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Friedman: Turkey Attractive, Skeptical On India

GEORGE FRIEDMAN
Friedman: Turkey Attractive, Skeptical On India
George Friedman is one of the leading geopolitical strategists of our time. He founded Strategic Forecasting Inc. (Stratfor), an intelligence and consulting firm, in 1996, and serves as the company’s CEO and chief intelligence officer. Dr. Friedman is highly sought out by various organizations from around the globe for his geopolitical analysis and advice. He is the author of “The Next 100 Years” and “The Next Decade,” both New York Times best-sellers.Dr. Friedman recently sat down with ETF.com to discuss the ongoing tensions in Asia between China, Japan and Vietnam, and highlights which Southeast Asian nations are poised for a growth spurt. He also spells out what a Modi-led election win in India means for its market, how fracking will impact geopolitics in the future, and tells us which country he favors the most economically in the coming decade.
ETF.com: Last quarter, you said the markets were overreacting to the situation in Ukraine. Has anything surprised you regarding the renewed tensions between the West and Russia since?
George Friedman: Nothing like the Cold War where there were really massive tensions. And the markets weren’t necessarily affected by much of what went on in the Cold War. We had massive rallies. We had busts. We had the entire range of things.So from the standpoint of the international system, what’s happening in Ukraine is causing a realignment of the West. It’s very complicated. The Russians are still being extremely cautious. But its impact on the markets is dubious; it’s just not that significant on that level.
ETF.com: Do you also hold that view with Eastern European peripheral nations?
Friedman: That has a different dimension. When you take a look at these countries—Poland, Slovakia, Hungary, Romania, Bulgaria, but particularly Poland and Romania, which has taken a leading position with the Americans—this is simply another fracture point in the European Union.We already have the fracture point in the European Union between southern Europe and northern Europe. We have a fracture point developing between France and Germany. We have fracture points developing politically, as we saw with the right wing success during the European parliamentary elections.Now we have another one, which is where Poland and Romania and these other countries have a vested interest in what happens in Ukraine. Portugal and Italy and even Germany have much lower stakes, where the effect is not where you might expect it. It is in another dimension of disunification of Europe, and a much stronger presence of the United States in western and central Europe in its alignment with the Poles and Romanians.

So when everything was done here—and these countries in the eastern frontier certainly had concerns about what Russia was going to do—it wasn’t the European Union, it wasn’t the European countries that took a leading position, it was President Obama going to Poland, Vice President Biden going to Romania, endless diplomacy going back and forth that was key.

ETF.com: Last quarter, you referred to the friction between Japan and China as saber rattling. China is now having territorial disputes with Vietnam, causing a plunge in Vietnamese equities. There’s a sense of increased nationalism throughout Asia. Do you see confrontations in Asia escalating? How will that impact economic growth in the region?
Friedman: Divide them between two parts, between those where the confrontation has to be naval, such as between Japan and China. Those are less likely to happen simply because of the limits on the navies in the region. It takes a lot to have a naval confrontation.

Vietnam is a special case because it borders China. Although China went to war with Vietnam in the 1970s, and was pretty badly defeated by the Vietnamese, there’s always the possibility of it escalating to a conflict.

In this particular case, the Chinese are really not itching to have another go at the Vietnamese. They badly miscalculated last time, and in many ways, the Vietnamese are as strong as they were then. The Vietnamese are certainly not looking for a battle with the Chinese.

So my argument is that the Vietnamese/Chinese relationship is qualitatively different from the Chinese/Japanese relationship at this point in time, because one is a ground conflict between two countries and borders, and the other is a naval conflict that neither is in a position to engage in.

ETF.com: Are you optimistic about Vietnam’s economic growth prospects?

Friedman: Vietnam has had a growth spurt. If it’s unlucky, it’ll grow like China and wind up in an impossible situation. If it’s lucky, it’ll slow down, consolidate, have a business cycle, cull the inefficient businesses and move forward. So my view of potential growth is that it’s probably the worst thing a country can have, because eventually, as with Japan in 1991, that ends, and ends badly.

So my argument is that Vietnam should have a cyclical downturn; it’s probably having one. But there are other countries emerging in Southeast Asia—including Laos, Cambodia, Myanmar, the eastern parts of southeast Asia, the Philippines—that are also due, at least some of them, to have a growth spurt.

