Saturday, 29 October 2011

Healing Renewables Achilles Heel

I have two friends I admire who years ago took a chance on wind energy. Both simply thought it was the right thing to do. They bought used turbines, one from Alberta, one from Texas. In one case the "wind regime" or the amount of wind that blows through the farm, isn't great and he admits he'll never get his investment back. In the other case, the turbine certainly produced power which then charged a big box of batteries. An inverter changed the DC power into AC so it could be used in the house. The challenge here was to use the power when the wind was blowing (often at night) because the batteries would get dangerously hot, and be patient when there was no wind and the laundry needed to be done. Working outside the home, and trying to provide a reasonable lifestyle for his family, this friend finally decided to shut the system down and join the grid. 

These are  the real challenges for all of us when it comes to renewables. Sure PEI and other coastal areas get lots of wind, but there are really only a limited number of areas where the wind blows reliably strong enough to justify the tens of millions of dollars in investment in wind turbines. Solar production will work in areas with lots of sun and little rainfall, that's why you usually see the big arrays set up in deserts. (Using the sun to heat domestic hot water with a panel remains very doable everywhere).

But properly locating renewable projects is just the first challenge. The variability of renewable energy is a whole other issue. Even on PEI the wind blows strong enough to produce power efficiently about thirty percent of the time, and of course we never know when that will be.  Electric customers however want to make toast, cook dinner, dry the clothes, whenever they want to, not just when the wind is blowing.  That's why jurisdictions like Denmark and PEI (which relies more on wind than any other jurisdiction in North America) set upper limits for wind production (30% or so), because utilities have to have back-up generation to replace wind energy when it's calm, and the economics get way out of kilter trying to back-up much more than that. It's why PEI has been so insistent on getting some kind of regional power agreement in place (and get a stake in the new Newfoundland hydro-electric project), so that that back-up power is readily available, reasonably priced, and in the best of all worlds, renewable as well.

The systems operator (fancy name for the person sitting in New Brunswick who monitors who's producing and who's buying power) says there are moments (when the wind is blowing hard, and demand is light) when PEI IS supplying all its energy needs from wind, but it's very rare. (and check out Peter Rukavina's efforts to monitor this on his website: )

Storing renewable energy for later use is really the holy grail in the business. Summerside is taking small steps in that direction with the heaters it's offering homeowners that can take off-peak wind energy at night and store it for heat distribution during the day.

There are more ambitious storage projects on the go too.  There's a  very small electrolysis set-up at North Cape on PEI that produces hydrogen from wind energy  for later burning, and  the Wind Energy Institute of Canada, also in North Cape, is just embarking on storage research on a much larger scale. The wind turbines are just now being erected to provide the additional power.  And then there's this story about using banks of lithium batteries to store power in West Virginia. I'm presenting two versions because it highlights the differences between publications, one very enthusiastic, the more mainstream a little more cautious.  The bottom line: once storage becomes efficient and affordable, the possibility of a carbon neutral future, while enjoying the convenience of the grid,  becomes so much more realistic.

Cool energy-storage projects popping up; expect a lot more
by David Roberts  •  Oct. 28, 2011 •

Tracking the politics of clean energy can be a surreal and dispiriting experience. D.C. is so swamped in fossil-fuel money, fossil-fuel lobbyists, and fossil-fuel-owned pols that the conventional wisdom is absurdly pessimistic about clean energy: It's unreliable, it costs too much, it can never work, blah blah.

Meanwhile, out in the real world, costs are plunging and the intermittency problem (insofar as it's actually a problem and not a talking point of the fossil crew) is being solved.

There are two ways to solve it: one is connecting more renewables over a wide geographic area, which generally requires more transmission lines and grid upgrade (for intriguing news on that front, see here2); the other is adding energy storage, so solar and wind plants can provide power even when the sun isn't shining and the wind isn't blowing. That's what today's post is about.

I give you the Laurel Mountain wind farm, in West Virginia:

That's 61 1.6-MW wind turbines, for a total of 98 MW. And here is the massive bank of lithium-ion batteries that the wind farm will be connected to:

That's the world's largest lithium-ion battery farm -- 32 MW worth of storage, courtesy of A123 Systems3. The AES power company just announced yesterday that the wind/storage power system is up and running in full commercial operation. All told, it will feed 260,000 MWh a year into the power market along the Eastern seaboard. (For details, check out the full story4 at Forbes.)

