Wednesday, March 5, 2014

Cutting Through The Global Warming Debate: It's the Rising Sea Level, Stupid!

Every day brings a new report on some obscure impact of climate change by 2050. Today's headline is almost comical, "Chipotle Warns It Might Stop Serving Guacamole If Climate Change Gets Worse". Along the same lines, a typical example of a news story about the impact of global warming is the claim that "climate change may cause major lizard extinctions by 2050". The cacophony of claims about all the catastrophic events that may occur by 2050 become little more than white noise to climate change deniers and skeptics. 

Here is the climate change impact that most resonates with climate change skeptics. "The sea level is rising by 1/10" per year". It may be that the sea level rise of 1/10 inch per year is such a slow trend and is so lacking in shock value that it is not much of a headline generator. However, it's easy to understand and fairly linear. It's also one of the most worrisome aspects of the millions of metric tons of greenhouse emissions gases being emitted annually.

Here is another tactic to take with global warming skeptics. Make a wager that 2015 will be the warmest in recorded history. If James Hansen is correct, you have a good chance of winning the wager, and it refutes the denialism that has been fomented due to the decade long pause in the increase in global surface temperatures

And for those living in areas of the U.S. that have suffered through a brutally cold winter, suggest they visit this site that shows the global temperature departure from average. The maps on this site visually show that while some geographies are unusually cold, they are more than compensated by areas that are unusually warm.

Global warming deniers may try to refute the fact that the seas are rising. Of course, many of the same folks will tell you that dinosaur fossils were put here to test our faith. However, I'll take the word of NASA scientists that confirm that the sea level is rising. If the folks at NASA are good enough at math that they can put a man on the moon, I trust their capability to measure the rising sea level

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Tuesday, March 4, 2014

Is The Impact of Japan's April 1 Consumption Tax Increase Being Underestimated?

The general consensus seems to be that the upcoming consumption tax increase in Japan has been so thoroughly analyzed that its impact is baked into future projections. My crystal ball in regard to the impact of the 3% increase in the consumption tax from 5% to 8% is rather cloudy. But it seems like the impact could be more severe than most analysts seem to expect. The sales tax increase could set off an ugly downward cycle.

Here are a couple of other events that led to the type if forward shifting of demand that the upcoming tax increase is producing

Japan - The April 1, 1997 2% increase in the consumption tax from the then 3% to 5% led to a huge increase in sales of big ticket items in the run-up to the hike in rates. However, it was followed by a year and and half recession.
Global - The boom and bust in purchases of high tech capital goods due to Y2K compliance led to a recession in 2000 that hit virtually every developed economy.

Japan's economy is already under huge duress due to an aging population. With 24% of the population age 65 or older, no other country in the world has so many senior citizens to support. Japan still has a labor force participation rate of 59% (versus 63% in the U.S.), but it bound to decline over time.

Japan government spending, deficits, and debt make one dizzy just pondering the numbers, as pointed out by Wolf Richter. The Japanese government's Ponzi game of borrowing half of spending and creating demand for the borrowing via money printing will ultimately lead to a collapse. The $70 billion a month of "quantitative easing" by the Bank of Japan to soak up demand for Japanese government debt is ultimately a recipe for a Weimar Republic like collapse.

The Japanese economy is headed for a calamity at some point in the future due to the massively excessive debt and deficit. Will the April 1 consumption be the straw that breaks the camel's back? Probably not. However, don't be surprised if the boom bust impact of the April 1 consumption tax increase is worse than most analysts are projecting. It seems reasonably likely that Japan is in for a nasty recession during the balance of 2014.