The Oil Reversion

Ten years ago the US was a net importer of oil, importing about 70% of its needs, mostly from the Middle East.  Today the US is a net exporter of oil and natural gas, and imports only 30% of its needs.  The reasons for this are, the cost of shale oil extraction in North Dakota has gone down by ca. 50% and the use of fracking has provided huge amounts of oil and natural gas.  The US is poised to become the second largest producer of oil in the world after Russia, and is about to out-produce Saudi Arabia.  What a reversal of fortunes.

So I think we can safely say that the “oil weapon” that was used by the Arabs in the 1970’s to blackmail the West, will never happen again.  The US exports natural gas to Canada and Mexico and by tanker as liquefied natural gas (LNG) to Europe.  Pres. Trump wants to double those exports in order to wean Europe away from dependence on Russia’s oil/gas supplies.  Also, the fact that the US is a net exporter of oil/gas means that the price of a gallon of oil has gone down from its historic highs,and will probably never rise again.  At present there ise more than enough gas/oil in the world to satisfy current needs.  But, everyone is aware that these needs and demands for energy in the form of electricity is always increasing, hence the need to develop efficient clean energy production.

There are six major forms of clean energy being developed and used: 1. Biomass, especially burning trash and agricultural byproducts; 2. Solar, several types including solar batteries (direct energy) and solar mirror farms (indirect); 3. Waves, both coastal waves and deep-sea water movements; 4. Wind, mainly in the form of huge propeller farms; 5. Hydro; from dams and waterfalls; 6. Thermal, mainly from underground heating.  Each of these forms have their niche, such as underground thermal heating is used in Iceland to supply most of their energy needs.  In Holland, there is a lot of offshore wind energy being exploited.  In desert areas, solar is being rapidly expanded, in Spain, Israel and California.  All of these methods are being developed, thus gradually lowering the dependence on oil.  And then there is of course nuclear energy, and in the long-term fusion energy.

All of these alternative energy sources, as well as the current glut of oil on the world’s market, have reduced the financial power of such countries as Saudi Arabia and Iran. And if that is their only money-earning resource, then they have in the long-term to change and plan for a different form of economy.  In Saudia that is one reason why the King-in-waiting Mohammed bin Salman, is already starting to transform and liberalize their society.  They will need to have women in their work force, which means allowing them to drive and to travel unimpeded by the old ways of needing to obtain written permission from their male relatives (and you thought they were making these changes because they have become humanitarians).  The increased involvement of women in society and their increased economic power will hopefully make Islamic societies more humane in the long run.

The US now has the largest amount of oil as a strategic reserve than at any time in the past, and its oil/gas production is increasing all the time.  The price of oil is bound to go down, thus hitting the Middle East oil producers financially and reducing their political bargaining power.  The world is changing, and we should not be afraid to grasp the advantage.

 

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China and Israel

Israeli PM Netanyahu visited China last week, accompanied by a prestigious group of Israeli business leaders and hi-tech experts, and had meetings with Premier Xi Jinping and others.  They are spoke about trade and technology.  China doesn’t have any strategic problem with Israel because Israel is not going to complain about their human rights issues or their island-building in the South China Sea, like the US, the Europeans and Japan would.  

But, what possibly could China and Israel have in common?  China is so huge and has an enormous population, while Israel is so small and has a population that could fit into one of several Chinese cities.  Yet I would submit that there are two things the Jews and the Chinese have in common.  First is an entrepreneurial spirit.  Second is a desire for stability. Even though China is a Communist dictatorship, some might argue that it had to be in order to unify the country and make material progress.  The cost of course for this was tremendous suffering and privation of the masses.  But, hopefully this is past now that China has embraced capitalism and the natural entrepreneurial spirit of the Chinese people is flourishing.  In that respect they can gain a lot from sharing in the amazing technological advances coming out of Israel’s innovative high-tech sector.  For example, milk production has gone up significantly in Vietnam and  China as a result of Israeli hi-tech milk production methods.    

Meanwhile Israeli President Rueven Rivlin was visiting Vietnam, where he attended a show of Israeli military technology.  These visits to Asia are all part of an Israeli effort to forge bilateral ties with countries other than the USA as a result of the antagonistic policies of former President Obama.  These have included Netanyahu’s tour of African countries and recently visits to Singapore and Australia.  Meanwhile the Israeli economy continues to strengthen and the Israeli shekel is one of the strongest currencies in the world.  It is ironical therefore that the current Coalition Government might fall due to a stupid dispute over the Israel Broadcasting Authority.

The Market booms

During the recent election it was forecast that if Hillary Clinton won, the US stock market would first go up and then drop precipitously.  But, if Trump won, it was forecast that the opposite would happen, the market would first drop and then go up significantly.