It won't be the world's largest for long, though. Some time late next year, Duke Energy will switch on a 36-MW battery storage system, the world's (new) largest, attached to the company's 153-MW Notrees Windpower Project in west Texas. The storage system will use the proprietary dry-cell battery technology of a very cool company called Xtreme Power6. The systems contain both dry-cell batteries and sophisticated power control technology, so they not only store power, they enhance grid reliability. As the CEO explained it to me a few years back, the storage system basically presents itself to the grid like a highly dispatchable power plant.

The energy-storage industry is still in its infancy7. Over 99 percent of the energy storage installed globally is made up of pumped hydro, whereby surplus power is used to pump water uphill and then the water flows down, turning turbines, when spare power is needed. That's a solid, reliable way of doing things, but its efficiency isn't that great and it faces some geographic limitations. Tons of new and alternative technologies are coming online as we speak, though: compressed air, flywheels, molten salt, and several different kinds of batteries, including the distributed batteries in electric vehicles.

Discussions on storage often end with, "for now it's too expensive." In most cases, that's true, but it's misleading to treat the affordability question as though it's a binary switch, as though someday storage will flip from being too expensive to affordable. Right now, some forms of storage are cost-effective in some applications given some markets and regulations and some accounting methods. (See above!)

What will happen is, that small pool of affordable storage applications will grow larger, not only because the technology will advance but because accounting methods will change (full lifecycle cost accounting over extended time periods makes storage look a lot better), regulations will change, markets will change, and the engineering culture inside power utilities will change.

All this will happen, I predict, much faster than even the most optimistic projections now have it. Even as a kind of resigned fatalism-bordering-on-nihilism has gripped the political conversation, out in the world, clever people are doing ambitious, exciting things. Don't let politics fool you: This is an amazing time to be involved in clean energy.

October 28, 2011
Batteries at a Wind Farm Help Control Output

ELKINS, W.Va. — Another wind farm opened on another windy ridge in West Virginia this week, 61 turbines stretched across 12 miles, generating up to 98 megawatts of electricity. But the novel element is a cluster of big steel boxes in the middle, the largest battery installation attached to the power grid in the continental United States.

The purpose of the 1.3 million batteries is to tame the wind, but only slightly, according to the AES Corporation of Arlington, Va., which developed both the wind farm, known as Laurel Mountain, and the battery project.

The installation is far too small to store a night’s wind production and give it back during the day when it is needed, or to supply power when the wind farm is calm for more than a few minutes. Instead, AES says, the battery will be a shock absorber of sorts, making variations in wind energy production a little less jagged and the farm’s output more useful to the grid.

The technology is young, and the finances are challenging. But the task of smoothing output, and the more ambitious one of storing many hours of electricity generated by wind production, seem likely to become ever more important as states require that a rising percentage of their electricity come from renewable sources.

The 13-state regional power grid that includes West Virginia, for example, has a capacity of 4,800 megawatts of electricity from the wind. But that number would grow eightfold if all of the states involved reached their renewable targets.

Power systems have always faced fluctuations in demand. As they incorporate more wind into the mix, they will have to cope with supply fluctuations as well.

Predicting wind output can be a challenge. “If you blow your forecast, you’re in a heap of hurt,” said one storage expert, David L. Hawkins, a senior consultant at KEMA, a consulting firm.

Other power sources, mostly natural gas plants, can be called on as replacements, but such plants take longer to ramp up — or ramp down — than a wind farm or a field of solar panels, a problem that is becoming more widely recognized across the country. This year, two big manufacturers of gas-fired power plants, Siemens and General Electric, promoted new models that could change output faster, but system operators say that even these may not be nimble enough.

“That’s the challenge you have in running the power system,” said Mark T. Osborn, an executive at Portland General Electric in Oregon who is working on a similar installation in the Pacific Northwest. “Storage has been thought about for years, but the costs have always been too high. Now when you’re trying to integrate more renewable resources, storage becomes more necessary.”

Already, in periods of low energy demand on windy nights, wind production is so strong that electricity prices on the grid can decline to zero or even go negative. When they are negative, grid operators bill wind suppliers to put power into the system.

In theory, the assumption would be that the operators of the batteries here would charge them at night and release the energy during peak periods in the daytime.

But the batteries are so small — somewhere between C and D batteries in size — that the wind farm, at full power, would fully charge them in about 15 minutes. Even at a peak demand time, the energy stored would only be worth a few hundred dollars.

