nations.

Scatological Research

A DNA analysis of fossil feces found in a cave in Oregon indicates that humans lived in North America 14,340 years ago – “1,000 years before Clovis,” the previously known earliest inhabitants.

These “coprolites” yield valuable clues about diets that may have influenced the thinking and strategies of our nomadic ancestors.

Key officials in the current administration should immediately start “going in designated locations” to petrify their poop for posterity. Fifteen thousand years hence, this may provide the only clue to explain the thinking and strategies behind their delusive policies.

Parsing Paulson's Proposal

Treasury Secretary Henry Paulson has just released his blueprint for financial reform. Two things are very disturbing about this proposal. First, it gives the Feds increased authority to regulate a limited number of institutions that are already regulated but not the cause of today’s economic crisis. Secondly, all the proposals require the approval of Congress – a body that did not even read the Patriot Act before passing it into law is going to read and understand the economic mumbo-jumbo of the Feds?

Woe-begone to us when it’s Congress and the Feds watching the henhouse.

Might as well trust me with your money. Like all our presidential candidates, I, too, am a born-again political-cum-economic-cum-whatever change agent you want me to be. The tax rebate amount that you receive in May should be wired in full to the Swiss bank account of Dave Westfall, Esq. In return, Mr. Westfall and I promise you a WORRY-FREE and ECONOMICALLY-FRUGAL European vacation this summer.

By not even leaving your home and being hassled at the airport, you will automatically be worry free. By not spending twice as much on food in Europe, you will continue to remain economically frugal. Please e-mail me at once if you are interested and I will provide you with the details for the wire transfer. Although we are change agents, once we collect your payment, we cannot give you back any change. But we will send you a DVD on the intangible benefits of this brand new financially reformed vacation package – ABSOLUTELY FREE.

NOTE:

This offer is not affiliated with the NBA – Nigerian Banking Association. Participants must be over the age of 18 and sign waivers for forms OCC, OTS, CFTC, PFRA, CBRA, and LTCM, all in duplicate. Form SR (Scam Release) ought to be signed in triplicate. The vacation is completely tax-exempt and no details, especially Mr. Westfall’s, should ever be reported to the IRS.