Ecologically, there are only so many low-wage, high-growth countries that can fit into the box. Vietnam may not have made as much of its growth spurt as it could have—I rather think it has—but it could also wind up in a much more crowded atmosphere.

ETF.com: Of those Southeast Asian countries, Laos and Cambodia still only have a handful of securities listed on their exchanges. Myanmar is currently working on creating a stock exchange. Are there any investable markets in Southeast Asia in which you share that same optimism?

Friedman: First of all, all these markets are sketchy in some ways, including the Chinese, I might add. These are debt-driven, not equity-driven economies. That is, if you want to start a business, you don’t normally go do an IPO; you normally go to a bank and do a financing and the bank president sits on your board, and so on.

Looking at these countries’ level of economic development in terms of the viability of the equities market is kind of a mismatch. Their equity market grows far later than their economies do.

So what you do here is, when you make investments, you can’t treat it as a Western equity-driven country. You go in—as many have done very successfully—and you actually invest in various projects and companies. It’s a direct investment play at this point. Most Western investors aren’t comfortable doing that, so they miss on the first major growth spurt—except for those who do make this investment; they come out quite happy to have participated.

So in these countries in Asia, given their structure, the very fact that they’re beginning to grow but there’s no equity market is the opportunity. But it’s a harder opportunity to take.

ETF.com: What do you make of Abe and his political agenda? Will his attempts to rewrite Article 9 of the Constitution and rebuild Japan’s military, hinder alliances in the region, possibly affecting the country’s growth?

Friedman: Japan is the third-largest economy in Asia, if you buy the Chinese numbers. It is also a country, unlike China, without a billion impoverished people. It’s highly unified. It has disregarded Article 9 of the Constitution for decades, having a military of substantial size, having a naval force and an air force, designating it all as a Self Defense Force and twisting it.

So Japan is already a major power, and I would argue that in East Asia, it is a far more significant major power than China, because the Chinese military, the armed ground forces—the People’s Revolutionary Army—is primarily a domestic security force, not a conventional army. Its naval power is emerging, but has not yet reached a point where it could challenge the United States, and I think would have a great deal of trouble challenging the Japanese.

Abe is not an ultranationalist, he’s a nationalist. He is coming out, as was inevitable, as unabashedly acting in the interests of Japan. Now, the Japanese always acted in the interests of Japan; they just had a little pretense that they had no national interests. But they did; everybody in Asia knew they did, and they worked in tandem with the United States.

The important question is not whether Japan is a great power; it is. Or whether it has national interests; it does. It’s about what its relationship to the United States is. Japan has chosen to shape its strategic outlook for close to 70 years based on alignment with the United States. The question to ask about Abe is, Is he prepared to simply continue this alignment, or is Japan going to go out on its own?

I think the answer is that he’s certainly not going to dramatically shift that alignment, but he is going to make clear his alignment between two equal nations—at least in principle—and that on occasion, it will pursue its own interests independent of the United States. So it’s simply an obvious thing happening. What else would the third-largest power country in the world do but act like the third-largest country?

ETF.com: Moving on to India, Indian equities have been surging for the past six months in anticipation of a BJP/Modi win. Now that he’s prime minister, have the markets gotten ahead of themselves with regard to what Modi can accomplish at the national level?

Friedman: Oh, way ahead of themselves. The markets excited themselves over Modi without realizing that in the end, as prime minister, there are limits to what he can do. First, the national government is surrounded by these states that have tremendous influence on what can be done. Second, the Indian bureaucracy is enormously inefficient, and simply shouting orders at a ship that doesn’t hear you doesn’t do much.

He said all the things that the markets wanted to hear. Markets have a strange belief that the nature of the leader can magically transform a country. There are institutional realities in India that cannot easily be overcome. Now that he’s in office, disappointment will come in very quickly.

ETF.com: Fracking and new extraction methods have unexpectedly tilted the world’s energy riches toward the U/S/ and away from the Middle East. How will this shift affect geopolitics in the coming years, and what is your view on the price of oil in the coming years?

Friedman: It’s changed the geometry of supply and demand dramatically. At the time that Europe and China are slowing and new powers have not emerged, the United States has come on the market with a source of energy nobody calculated. As that technology spreads to other countries, you will also see even more energy being produced.

There are legal limitations in some places, environmental limitations. But in the end, this technology is going to change things. It is very difficult for me to see how the price of oil is maintained at current levels. But it’s hard for me to see why they’re contained there at current levels in the first place. That shows the limits of my knowledge; I don’t pretend to be an oil trader.