The economics can be likened to storing tap water in a solid gold vessel. While AES did not disclose the price of the wind farm or the battery installation, a company executive gave a nod when presented with an industry estimate that the batteries and related electronics cost in the range of $25 million.   The supplier, A123 Systems, of Westborough, Mass., says future installations will use batteries developed for electric cars and will cost less.

Yet the batteries perform two other tasks that the company hopes will turn a profit and pave the way for even bigger projects.

Rather than store power on a daily basis, said John M. Zahurancik, vice president for operations and deployment at AES Energy Storage, the installation will earn its keep by storing energy for minutes at a time, over and over again.

In the space of an hour, the output from the wind farm could go from 98 megawatts to zero. “In any short couple-minute interval, it could vary 20 or 30 or 40 percent,” Mr. Zahurancik said.

The batteries will smooth out the changes so the rest of the grid can catch up, he said, making the electricity sold more valuable.

The battery installation will also assist with a different kind of grid stabilization: trying to keep the alternating current system correctly synchronized. To keep the system as close to 60 cycles as possible, the regional grid operator, the PJM Interconnection, sends a signal every four seconds, asking for power to be added or withdrawn.

Experts foresee other roles as the grid evolves. For example, PJM operates a real-time market in which electricity is priced in five-minute blocks. At a given location, the price from one block to the next can vary significantly.

Mr. Hawkins of Kema said that a big battery array could make money in that market.

“It’s kind of like being a day trader on Wall Street,” he said. “If you see a $30 price spread, you can make some interesting trades doing it over and over in the course of a day.”

Thursday, 27 October 2011

Love It

I just can't think of anything more important than fall cover crops.  It's an expense, getting a "catch" becomes more risky later in the Fall, but the benefits, and what it says about the farmer who does it, are very important.

The grass (rye possibly), and more importantly the roots help to hold the soil in place through the winter and spring run-off when tons of soil can be lost on bare ground.  But the benefits don't end there. The grass  helps soak up excess nitrates from fertilizer used to grow the harvested crop. Nitrates work because they're water soluble and get taken into growing plants. Nitrates are a menace to ground water and waterways because they're water soluble and leach out of the soil if they're not used. Once they're taken up by plants  they become much more stable chemically  and available for next year's crop.

Perfect world: no fall plowing, cover crops on harvested fields. We don't live in a perfect world.

Tuesday, 25 October 2011

Come Together... Right Now

A large crowd listened to a very experienced organic farmer-organic farming campaigner Monday night at the MacPhail Homestead, and Patrick Holden had some interesting things to say.  He presented a clear outline of how conventional/industrial farming had developed since the Second World War, talked about developments on his own dairy farm in Wales that he originally went to as a commune member (he milks Ayrshire cows and makes organic cheese that's sold in high-end stores), and he shared his deep concerns about the future, climate change,  running out of non-renewable inputs, and the health costs associated with eating too much processed food.

He's been the director of the Soil Association in Britain (comparable to the various Certified Organic Producer Co-ops in Canada), but has now created a new organization called the Sustainable Food Trust. He thinks organic farmers have been a little "preachy" and have wrongly demonized conventional farmers.  He's convinced that the issues facing food production are too serious for farmers to remain in silos, that they have to work together.  Bottom line: soil fertility is everything, that means growing grass to preserve and enhance organic matter, that means the necessity of livestock, and that has to be done whether farmers or organic or not. Sustainability is the key for Patrick Holden.

Here's an audio link to about 5 minutes of his speech where he develops these ideas (audio isn't perfect, and there was a videotape made of his presentation and I'll let you know when that's available). And I just have to add that it was great being in the same room as George McRobie. He's part of the "small is beautiful"  sainthood, and has inspired a lot of people like Patrick Holden and others at MacPhails last night.

Monday, 24 October 2011

More Following the Money

A failing business is a risk to not just the business owners, but others as well.  Desperation and fear are not the best motivators for making good decisions. And owners of small family businesses like farms face all the additional pressures of pride and history.  I'm convinced it's one the reasons the strong recommendations from a handful of commissions and public inquires (the latest from Judge Ralph Thompson) to bring in land zoning to protect farmland just gather dust. After a decade of losses farmers want to maintain every opportunity to cash in on development opportunities so they can walk away with something once the debts have been paid. They end up fighting the very thing most know is badly needed.  It certainly skews the discussion over turning food crops into fuel. Farmers have looked greedy and short sighted pushing for ethanol production, but peel away the rhetoric and you find that what farmers really want is a profitable market to sell into, period.

