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Category: Economics / Money / Investing (Page 1 of 9)

Economics, Money, and Investing.

Major Price Increase for Natural Gas


Most everyone who uses natural gas in the U.S.A. is probably noticing or about to notice a shocking increase in cost. The story is that reserves are low and gas producers haven’t been able to drill because of Wall Street profit-taking, so supplies are short.

Well, I don’t believe it and here’s a why. For the past 20 years, winter temperatures in the Northeastern U.S. have been steadily rising due to climate change. I’ve seen the data and recorded some of my own. I’m an engineer and it’s been my habit for decades to keep daily records on gas and electricity consumption.

Where we used to have 12 to 18 inches of snow on the ground at times during winters here in West Virginia, now there’s just a light dusting or none at all. The trend became very obvious about six years ago with almost no snow on the ground for the past six years. The near constant grinding of snowplows is replaced with silence. In 2018 I bought a nice new snowthrower. It’s never been used even once. It’s been sitting in the basement for the past four years.

For the past several years, natural gas consumption in my home has been half what it’s been in the past. From the middle of January to the middle of February, our daily gas consumption for heating was usually 1,000 to 1,400 cubic feet per day. Today it’s 600 or less.

There shouldn’t be a shortage when consumption is half what it used to be. I think the natural gas providers are not happy with their reduced sales due to climate change and have raised prices to maintain profits.

Canned Food is Fine


When I was a kid in the 1950s and 60s, my mother had the opinion that canned food was of low-quality and best avoided. I was young and took her word for it. I maintained this opinion myself into adulthood and sometimes shared it with others. But occasionally I wondered because my own observations and experience didn’t agree. In the late 1990s I became sufficiently curious and learned about it. But first some history.

A Real Short History of Modern Canning

The Dutch Navy were the first to seal foods like salmon in metal cans in 1772. For some reason, this process remained unknown outside of the Netherlands.

The rest of the story begins with French military logistics. In 1795, Napoleon offered a large reward to anyone who could develop a way to preserve foods so that armies could have better provisions when deployed, especially in summer temperatures. As you may know, logistics is what wins wars and availability of food was a major limiting factor in what armies could do.

Fifteen years later, Nicolas Appert won Napoleon’s prize after observing that food cooked inside a sealed jar did not spoil. The reason for this was unknown for another 50 years until Pasteur identified the role of microbes in the spoilage of food. The army worked on developing this process but advancement was slow and the wars were over before useful quantities could be produced.

Development of the canning process continued in Europe and the U.S.A. A process was developed for canning foods in hand-made wrought-iron cans, which worked. But the process was labor intensive and expensive. In 1824, Parry took canned beef along on his voyage to the Arctic. In 1829, James Ross took canned food to the Arctic as did John Franklin in 1845. Some of these provisions were found in 1857. One can was opened in 1939 and found to be edible and nutritious but was not tested for lead contamination from the lead solder used to make those cans.

By the mid-1800s, the wealthy began to see canned foods as a status symbol and novelty. By the 1860s, rising urban populations increased demand for canned food. Many inventions and machines were developed to fabricate cans rapidly. Improved processing methods reduced cooking time from six hours to 30 minutes.

Skipping ahead, a big step was the invention of the double-seam can in 1888. These provided a reliable perfect seal and were called Sanitary Cans. This is the type of can we use today. By World War 1, mass production of canned goods was perfected and large quantities of food, coffee, cigarettes, medications, and ammunition were packaged for the soldiers in cans by the British, French, and the U.S.A. At the end of the war, the companies equipped to make such foods like Nestle and Underwood turned to selling to the general public. Canned foods proliferated. It was now possible for European made foods to be sold in the U.S. and vice versa. Canned tomatoes and canned peaches were available year-round, regardless of the season. It was a whole new world.

Expiration Dates and Safety

I’m old so while I now expect expiration dates on foods, it still seems like a new thing for me. I remember when milk started to bear a date, then eggs, then meat. Before that you could write your own date with a grease pencil if you wanted to. And these were manufacturing or packaging dates, not expiration, best by, or use by dates. Food manufacturers soon realized that by putting “use by” dates on everything they could force supermarkets and consumers to donate or discard food that was past the date and sell a lot more product. Very quickly, manufacturers were all-in on putting dates. Customers began to expect dates.