But it seems to me that the pressures—particularly if the United States starts to legalize exports, which I suspect it will—that these structural shifts are going to create a very different dynamic for 20 or 30 years in energy.

ETF.com: Looking out into the coming decade, what region or country are you most optimistic about economically?

Friedman: The United States. The United States, unlike Europe, is not fragmented into tiny pieces. Unlike China, it isn’t suffering with a billion impoverished people. I see some lesser countries emerging—Poland, Turkey. I see Japan, which has done remarkably well over the past 20 years in maintaining its status as a major economic power, all of which are attractive.

But far and away, the most attractive remains the United States. It has a low population density. It has a great deal of land available. It has all the things that you’d want to see geopolitically in a country rising.

ETF.com: How does Turkey look at the moment? Is it out of the woods politically, and can it now move ahead with reforms?

Friedman: They don’t have to move onto reforms; they’ve done extremely well in the past 10 years without those reforms. They had some riots. Other countries have riots; the United States had riots in the 1960s and ’70s. There’s a tendency to see every large-scale demonstration in the country as being a major upheaval. What’s interesting is how meekly they contained it and moved on. So having just been in Turkey, this country has maintained an extraordinary growth rate, aside from 2009. It’s not an accident.

ETF.com: Thanks for your time.

ETF.com INSIGHTS
Vanguard Total Stock Market (VTI | A-100)
Looking out over the coming decade, Friedman still finds the U.S. more attractive—economically and geopolitically—than any other country on the planet. While he gives no opinion on current U.S. stock valuations, for a cheap and efficient long-term bet on the U.S. economy, it doesn’t get any better than VTI. Holding more than 3,500 companies of all sizes, the cap-weighted VTI delivers total market coverage of U.S. equities at a shockingly low 0.05% cost. Even better, the fund has phenomenal tracking history, with little to no slippage from its index, making it practically free to hold the fund. Trading more than $170 million at pennywide spreads daily, VTI is the poster child for what makes ETFs such an efficient, long-term investment vehicle.
iShares MSCI Turkey (TUR | B-99)
Friedman sees Turkey as a country well positioned for growth. For the past decade, it has been growing at a phenomenal rate—the country went from a 2002 GDP of $196 billion to a 2013 GDP of $789 billion. In regard to Turkey’s tremendous growth, Friedman notes, “It’s not an accident”—suggesting that the country has a political and economic foundation built for growth. To access this growth theme, consider TUR, which tracks a market-cap-weighted index of more than 80 Turkish companies. If Friedman proves correct about the country’s growth prospects, its equities are selling at a discount—TUR’s 11.09 P/E is a fraction of the richer valuations seen in some emerging markets.
ETF.com Alpha Think Tank ETF Tracker
Methodology: ETF selections are made solely by ETF.com. They are neither selected by, nor are they investment recommendations from, Alpha Think Tank strategists. ETF selections are made by the ETF.com Analytics team based on the themes highlighted in each weekly interview with Alpha Think Tank strategists.We implement a stop-loss of 10% from the ETF.com Pick Date, whereby any funds triggered by that stop will drop off the tracker. The tracker data is updated weekly and is subject to change, according to our ongoing interviews with our strategists.
Ticker Fund Name ETF.com
Pick Date
TR %
(Since Pick Date)
TR %
(1 Yr)
Closing Price $ (6/12/14) Inspired By