I haven't read as good a discussion of this dilemma than this piece from the weekend about a farmer's decision to allow shale-gas exploration on his farm. Throughout the piece you get the sense that if the dairy and cattle farms were profitable, the farmers would be in a much stronger position to assess the enormous environmental risks from fracking, but, as the saying goes, when you've got nothing, you've got nothing to lose.

October 22, 2011
Drilling Down on the Family Farm

Seamus McGraw is the author of “The End of Country.”

Ellsworth Hill, Pa.

A CLOUD of dust and sand and diesel exhaust, thick as a desert windstorm, snaked up into the sky and blotted out the midsummer Pennsylvania moon. The scene was backlighted by 100 high-powered lights glaring from the top of a 70-foot-tall, hundred-yard-square acropolis of broken stone carved into our hillside.

Standing there, in what used to be my family’s pasture, I was surprised by my own feelings as I watched a small army of workers rev up the machines that would crack open the Marcellus Shale deep below my land, the same rich cache of gas that New York now seems poised to exploit.

I thought I was prepared for it. I had seen this operation before, on other people’s land. I had even been mildly impressed by the military precision of it all, by the way the roughnecks moved wordlessly among the massive water tanks arrayed around a drill pad the size of a high school football stadium, while others monitored the gargantuan pump itself, a 40-foot-long battleship of a machine that would blast a toxic cocktail of water and up to a dozen chemicals a mile and a half deep into the earth at more than 9,400 pounds of pressure per square inch to shatter the rock and release the gas trapped inside it.

But now that it was happening on our 100 acres, I could understand in a much more visceral way why the word to describe this process — fracking — stirs such fear. I could even feel the stirring of that fear myself.

It hadn’t been an easy decision to let the drillers onto our land four years ago. Not for me, not for my family, not for our neighbors, most of them former dairy farmers who had, over the years, been slowly strangled, driven out of business in part by spiraling energy prices. To us, the land was more than a spot on a driller’s map. It was home. The sum of who we are.

My parents bought the place 40 years ago. It started out as a weekend retreat but quickly became an obsession. We’d usually spend three or four nights a week there, trying to indulge my father’s dream of becoming a gentleman farmer and my mother’s dream of becoming a character in one of the frontier romance novels — buckskin bodice rippers, she called them — that she adored. My mother succeeded in achieving her dream. The same could not be said of my father. For a few years, he tried to press me into service in a never very successful attempt to raise beef cattle. We had about 40 head. My heart wasn’t in it.

Ultimately, my father quit trying. When I turned 18, I shook the dust of that place off my boots, headed off to college for a while, failed at that, and then failed at a series of jobs and marriages until I drifted into journalism and never figured out how to drift back out of it. But the place was always with me. It defined me. I went back every chance I got. My sister was married there. So was I, the third time at least. My father died there. I had always imagined it the way I remembered it. But it wasn’t that way anymore.

The working dairy farms that used to surround us had failed, most of them choked to death by a complex system that held the price of milk in check while energy prices, which drove up the cost of everything on those farms, spiraled upward. Those who could leave did, selling off their land, often in small chunks to people from New York or New Jersey who imported with them a fantasy of country living. Little by little, the country I had known, that whole way of life, was vanishing. It was, as one of my neighbors put it, “the end of country.”

And now, the drillers were coming.

The way I saw it then, the way I still see it, is that there was a sense of inevitability to it all. It wasn’t just about the money. Though some of us, like my own family, were offered hundreds of thousands of dollars for our mineral rights, others, like my neighbor across the road, who signed before the full potential of the Marcellus was understood, got a pittance, just enough to pay their property taxes. It was about something more important. The way we saw it, maybe the gas in the Marcellus could buy us one more chance. Sure, it could also very well turn out that those long strands of $10 words in the contracts the companies offered would be a noose, binding us to an industry that would poison the last valuable possession we had. But they could also be a lifeline.