The reasons given were that Clinton was a known politician and people would have some confidence in her governing, but after her spending on more entitlements increased (as with Obama) then the market would suffer.  But, with Trump, the initial decrease would be due to lack of confidence in his experience in government, yet his pro-market business approach would subsequently lead to a market rise.

Well, Trump, as you know, won, and the predicted has happened.  The market took a one day drop of over 800 points.  But, since then it has been gradually climbing, and as Trump has staffed his appointments with experienced businessmen, such a Treasury Secretary Steven Mnuchen, the market has risen sharply.  In fact, the market has risen to previously unknown heights, with the Dow Jones Index going over 19,000 points for the first time in history, and it is now approaching 20,000.

For anyone invested in the US market (or anywhere else) this is very good news.  Not only is the US market robust, but the US dollar has gained ground and is now stronger than for some time.  This increases the value of the US economy and as Trump promised, will help to make the US great again.  Everything else depends on a strong economy and Trump is fulfilling that pledge even before taking office.

 

Turning Left

When the left is defeated, what does it do, it turns further left, as if that will help it.  For example, when Labour leader Ed Milliband was defeated by Conservative leader David Cameron in the last general election in the UK, he resigned and the Labour Party chose an even further leftist leader Jeremy Corbyn to replace him.  Corbyn has almost no chance of ever being elected.  Whatever happened to New Labour and the Blair revolution?  And when Corbyn was rejected by the Labour MPs, who know the reality of the situation, what happened?  The Labour Party as a whole re-elected Corbyn.  This is equivalent to self-induced suicide. Corbyn not only has no charisma and no leadership qualities, but is so far to the left that he called Hamas and Hizbollah, two recognized terrorist organizations, his friends. I am not upset by this move, it is so self-defeating that it essentially rules out any Labout Party involvement in government for another political generation.

Similarly in the US.  When Hillary Clinton was unexpectedly defeated, for being an arrogant, unsympathetic, criminal candidate, what happens.  The Democratic National Committee is holding elections for a new Chairman and who is considered the leading candidate, Keith Ellison!  He is one of only two Muslims in Congress and has far-left views and has twice aligned himself with Muslim Brotherhood positions.  Similarly the leader of the left-wing of the Democratic Party Bernie Sanders is now more prominent than ever, mainly because he opposed Hillary and since she lost he can claim that the Dems might have won if he had been selected as their candidate.

In both the US and UK the moves of the left opposition to the far left as a defensive reaction to their losses will only ensure further defeat.  Instead they should be moving towards the center, but they lack the intelligence to do so.  One example of the failure of socialism is Venezuela, that has oil and should be wealthy but is now bankrupt due to the mismanagement by the socialists Chavez and Madura.  Next door is Chile, that has seen a huge GDP improvement of 250% since the overthrow of the socialist Allende. The facts are there, staring everyone in the face, socialism does not work but the free market and competition does.

Modern Slavery

It may surprise many people to learn that there are estimated to be ca. 46 million slaves around the world today, and maybe many more.  Yes, not only does slavery still exist hundreds of years after it was declared illegal, but it is growing and the cost of a slave has plummeted.  That is because of world over-population and economic competition and the needs of modern industry for ever more production, sometimes for products that are restricted to remote locations and environments, where there is limited access and no supervision.

I happened to watch Steven Spielberg’s movie “Lincoln” recently, in which he recognized the need to abolish slavery before the US could really enter the modern world.  It is a dark and serious subject and treated appropriately, with an exceptional performance by Daniel Day-Lewis.  Yet that slavery was the institutionalized slavery of Black Americans.  The current slavery is quite different.

This article is partly based on a documentary entitled “Invisible Hands” that appeared on the Deutsche Welle network.  Wikipedia has a Global Slavery Index (https://en.wikipedia.org/wiki/Global_Slavery_Index ) that lists the estimated number of slaves in each country.  By far the largest population of slaves is in India, over 14 million, although it is a small percentage of the total population (1.2%).  Most African countries have a residual number of slaves, and even the USA is listed as having 60,000 slaves and even Israel at 6,500. Most of these are illegal immigrants who have no means to obtain legal protection.  Their documents are taken from them by criminals and they are forced to work under threat of violence and/or death as sexual workers or in menial tasks.

The largest kind of slavery problems occur in West Africa, mostly in mining and agriculture.  For example, much of the chocolate that we eat is produced from plantations in West Africa that use illegal child slaves, often sold by their poverty-stricken families, and forced to cut cocoa beans for years without pay.  A French reporter who was investigating this situation a few years ago disappeared without trace.  A German reporter has recently produced a film entitled “The Dark Side of Chocolate,” that documents this slavery situation.  The sad fact is that the major chocolate companies signed an agreement several years ago to stop using slavery in the collection of chocolate, but they have obviously not kept their pledge.