INDA iShares MSCI India 2/24/14 25.11 29.11 30.24 Roubini
EWI iShares MSCI Italy Capped 1/27/14 15.28 44.01 17.96 Luskin
EWP iShares MSCI Spain Capped 1/27/14 15.22 49.81 43.46 Luskin
EWW iShares MSCI Mexico Capped 3/3/14 13.76 7.68 67.69 Friedman
CCXE WisdomTree Commodity Country Equity 3/14/14 12.94 17.22 32.49 Schiff
PXH PowerShares FTSE RAFI Emerging Markets 2/17/14 12.33 12.95 21.56 Arnott
AMU ETRACS Alerian MLP ETN 1/27/14 12.05 18.93 31.52 Luskin
INDA iShares MSCI India 4/9/14 11.67 29.11 30.24 Kotok
EWP iShares MSCI Spain Capped 2/24/14 9.11 49.81 43.46 Roubini
EWY iShares MSCI South Korea Capped 2/24/14 7.92 20.59 65 Roubini
GXC SPDR S&P China 2/3/14 7.91 14.61 75.03 Rogers
RSX Market Vectors Russia 2/3/14 7.70 10.15 26.29 Rogers
EWW iShares MSCI Mexico Capped 2/11/14 7.16 7.68 67.69 Fitzsimmons
EWP iShares MSCI Spain Capped 3/10/14 7.12 49.81 43.46 Dorsey
ELD WisdomTree Emerging Markets Local Debt 2/17/14 6.15 0.47 47.26 Arnott
EPOL iShares MSCI Poland Capped 3/3/14 5.86 14.90 30.52 Friedman
IEMG iShares Core MSCI Emerging Markets 4/28/14 5.62 13.27 52.1 Luskin
GULF WisdomTree Middle East Dividend 3/10/14 5.61 31.26 23.07 Dorsey
VCLT Vanguard Long-Term Corporate Bond 3/17/14 5.25 8.90 89.28 Yardeni
NKY Maxis Nikkei 225 2/3/14 4.95 9.15 17.39 Rogers
FXA CurrencyShares Australian Dollar 3/14/14 4.83 1.35 94.27 Schiff
MCHI iShares MSCI China 4/15/14 4.58 12.03 46.79 Faber
GMF SPDR S&P Emerging Asia Pacific 4/9/14 4.19 14.94 82.455 Kotok
EWJ iShares MSCI Japan 3/3/14 3.79 8.74 11.77 Friedman
VTI Vanguard Total Stock Market 4/28/14 3.72 22.74 100.29 Luskin
RSP Guggenheim S&P 500 Equal Weight 3/10/14 3.10 24.65 75.36 Dorsey
BKF iShares MSCI BRIC 5/22/14 2.76 12.93 39.09 Arnott
BAB PowerShares Build America Bond 4/9/14 2.63 7.24 29.3 Kotok
FXC CurrencyShares Canadian Dollar Trust 3/14/14 2.28 -5.69 91.6 Schiff
ERUS iShares MSCI Russia Capped 5/22/14 2.23 7.15 20.16 Arnott
GDX Market Vectors Gold Miners 3/31/14 1.80 -14.44 24.03 Merk
DBGR db X-trackers MSCI Germany Hedged Equity 2/24/14 1.70 21.72 26.58 Roubini
EWS iShares MSCI Singapore 5/5/14 1.47 10.32 13.81 Bremmer
FXY CurrencyShares Japanese Yen Trust 3/31/14 1.46 -5.94 95.91 Merk
DBC PowerShares DB Commodity Tracking 3/14/14 1.38 1.42 26.39 Schiff
EWH iShares MSCI Hong Kong 4/15/14 1.34 15.94 21.1 Faber
DBC PowerShares DB Commodity Tracking 3/31/14 1.03 1.42 26.39 Merk
DBB PowerShares DB Base Metals 5/8/14 1.01 -4.57 16.08 Gartman
XLU Utilities Select SPDR 4/9/14 0.93 17.68 42.28 Kotok
SCPB SPDR Barclays Short Term Corporate Bond 3/17/14 0.41 1.57 30.79 Yardeni
ITA iShares U.S. Aerospace & Defense 5/5/14 0.34 39.41 110.72 Bremmer
KOL Market Vectors Coal 5/8/14 -0.11 -0.86 18.5 Gartman
USDU WisdomTree Bloomberg US Dollar Bullish 4/15/14 -0.12 N/A 24.771 Faber
VNM Market Vectors Vietnam 4/15/14 -0.17 5.58 20.7 Faber
ROBO Robo-Stox Global Robotics and Automation 3/3/14 -0.18 N/A 26.91 Friedman
AFK Market Vectors Africa 5/5/14 -0.79 18.15 32.86 Bremmer
CHIQ Global X China Consumer 3/17/14 -1.40 2.41 14.04 Yardeni
FXE CurrencyShares Euro 3/31/14 -1.58 1.37 133.88 Merk
XRT SPDR S&P Retail 3/17/14 -1.99 10.71 84.41 Yardeni
EIDO iShares MSCI Indonesia 5/28/14 -3.82 -8.51 27.22 Fitzsimmons
CHIQ Global X China Consumer 2/11/14 -5.20 2.41 14.04 Fitzsimmons
PEJ PowerShares Dynamic Leisure and Entertainment 3/17/14 -5.98 19.66 33.19 Yardeni
IAU iShares Gold Trust 3/14/14 -7.84 -8.45 12.35 Schiff
Data as of 6/12/14
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Famine and Water Riots Are Coming, Warns New IPCC Intergovernmental Report

The Intergovernmental Panel on Climate Change (IPCC) has released a new report on the state of the global environment. One of their most important messages is that we need to prepare for famines and water shortages in the coming decades.