Today, everything has a date. Even bottled water has a date and many consumers think dates are required by law. They are not. The only things in the U.S.A. required to have a date are pharmaceuticals and baby formula.

When use-by dates began to appear on cans, I just laughed. Cans are hermetically sealed and then heated to sterilization temperature or higher, as high as 130C. Most items are cooked in the sealed can itself. There’s no chance for microbial contamination unless the can leaks.

Modern double seam cans like we’ve used for the past 100 years almost never leak. When they do it’s usually visible. If a can isn’t damaged or bulging and passes the appearance and smell tests, it’s safe to eat.

In the 1970s, a trove of cans of freeze-dried food from 1865 was discovered and tested1. There was no trace of microbial contamination and the food was safe to eat. In the 2000s a trove of cans of various foods from the Depression Era (1930s) was discovered which were sent to a food lab for analysis. All of it was safe to eat. The worst case of degradation was the canned corn, which had lost 30 percent of its nutrient value, but was safe to eat.

Do canned foods last 20 years? USDA says “Most shelf-stable foods are safe indefinitely.”

Back to My Mother

In short, my mom’s opinion about canned food was false. But why did she have this opinion? Thinking back on the stories she told me as I was growing up provided the answer. My mom grew up in a big city in Northern Germany in the 1910s and 20s. By the 1920s, a lot of the food on the table was canned because that’s all that was available. Her mother was an early health-food proponent and went to great lengths to seek out fresh fruits and vegetables, gather wild berries and mushrooms. This made an impression on my mother.

When my mom came to the United States in the 1930s, she was astonished at the abundant fresh foods available in markets everywhere, even in big cities. And like most immigrants, she had the idea that everything was better in the U.S.A., which led to her deprecation of canned foods as inferior.

Conclusion

The truth is it’s not a matter of inferior or superior, it’s a matter of cooked versus fresh. If you want raw or lightly steamed broccoli, that’s not going to happen with a can. On the other hand, the can of broccoli will be there waiting for you years into the future without power-consuming refrigeration or freezers. Canned foods tend to be cheaper not because they’re lower quality but because it’s usually prepared near the farm, doesn’t need refrigerated transport, and doesn’t have to be rushed to the market before it spoils. There’s also less waste that has to be refrigerated and rushed to the market. How much of a broccoli head’s mass amd volume do you actually use? A third? The rest goes in the trash but you paid for all of it to come to you fresh.

If you consider the can itself, it’s made of steel, which is cheap, abundant, and non-polluting in a landfill. Unlike plastics, steel is easily recycled but hardly anyone does because steel is so cheap. If you look at the big picture, canned foods make a lot of sense.

Drought Affects the Whole Country


When drought in the U.S. is mentioned, the first thing that comes to most people’s minds is the West, Southwest, and California in particular. There’s good reason for this. It’s been in the news every year. The rampant wildfires are terrible and spectacular. But the main threat of drought is to agriculture. California is the key to having nice things on our dinner tables. California produces 71 percent of the lettuce in the U.S, 90 percent of the strawberries, 99 percent of the garlic, 99 percent of the almonds, 99 percent of the grapes and world-class wines, and cantaloupes, watermelon, citrus, onions, celery, on and on. If we count the West Coast states, add apples, pears, cherries, and more.

Important as all that is to having nice things on the table, the meat and potatoes (literally), grains, and animal feed do not come from California. They come primarily from the middle of the country. The farmlands from Idaho, Montana, the Dakotas, Iowa, Nebraska, to Texas produce vast amounts of the staple foods we eat. In addition to feeding ourselves, the U.S. literally feeds the world.

How does all this stuff get where it’s going? Well, the United States was lucky. It came with a built-in railroad: the Mississippi River System.

Mississippi River System showing the Mississippi River and tributaries that are used for shipping purposes.

175 million (!) tons of freight a year is shipped on the Upper Mississippi system alone. For perspective, that’s 20,000 to 30,000 loaded freight trains. Not freight cars, freight trains.

Then we come to the Lower Mississippi and exports. The Port of South Louisiana handles 500 million tons of freight each year. Ninety-two percent of U.S. agricultural exports pass through the Port of South Louisiana. This is 78 percent of the world’s exports of feed, soybeans, livestock, and hogs. Sixty percent of the world’s exported grain passes down the Mississippi to the Port of South Louisiana. For perspective, that’s sitting by a railroad track and watching 25,000 loaded freight cars go by every single day. That’s not even possible on a single track.