Another place where there is terrible slave labour conditions is in the mining of tantalum, a rare metal that occurs in West Africa, where children and young men are worked as slaves in mines under terrible conditions controlled by armed soldiers.  If there is any accident they are left to die because it is too expensive to remove them and treat them. Tantalum is used in smart phones. This is in addition to the better known slavery that occurs in gold and diamond mining in Africa.

In India, the slavery often occurs when whole villages are owned by someone and the villagers are treated as slaves in exchange for allowing them to continue to live there. Most of the slaves in India work in brick making, using mud, that makes construction in India both cheap and dangerous. Notably most countries do not act against their domestic slavery because it is not profitable to do so.  West African countries have little leverage against the chocolate conglomerates and the Indian Government cannot stop the slavery in brick making for fear of causing a rises in the price of construction.  It is mostly private anti-slavery organizations that work slowly and deliberately against these manifestations of modern slavery.

Triggering Article 50

Now that the citizens of the UK have voted by a majority in a Referendum that they want to leave the EU, the process is only just beginning.  There are politicians on both sides, in the UK and EU, who have said that the process should be started quickly, or slowly.  What actually needs to be done is for the UK Government to send a letter to the EU President triggering Article 50 of the Lisbon Treaty relating to a member requesting to leave the EU.  But, there is a constitutional question here, can the British PM, presumably David Cameron’s successor, simply write a letter to the EU President Carl Juncker, or does he/she have to get the full support of Parliament for this move?  In other words can a PM do this as an executive decision or does it require UK legislation?

The distinguished London law firm of Mishcon de Reya has submitted an affidavit on behalf of some leading businessmen to the UK Government asking them to submit a bill to Parliament in order to obtain its agreement to trigger Article 50 of the Lisbon Treaty. This is based on the principle that since UK membership in the EU required Parliamentary approval, it must require Parliamentary approval to leave.  However, it is known that a majority of the MP’s actually are against the Brexit and this raises a very difficult question.  Suppose a Bill to leave the EU is brought by the Government before Parliament and it is rejected by a majority.  What to do then?  Does a vote in Parliament overcome a Referendum, or vice versa?   This could get very messy!

The consequences of the Brexit have so far been more dire than the proponents predicted, including an over 10% drop in the value of the pound, and many are now regretting their fling against the establishment.  Also, Brexit has unleashed a wave of anti-immigration right wing fervor in the UK, that has the Jewish community worried.  How will those EU citizens in Britain now be treated if/when the Brxit is formalized?  How will Brits living in the EU be treated, will they all have to leave?  This can only be determined in a negotiated exit, and Britain and the EU have 2 years from the time Article 50 is formally invoked to negotiate the terms.

Brexit or Bremain?

The debate over whether or not Britain should exit or remain in the EU is hotting up as it comes to the wire on Weds June 23.  That’s when the referendum that PM Cameron promised the British people in his last election campaign will take place.  After extensive negotiations Cameron claims that he has managed to obtain better conditions for Britain in the EU, and so he advocates that Britain stay in.  The Tory Party is split between so-called Euro-skeptics and Bremain followers of Cameron.  The Labour Party under Jeremy Corbyn is solidly for staying in the EU.  That is what cost the life of Labor MP Jo Cox, who was murdered by a mentally unstable right wing extremist.  But, this is neither a left/right not a rich/poor divide.

The Labour Party is very left in its policies, but many Unions and their working members are solidly against the EU.  They fear further loss of British jobs to migrants from the EU, who have freedom of movement within the EU (note that these migrants are nothing to do with the Muslim migrants fleeing war, such as the Syrians).  In fact the number of EU migrants in Britain is far higher than the early estimates, it is  estimated that there are ca. 350,000 now living and working in Britain.  But, although this may be true it is pointed out that these migrants are mostly not on the dole, they are working hard, paying taxes and have indeed contributed greatly to the full employment and relatively high standard of living in the UK, compared for example to some other EU countries.

The wealthier class is also split, some thinking that EU migration cuts salaries due to competition and this is good for business.  They also fear that losing direct access to the EU market of some 500 million people will be bad for business.  At present the EU buys 44% of UK exports and this would drop drastically if the UK left the EU.  On the other hand, many upper class citizens are right wing in their views and are upset about the loss of control over British life and immigration to faceless bureaucrats in Brussels.

Polls show the two sides are neck and neck.  While Cameron as PM draws much middle class support, Boris Johnson, former Mayor of London and a Conservative who people think has his eyes on Cameron’s job, is a popular and effective Brexit campaigner.  If Brexit wins, Cameron might have to resign and Johnson’s star may rise.  But, if the majority vote to stay in then Cameron will remain PM and many think that a great economic uncertainty and possible disaster will be avoided.  For what it’s worth I think the UK should stay in the EU, mainly for the economic advantages of being part of a huge and border-less market. But, the EU certainly has its problems and the UK will have to shoulder its part of the economic costs of the poorer and economically unsound members, like Greece?  We’ll soon see.