Photo, above, of California’s low water levels due to drought this year, by Randall Benton, Sacramento Bee.

The Guardian‘s John Abraham and Dana Nuccitelli have a great guide to the report. They write:

The report discusses the risk associated with food insecurity due to more intense droughts, floods, and heat waves in a warmer world, especially for poorer countries. This contradicts the claims of climate contrarians like Matt Ridley, who have tried to claim that rising carbon dioxide levels are good for crops.

While rising carbon dioxide levels have led to ‘global greening’ in past decades and improved agricultural technology has increased crop yields, research has indicated that both of these trends are already beginning to reverse. While plants like carbon dioxide, they don’t like heat waves, droughts, and floods. Likewise, economist Richard Tol has argued that farmers can adapt to climate change, but adaptation has its costs and its limits. In fact, the IPCC summary report notes that most studies project a decline in crop yields starting in 2030, even as global food demand continues to rise.

The report also discusses risks associated with water insecurity, due for example to shrinking of glaciers that act as key water resources for various regions around the world, and through changing precipitation patterns. As a result of these types of changes, the IPCC also anticipates that violent conflicts like civil wars will become more common.

Here’s a chart from the report tracking likely decreases in crop yields over time, if climate change continues unchecked.

Essentially, climate change is going to decrease our supply of food and water. And this, the IPCC suggests, will foment civil unrest and could lead to more armed conflicts than we have now.

Other looming threats include greater risks of flooding, ocean acidification, and animal extinctions.

It seems clear that mitigating climate change doesn’t simply mean curbing our fossil fuel emissions and agricultural runoff into the oceans. We’re also going to need to figure out new ways to improve our food and water security. Perhaps the breakthrough technologies of the twenty-first century will involve genetic tweaks that make plants more resistant to drought, and cheap ways to recycle or purify water.

If we can’t agree on what to do about climate change, one has to hope that we can unify around what to do about hunger and thirst.

Read the entire IPCC report [PDF]

 

WEF Impact Investing Report

wef-impact-investing-thumbOver the last few years, much excitement has been generated around the term “impact investing” – an investment approach that intentionally seeks to create both financial return and measurable positive social or environmental impact. Despite the buzz, there is limited consensus among mainstream investors and specialized niche players on what impact investing is, what asset classes are most relevant, how the ecosystem is structured and what constraints the sector faces. As a result, there is widespread confusion regarding what impact investing promises and ultimately delivers.

This report is a result of engaging over 150 mainstream investors, business executives, philanthropic leaders and policy-makers through interviews, workshops and conference calls. The overall objective of the Mainstreaming Impact Investing initiative is to provide an initial assessment of the sector and identify the factors constraining the acceleration of capital into the field of impact investing.

Download the report (PDF)

 

A Nation On Fire: Climate Change And The Burning of America

A Nation On Fire: Climate Change And The Burning of America

http://www.globalfundexchange.com/blog/2013/07/31/a-nation-on-fire-climate-change-and-the-burning-of-america/

June 20, 2013: Wildfires fires approach the town of South Fork, Colorado (Credit: AP)

 

Huge, explosive fires are becoming commonplace, say many experts, because climate change is setting the stage — bringing higher temperatures, widespread drought, earlier snowmelt and spring vegetation growth, and expanded insect and disease infestations.


Scientists and fire experts speaking on a recent conference call organized by the Union of Concerned Scientists say the nation is moving into an era when massive and destructive wildfires of the kind that occurred only sporadically over the last century will now be a regular occurrence. “Within the next few decades we anticipate these [forest] systems being as dry on a regular basis as the major fire years of the last century,” said Anthony Westerling of the University of California, Merced.

“We are now completely certain that there is a climate signal in the observed fire activity,” added Dave Cleaves, climate adviser to the head of the U.S. Forest Service. “Fire, insects, disease and moisture stress are all being linked more closely by climate change.”