Tapping the more than 400-trillion-cubic-foot reserve of gas in the Marcellus could allow a farmer to keep his land and keep it intact. He might lose a few acres, maybe 5 or 10 if the drillers decided to put a rig on his land to suck out the gas from below his farm and the others they had leased for a mile around. He might lose none, if the drillers decided that all they really needed from him was the gas underground. He could keep farming if wanted to. And if he didn’t, well at least this was a chance to keep one more generation on the land, and in the process buy all of us a little time to figure out how to cut through the ropes that bind our fortunes to the political intrigues of a half-dozen oil-rich countries on the other side of the planet and the speculative games of oil traders in New York.

We were not entirely ignorant of the risks. We understood that what was coming to our little corner of Pennsylvania, and all over the state, was an enormous industrial operation.

It takes as many as 400 truck trips to complete a single well, and that’s not even counting the fuel-guzzling equipment needed to alter the ancient land to carve out the three- to five-acre drill pad itself. Once that’s done, the diesel drill rigs arrive, towering diamond-tipped syringes that work round the clock, often for two weeks at a stretch, to bore down 7,500 feet or so into the Marcellus before making a 90-degree turn to bore another mile and a half laterally. It’s a dirty, noisy, energy-intensive process, and despite the industry’s boast that natural gas burns 30 percent cleaner than oil, in the Marcellus the hunt for it is still fueled almost entirely by diesel.

And that’s not the only resource that’s consumed. It takes millions of gallons of water to break up the shale, and at least 30 percent remains underground forever. The rest of it, along with the slightly radioactive, highly saline and heavy-metal-laden water that has existed alongside the shale for 400 million years, flows up to the surface over the lifetime of the well.

IT’S a perilous process. There is the risk of surface spills — of the fracking fluid or flowback water, or even of diesel, whether held on the site to fuel the process or dumped when a driver fails to navigate the hazards on back roads never meant to handle this kind of traffic. Groundwater has also been fouled by drifting methane that migrated because the drillers, by dint of ignorance or carelessness or just plain bad luck, failed to properly isolate those deposits with cement.

This will never be a perfectly safe operation. No industrial process ever is. There will always be risks of accidents, mechanical failures, human error. That’s every bit as inevitable as the development of the Marcellus itself. There will never be enough regulators to police all the trucks and tanks and rigs that will cover the Marcellus from New York State to the Kentucky state line in the next few decades. In the end, the responsibility for monitoring this, for holding the industry to its promises and responsible for its failures, will fall where it has always fallen — on the shoulders of the people on the ground, the people whose lives will be most directly affected.

Standing there in what used to be our pasture on that light summer night, watching as the machinery of progress blasted the rock a mile beneath my feet, I realized that was what scared me the most. Not that this was inevitable, but that its impact depended so much on me, on whether I had the character to come out from behind the convenient shield of “are you for it or against it” ideology and find the strength, the will and the means to do what I can to make sure this is done in the best way possible.

I still don’t really know the answer.

Thursday, 20 October 2011

Follow the Money

I've written a fair amount on the impact of large farm subsidy programs in the U.S. and Europe on Canadian farmers. ( )We tend to be the boy scout of trading countries, generally because Canada didn't have as large a government treasury to draw on, although that's clearly changing since the 2008 financial/banking crisis, and the impact that's had on American and European sovereign debt.  The bottom line is that Canadian farmers compete in international markets, and for space in Canadian supermarkets, and are at a disadvantage if competitors get additional support from government cheques in the mailbox.

As the U.S. and Europe try to wrestle with huge deficits, expensive agriculture policies are under the microscope. U.S. programs have traditionally been geared towards increasing production of a handful of commodities (corn, soybean, rice, feed grains, sugar, etc... grow these crops and a farmer gets a cheque in the mail, even if these crops are highly profitable in the marketplace). European policies  lean towards subsidizing the export of commodities (which really hurts farmers in developing countries) and some strong measures to protect the environment. (see  for more on this).

Reports this week that, not surprisingly,  agricultural interests in the U.S. and Europe are working hard to hold onto what they have. If there could be real reform it would benefit Canadian farmers. Food prices would have to better reflect the cost of production, not the level of government support. This could lead to somewhat higher food prices.

October 17, 2011
Farmers Facing Loss of Subsidy May Get New One

It seems a rare act of civic sacrifice: in the name of deficit reduction, lawmakers from both parties are calling for the end of a longstanding agricultural subsidy that puts about $5 billion a year in the pockets of their farmer constituents. Even major farm groups are accepting the move, saying that with farmers poised to reap bumper profits, they must do their part.