So what does drought have to do with this? The Mississippi River System drains the central portion of the U.S.A. from Minnesota and Wisconsin to Texas, Montana, Kansas, Nebraska, Ohio, Illinois, Indiana, and so on. Drought is affecting these places too and the first sign of this is the water levels up and down the Mississippi. The water levels got so low this year that the barges that carry freight up and down the river were getting stuck on the bottom and causing traffic jams.

The problem should now be obvious. If low water becomes more frequent, and because of climate change it almost certainly will, it’s a huge problem. One could easily prove the point that the lifeblood of the country flows up and down the Mississippi River System. It’s the main artery. Disruptions here will upset not just agricultural products but every industry that involves heavy river freight starting with fuel oil, crude oil, coal, coke, fertilizer, limestone, iron, cement, and a long list more. The economic effects of this are staggering, not just for the U.S.A. but the world.

Solutions? There aren’t any good ones. One could build rail lines that parallel the river and tributaries, but this is a big project and cannot be done quickly. The land easement problems alone would take decades to sort out in the courts. More dams and locks on the river? This is possible in some few places but is an enormous project that would take decades to implement.

The good news is that scientists have been thinking about this for a long time. In recent decades we have greatly reduced the amount of water we take out of the river and use for irrigation and other purposes that evaporates or otherwise isn’t returned to the river. Since the drainage area of the Mississippi is so large, climate scientists can’t be certain about what’s going to happen at every point along the river. There’s evidence that the change is slow and that this year was an extra dry glitch. We must hope that this is true.

In any case, the Mississippi River problem is one to watch out for in the coming years. It’s a big one.

The IRS Expansion


IRS Logo

The organizations paying for ads opposing the IRS expansion and the hiring of more IRS agents are telling on themselves. They’re calling it a “shakedown”.

Let’s think about this for a minute. The IRS doesn’t take any more than they are legally allowed to, which in the U.S. these days is very little. This is the amount legally owed. Anyone who would call expansion of the IRS a shakedown is admitting that they are a tax cheat. They’re admitting to breaking the law and not paying their fair share. All such people are in the top ten percent of wealth in this country.

So who is paying for these ads? The ones I’ve seen are paid for by an organization called “Americans for Prosperity”. Great sounding name but who are they? Americans for Prosperity is the Koch Brothers’ propaganda outlet, funded by them. Are you a billionaire? A millionaire? No? Then this expansion doesn’t apply to you.

Americans for Prosperity produces ads that try to get normal middle-class people and the poor angry about issues that have nothing to do with them but do concern the Koch Brothers and their billions. Unless you’re a billionaire or expecting to become one soon, you’re being played. Keep this in mind the next time you see an ad from Americans for Prosperity.

The ads imply that the IRS engages in theft, when it’s the reverse. All the IRS does is enforce the tax code as set forth by Congress, nothing more. Those who cheat are the thieves, robbing the government of funds that would come to the middle-class and poor in the form of roads, highways, education, assistance, medical care, and security.

Ironically, it’s the richest people who can easily afford to pay their taxes that complain. The poor pay little tax, as it should be, but the Koch Brothers still want you to vote for things that benefit them, not you. Don’t be fooled by the name Americans for Prosperity. Whose prosperity? Yours? No.

Will the IRS be targeting the billionaires? Of course they will. Why would they come and audit you if you’re an ordinary wage earner, who pays their taxes with every paycheck? It would be a waste of time. It’s the ones who owe tens of millions of dollars on a hundred million in income that is worth the effort. These cases also require more manpower and smart auditors to untangle complex tax-dodging arrangements. That’s what those agents will be doing — exactly what the Koch Brothers and hundreds of others don’t want.

Tax rates in the U.S.A. are very low when compared to the rest of the developed world. They are very, very low when compared to the 1950s and 1960s when the U.S.A. was at it’s most prosperous. Republicans have been gutting the IRS for 30 years by reducing IRS funding and staff. Why? The intent is to hobble the IRS so their wealthy donors can cheat with impunity.

What’s more, it’s not even an expansion of the IRS if you look back 30 years. It’s the intent of Congress to restore funding and restore the IRS to an appropriate level. Again, unless you’re a billionaire or millionaire, none of this concerns you.

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