Wildfire statistics compiled by the National Interagency Fire Center in Boise, Idaho, offer sobering confirmation. The seven largest fire years since 1960 have all occurred since 2000. In 2006, 2007, and last year, the toll exceeded 9 million acres, an area roughly equivalent to Maryland and Rhode Island combined.

This year’s fire season, while running behind 2012 in terms of acreage lost thus far, is proving particularly destructive and tragic in some places. A year after the Waldo Canyon fire set a new standard for destructiveness in Colorado by burning nearly 350 homes in 2012, this June the Black Forest Firedestroyed more than 500 just a few miles away. And the June 30 Yarnell Hill fire in Arizona killed 19 members of a Hot Shot firefighting crew when they were overrun by flames, the deadliest wildfire in 80 years.

There is no single reason for the recent transition to more frequent and explosive fires, says Oltrogge. For one, too many people are “deciding to build communities where there will be big scary wildfires.” And there is too much fuel built up in forests where frequent low-intensity fires once thinned out underbrush but where decades of man suppressing natural fires has resulted in overcrowded stands of trees now vulnerable to catastrophic fires. Plus, emphasizes Oltrogge, “I can tell you as a matter of fact that climate change is a key contributor to what we’ve been dealing with the last 10 to 12 years.”

That’s hardly an outlier opinion. In congressional testimony two years ago, Thomas Tidwell, the head of the U.S. Forest Service, told lawmakers that his agency faces conditions of higher temperatures, earlier mountain snowmelt, and much longer fire seasons, which “our scientists believe … is due to a change in climate.”

Wildfires-02Tidwell again delivered that message yet again to Congress last month. Large fires in excess of 10,000 acres are seven times more common today than four decades ago, Tidwell said. The fire season is two months longer. In 2012, he said, “over 9.3 million acres burned in the United States. The fires of 2012 were massive in size, with 51 fires exceeding 40,000 acres. Of these large fires, 14 exceeded 100,000 acres.”

And that comes with a huge price tag.

The cost of federal firefighting efforts, borne largely by the Forest Service and the Interior Department’s Bureau of Land Management, has also risen dramatically. At the Forest Service, firefighting now often eats up 40 percent of the agency’s annual budget. In a little more than a decade, fire staffing at the Forest Service has more than doubled. During the decade of the 1990s, federal firefighting costs averaged less than $1 billion a year; since 2002, the annual cost has averaged more than $3 billion.

There is little prospect of those costs declining. In fact, a report released last month by Headwaters Economics concluded, “These changes will all contribute to escalating wildfire protection costs for all levels of government.”

Federal efforts to reduce fire risks — through thinning of small trees and underbrush and by setting what are known as ‘prescribed fires’ to cut down on those small fuels that can lead to large catastrophic fires — were accelerated around the year 2000, when spending on what is known as the hazardous fuels reduction program run by the Forest Service and Department of Interior tripled. But spending on fuels reduction since 2011 has declined, and in its budget request this year, the Obama administration has sought a cut of more than 30 percent, the third year in a row it has proposed substantial reductions to Congress. The administration’s request for hazardous fuels reduction for next year is just $297 million.

Wildfire preparedness has taken another hit as a result of automatic budget cuts under sequestration, which cut spending from $500 million last year to $419 million this year. A report released this spring by House Appropriation Committee Democrats found that sequestration would mean the Forest Service would have 500 fewer firefighters this season, and 50-70 fewer fire engines and two fewer aircraft.

Increasingly, lawmakers are calling on the Forest Service and Interior Department to spend more on preventive measures in order to eventually reduce firefighting costs. “You can spend more modest amounts on the front end, with preventive kinds of efforts, or you can spend your time investing substantially more money trying to play catch-up as these infernos rip their way through the West,” said Sen. Ron Wyden (D-Oregon) last month.

Even with stronger financial support, the job of treating forests to reduce wildfire is enormous. The federal government is currently treating about 3 million acres a year, but Tidwell, the chief of the Forest Service, told Congress in June that between 65 and 82 million acres of Forest Service lands “are in need of fuels and forest health treatments — up to 42 percent of the entire system.”

Across all federal land holdings, 231 million acres are at moderate to high risk of damage from wildfires, according to a 2011 Congressional Research Service report. “Since many ecosystems need to be treated on a 10-35 year cycle … current treatment rates are insufficient to address the problem,” the report found.

Attacking the escalating expense of fighting fires is a difficult problem.