But in the same breath, the lawmakers and their farm lobby allies are seeking to send most of that money — under a new name — straight back to the same farmers, with most of the benefits going to large farms that grow commodity crops like corn, soybeans, wheat and cotton. In essence, lawmakers would replace one subsidy with a new one.

“We are very much aware of the budgetary constraints of the federal government,” said Garry Niemeyer, an Illinois farmer who is president of the National Corn Growers Association. “We want to do our part as corn growers to help resolve those issues, but we only want to do our proportional part. We don’t want to have everything taken out on us.”

But Vincent H. Smith, a professor of farm economics at Montana State University, called the maneuver a bait and switch.

“There’s a persistent story that farming is on the edge of catastrophe in America and that’s why they need safety nets that other people don’t get,” he said. “And the reality is that it’s really a very healthy industry.”

The subsidy swap is gaining momentum as lawmakers seek to influence the cuts in farm programs that are expected to be made by a special Congressional panel charged with slashing $1.2 trillion from future budgets.

On Monday, leaders of the House and Senate agriculture committees said they were preparing recommendations for $23 billion in unspecified cuts over 10 years, far less than some other proposals.

Lawmakers’ reluctance to simply eliminate a subsidy without adding another in its place demonstrates how difficult it is for Washington to trim the federal largess that flows to any powerful interest group. Indeed, the $5 billion program that lawmakers are willing to throw under the tractor, known as the direct payment program, was created in 1996 as a way to wean farmers off all such supports — and instead was made permanent a few years later.

The new subsidy is being championed by Senator Sherrod Brown, Democrat of Ohio, and Senator John Thune, Republican of South Dakota.

Mr. Thune, a leading voice in favor of deficit reduction, received at least $80,000 in campaign contributions since 2007 from political action committees associated with commodity agriculture, according to data compiled by the nonpartisan Center for Responsive Politics, which tracks campaign spending. Mr. Brown has received $5,500 in PAC contributions from such groups in that period.

It is unclear how much support a new subsidy would garner, since many lawmakers view farm programs as a likely source of budget savings.

Critics say that farm subsidies today have little to do with helping struggling family farmers. Instead, they go predominantly to well-financed operations with large landholdings. All told, the subsidies amount to about $18 billion a year — about half of 1 percent of the federal budget.

An analysis of federal data by the Environmental Working Group, an advocacy group that tracks farm subsidies, showed that the top 10 percent of direct-payment recipients in 2010 received 59 percent of the money under the program. Those 88,000 people, including farmers, their spouses and absentee landowners, got an average of $29,598.

In lean times, such support might seem vital, but in recent years commodity farmers have done well.

The Agriculture Department forecasts that farm profits this year, measured on a cash basis, will total $115 billion, 24 percent higher than last year, thanks to soaring crop prices. Adjusted for inflation, profits are expected to be at their highest level since 1974.

The average income for farm households has been higher than general household incomes every year since 1996. The average household income was $87,780 for all farms in 2010, and $201,465 for families living on large farms.

“How do you justify this kind of money going to a sector of the economy that’s booming while other folks in the country are suffering?” Craig Cox, a senior vice president of the Environmental Working Group, said of the subsidies.

Lobbyists and farm-state lawmakers have long argued that farmers face risks, like bad weather, pests and volatile markets, that merit special treatment.

Direct payments have come under fire, however, because farmers get them whether markets are high or low. The new subsidy, called shallow-loss protection, would act as a free insurance policy to cover commodity farmers against small drops in revenue.

Most commodity farmers already buy crop insurance to protect themselves against major losses caused by large drops in prices or damage to crops. Those policies typically guarantee 75 to 85 percent of a farmer’s revenue, with the federal government spending $6 billion a year to pay more than half the cost of farmers’ premiums.

The proposed new subsidy would add another layer of protection to guarantee 10 to 15 percent of a farmer’s revenue, paying out not only in years of heavy losses, but also when revenue dipped less severely.

The shallow-loss plan getting the most attention is in a bill introduced last month by Senators Brown and Thune that would simplify and expand an existing program.

Gary D. Schnitkey, a professor of farm management at the University of Illinois, said the Brown-Thune plan would help protect farmers during longer periods of depressed prices. Without such a program, he said, “we would see financial stress and we would see farmers go out of business.”

It is unclear how much the proposal would cost taxpayers. Dr. Schnitkey said the plan could pay farmers $40 billion over 10 years. That would be $20 billion less than the programs it replaced, including direct payments and some smaller subsidies.

But Dr. Smith, the Montana State economist, said the cost could be much greater because the plan used recent high crop prices as its benchmark.

“If farm prices move back towards what are widely viewed as more normal levels than their current levels, farmers will be compensated for going back to business as usual,” he said.

In a statement Senator Thune said the proposal in the bill “corrects inefficiencies in several farm programs with a streamlined and cheaper approach.”

Representative Marlin A. Stutzman, an Indiana Republican, said that a shallow-loss plan would give farmers more flexibility in managing risk. “Farmers shouldn’t have to pay the brunt of the deficit problem,” he said.

Mr. Stutzman and Senator Richard Lugar, also an Indiana Republican, included the Brown-Thune plan in matching farm bills they introduced this month.

Congress is due to write a new five-year farm bill next year, but some lawmakers want to use the deficit-cutting process to revamp farm spending. President Obama has proposed cutting $33 billion from farm programs over 10 years, including ending direct payments without adding a shallow-loss program. Mr. Stutzman’s bill would slice $40 billion, with more than half coming from programs like food stamps and soil and water conservation.

Europe has blown its chance to reform the common agricultural policy

The consensus is that once-in-a-generation chance to overhaul an unjust and ecologically illiterate scheme will be squandered

 So what do we like about the European commission's proposals for the reform of the common agricultural policy (CAP), published on Wednesday?

The move away from historical payments to a flat-rate payment scheme is welcome; capping payments to the biggest farmers is only fair; more help to young farmers would refresh an industry; help for organic farmers is long overdue, and a basic requirement to put a proportion of farmland into environmental management is admirable.

But what don't we like? Handing out €435bn of taxpayers' money over the next 10 years to some of the most destructive corporations and richest individuals in Europe – as millions of people across the continent lose their jobs – is crass. There is to be no rethink of the export subsidy system which is unfair to developing countries, and no new obligation on farmers to protect rivers or biodiversity. The overall cut in funding for agri-environment schemes spells disaster.

Last week we saw some leaks of the proposals, but on Wednesday we received some considered responses from farmers, businesses, unions and environment groups. The consensus is that Europe had a once-in-a-generation chance to reform an unjust and ecologically illiterate scheme, but blew it.

The RSPB, which is one of the biggest recipients in Britain of farm subsidies, fears that conservation will go backwards. Here is Gareth Morgan, head of countryside conservation:

    "This a big let down for wildlife-friendly farmers. There will be an overall cut in funding for agri-environment schemes and on top of that countries could be free to re-allocate already overstretched rural development funding away from these schemes. There is also no targeted support proposed for high nature value farmers and crofters in areas such as the Scottish Highlands and islands which provide vital habitats for wildlife."

Greenpeace is furious:

    "If these proposals are left unchanged, the plan will allow the agri-chemical business to keep a firm lock on the food chain. Unless the European parliament and governments strengthen this proposal, the EU will spend €435bn of taxpayers' money to continue polluting nature and pumping our food full of chemicals. This is quite simply unjustifiable."

And the Friends of the Earth and WWF says the "greening" measures do not go far enough.

    "Agriculture is the biggest driver of biodiversity loss and water pollution in Europe. The current proposal should link not just 30% but a total 100% of direct payments to greening measures to decrease the pressure of agriculture on the environment. We need to make sure that each European farmer implements a meaningful crop rotation, devotes at least 10% of their land to biodiversity, and stops converting pastures into arable land that destroys our landscapes and increases carbon emissions. Today's proposal is far from achieving these changes."

But to my mind, the most telling response to the proposals comes from the National Farmers' Union (NFU), which represents most of Britain's 80,000 farmers, and the County Land and Business Association (CLA), effectively the union of hereditary and big landowners, who today issued a joint statement:

    "In terms of equity, we want to ensure that we have equivalent greening measures throughout the European Union. The purpose of this reform must be to bring the whole of Europe up to the standard of the better-performing countries. We want to see a fair allocation of the budget to the UK, in both pillars, so that there is no necessity subsequently to move money between the two pillars - in either direction. Specifically, we don't support the attempt to allow up to 10% modulation. We also need to see the capping proposals that would discriminate against the UK rejected. In terms of reducing complexity, we want to see greening measures which can be easily administered and monitored.