This is due in large part to the fact that the federal government, which shoulders most of the firefighting expense, has little power to control Americans’ urge to move into the woods because land use decisions are a local and state responsibility.

A key reason that wildfires have become more destructive, and fighting them more expensive, is that millions of Americans have made a conscious decision to move close to wildlands that are susceptible to fire — known by the infelicitous phrase the wildland-urban interface, or WUI.

“The number of housing units within half a mile of a national forest grew from 484,000 in 1940 to 1.8 million in 2000,” Tidwell testified to Congress last month. Another 1.2 million live within national forest boundaries, a nearly four-fold increase from 1940. Even with all that development near and in the forest, only about one-sixth of the WUI is developed, leaving plenty of room to make the situation worse.

Protecting those structures during fires has become the de facto number two priority of federal firefighting efforts, after protecting human life. According to Headwaters Economics’ recent report, “in a survey of [Forest Service] land managers, some estimated that 50 to 95 percent of firefighting costs were attributable to protection of private property.”

Further complicating the matter is the fact that knowing that federal firefighters will make valiant efforts to save homes “removes incentives for landowners moving into the WUI to take responsibility for their own protection and ensure their homes are constructed and landscaped in ways that reduce wildfire risks” according to a report by the Department of Agriculture’s Inspector General.

Ray Rasker, executive director of Headwaters Economics, said in an interview that a huge part of the problem is the fact that “there is no cost accountability for those who build in the WUI,” whether its individual homeowners or the local government bodies who make the development decisions about sewers, police coverage, roads and other issues.

“There are a lot of questions they ask about okaying a new development,” says Rasker. “But they don’t ask, ‘when we get a bill from the feds are we going to be able to afford our share of the firefighting costs?’” That’s because in most cases, they don’t have to share those fire costs. If they did, said Rasker, it would be much easier for local government to say no to development in the WUI.

“Eighty four percent of this land is still not developed,” Rasker says. “If you think it’s expensive now, you’re in for a big surprise. Fires are twice as big, they are burning twice as long. That’s the cost trajectory we are on.”

Climate change is altering the fundamentals in the West, bringing higher temperatures, earlier snowmelt that extends the fire season, severe and prolonged drought, and insect infestations that kill millions of acres of trees. Combined with scant evidence that policymakers at all levels of government are attacking the problems of fuels and population shifts into the WUI, there seems to be little prospect that the growing extent of wildfires will be stemmed.

paper released last December by the Forest Service, part of the government’s National Climate Assessment, looked at the effects of climate change on U.S. forest ecosystems. On the subject of fire, it presented a stark and sobering conclusion: by mid-century, wildland fires will be burning twice as much acreage as they do now.

Andrew Breiner contributed the graphics for this piece.

by anric

 

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Food security and world trade policy: How they are linked

Food security and world trade policy: How they are linked

http://www.globalfundexchange.com/blog/2013/06/10/food-security-and-world-trade-policy-how-they-are-linked/

Global food security is possible when food can move freely from areas of surplus to areas of demand

Free global agriculture trade is critically important to addressing food insecurity. The world will raise the most food the most economically and in the most environmentally responsible way when farmers plant the right crops for their local climate and soils using the right technology, then trade with others for the benefit of all. By encouraging free trade in a fair, rigorously enforced system, governments can help ensure that world food production thrives and that food surpluses reach areas of food deficit.

This Cargill infographic demonstrates the importance of world food flows – and the benefits that ensue when food moves freely from nation to nation.

by anric

 

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Creating a Sustainable Food Future: Reducing Food Loss and Waste

Creating a Sustainable Food Future: Reducing Food Loss and Waste

http://www.globalfundexchange.com/blog/2013/06/07/creating-a-sustainable-food-future-reducing-food-loss-and-waste/

The Food and Agriculture Organization of the United Nations (FAO) estimates that 32 percent of all food produced in the world was lost or wasted in 2009. This estimate is based on weight. When converted into calories, global food loss and waste amounts to approximately 24 percent of all food produced. Essentially, one out of every four food calories intended for people is not ultimately consumed by them.

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Food loss and waste have many negative economic and environmental impacts. Economically, they represent a wasted investment that can reduce farmers’ incomes and increase consumers’ expenses. Environmentally, food loss and waste inflict a host of impacts, including unnecessary greenhouse gas emissions and inefficiently used water and land, which in turn can lead to diminished natural ecosystems and the services they provide.

Big inefficiencies suggest big savings opportunities. We estimate that if the current rate of food loss and waste were cut in half―from 24 percent to 12 percent―by the year 2050, the world would need about 1,314 trillion kilocalories (kcal) less food per year than it would in the business-as-usual global food requirements scenario described in The Great Balancing Act, the first installment of this World Resources Report working paper series. That savings–1,314 trillion kcal–is roughly 22 percent of the 6,000 trillion kcal per year gap between food available today and that needed in 2050. Thus, reducing food loss and waste could be one of the leading global strategies for achieving a sustainable food future.

In this paper, the authorsprofile a subset of approaches to reducing food loss and waste that experts suggest are particularly practical and cost-effective, that could be implemented relatively quickly, and that could achieve quick gains. We also recommend a number of cross-cutting strategies to further galvanize commitment to reducing food loss and waste.

 To learn more about the series and sign up to receive updates, visit the World Resources Report website.

The World Resources Institute (WRI) will dedicate its next flagship World Resources Report (WRR), Creating a Sustainable Food Future, to exploring how we can achieve the “Great Balancing Act.” We’ll roll out a series of working papers over the next year that will set the foundation for and culminate in the World Resources Report 2013-2014: Creating a Sustainable Food Future.

Each installment of the WRR will take a detailed look at a potential solution that could help achieve a sustainable food future, creating a “menu” of practical, scalable strategies. Some menu items reduce projected growth in consumption, such as decreasing food loss and waste. Other menu items increase food production, such as restoring degraded lands back into agricultural productivity. No item on the menu can achieve a sustainable food future by itself, and the relevance of items will vary between countries and food chains. But the combination of solutions should help feed the world while contributing to poverty reduction, gender equity, ecosystem conservation, greenhouse gas emission reductions, and sustainable freshwater management.

INSTALLMENT 1

How can the world adequately feed more than 9 billion people by 2050 in a manner that advances economic development and reduces pressure on the environment? This is one of the paramount questions the world faces over the next four decades. The Great Balancing Actseeks to start answering this question by exploring the scope of the challenge and proposing a menu of potential solutions. This working paper is the first in a series that forms the foundation of the World Resources Report 2013-14: Creating a Sustainable Food Future.

Download the report  PDF, 1.4MB
View a narrated or static powerpoint presentation on this paper.

INSTALLMENT 2

About 24 percent of all calories currently produced for human consumption are lost or wasted. This paper examines the implications of this amount of loss and waste, profiles a number of approaches for reducing it, and puts forth five recommendations for how to move forward on this issue.

Download the report PDF, 1.1MB

by anric

 

Are We Really One Year Away From Global Riots

Are We Really One Year Away From Global Riots

http://www.globalfundexchange.com/blog/2013/05/30/are-we-really-one-year-away-from-global-riots/

We Are Now One Year Away From Global Riots, Complex Systems Theorists Say. Brian Merchant lays out an interesting connection.

What’s the number one reason we riot? The plausible, justifiable motivations of trampled-upon humanfolk to fight back are many—poverty, oppression, disenfranchisement, etc—but the big one is more primal than any of the above. It’s hunger, plain and simple.

If there’s a single factor that reliably sparks social unrest, it’s food becoming too scarce or too expensive. So argues a group of complex systems theorists in Cambridge, and it makes sense.

 In a 2011 paper, researchers at the Complex Systems Institute unveiled a model that accurately explained why the waves of unrest that swept the world in 2008 and 2011 crashed when they did. The number one determinant was soaring food prices. Their model identified a precise threshold for global food prices that, if breached, would lead to worldwide unrest.

Pretty simple. Black dots are the food prices, red lines are the riots. In other words, whenever the UN’s food price index, which measures the monthly change in the price of a basket of food commodities, climbs above 210, the conditions ripen for social unrest around the world. CSI doesn’t claim that any breach of 210 immediately leads to riots, obviously; just that the probability that riots will erupt grows much greater. For billions of people around the world, food comprises up to 80% of routine expenses (for rich-world people like you and I, it’s like 15%). When prices jump, people can’t afford anything else; or even food itself. And if you can’t eat—or worse, your family can’t eat—you fight.


Continue to read Brian Merchant’s excellent blog posts by clicking here

Watch our quick video – 10 Reasons to Invest in Agriculture – Now by Anric Blatt

 

 

by anric

 

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