    What we don't want to see are definitions of active farmers that would be a nightmare to enforce. The restrictive definition of an active farmer, and the proposed payment reduction and capping, are highly discriminatory - hitting farms of equal size and payment to a sharply different extent. They will also hinder structural changes that may be needed to improve efficiency. And in terms of competitiveness we would want the obligation to take up to seven per cent of a farm's area out of production significantly reduced. We will also insist that any greening measures do not have perverse consequences from a market or agronomic point of view."

Translated , this means that the two groups, who between them own most of the land in England, are acting like selfish, spoilt bullies. They do not want to see the subsidies of big farmers capped, nor they do not want more money to be given to the environment rather than single farm payments.

Moreover, they object to the EC trying not to pay people who do not actually farm, and they don't like the proposal to take up to 7% of a farm's area out of production. They make no mention of trying to help the small or the vulnerable hill farmers, and when they talk of equity they mean they want as much money as some of the biggest European agribuinesses get. In other words, "sod the environment, we want more".

Ten years ago, after a series of food scares, diseases and scandals, British farmers and landowners were widely pilloried for being socially out of touch with the public, grasping and irresponsible. They have only recently won back some of the trust and admiration but if the NFU/CLA continued to ignore the wider economic situation and try to take their welfare is more important than anything else, they will lose all the goodwill they gained.

Monday, 17 October 2011

Asking the Right Questions

It must be the size, maybe the perceived remoteness, of PEI that attracts controversial economic projects. Remember the Earth Future Lottery.  PEI would be home to a world-wide lottery, 5% of the gross revenue (tens of millions of dollars, looked like a lot for PEI, given that the jurisdiction that would approve this would be seen as a pariah)  would be split with environment groups, medciens sans frontiers, and other worthwhile organizations. The courts put an end to the project.  Then there was the Sprung Greenhouse which would have been built in Western PEI where jobs were badly needed.  I had the opportunity to produce a documentary pointing out the financial and environmental/biological problems with the project (kept it from being built on PEI), and it ended up in Newfoundland where it failed (this was back when the CBC had time and money to take on bigger projects).  Now there's Aquabounty Technologies, an American company that has a "research" facility in Fortune PEI.

I did several stories on Aquabounty, from interviews with company representatives pushing the positives of what it was trying to do, to Greenpeace, and local actions condemning the project.  Aquabounty used  bio-engineering to splice specific genes (from an Ocean Pout, and a Chinook Salmon) into conventionally farm-raised salmon. The genetically altered fish continues to feed year around (when it's natural counterpart stops feeding and gaining weight for months at a time) so the GMO fish reaches market weight in half the normal time.   The company says there are two big advantages: an important protein source becomes more cost effective, and the fish will be raised in indoor tanks, well away from wild stocks so there's no danger of  escape and genetic contamination. 

This is the first genetically modified animal to get close to being on supermarket shelves (there's more on the approval process later on), so GMO supporters and opponents are pulling out all the stops.  I know many have decided this is "frankenfish" and should have been stopped years ago. I'm tempted to think that too, but still have nagging questions.

There needs to be serious actions taken to protect ocean eco-systems (from acidity from climate change,  pollution, overfishing, etc) and there seems little doubt  that conventional outdoor  fish farming  in bays and estuaries is adding to the problems with concentrated fish waste, antibiotic leaching, and escaped fish.  If we need the protein and if there is to be fish farming, I think it does make sense to raise them in land-based indoor tanks, but the economics don't work, and that's the small upside with Aquabounty salmon.

I fully agree that not enough is known about many, many GMO products (including this fish) that get a health pass by being labelled as "substantially the same" as it's natural counterparts. It's one of the biggest failures of our whiz-bang technology/science bunch that there's no definitive answer to this. Does the fact this is fish gene to fish genome make it any safer? I don't know.  Does raising fish indoors where waste can be treated, and fish contained make this better than outdoor fish farming?   I think so. Does that mean Aquabounty  should be allowed to proceed? I don't know.

It turns out that Environment Canada is going to have a big say in whether this project proceeds. An important and interesting story from the weekend.

Safety of wild fish stocks questioned if GE salmon eggs hatchery gets OK
by Sarah Schmidt, Postmedia News October 16, 2011

OTTAWA — Environment Canada isn’t sure it can fully protect wild fish stocks if it approves the commercialization of a hatchery of genetically engineered salmon eggs.

The admission, outlined in internal records obtained by Postmedia News, could stymie efforts by American company AquaBounty Technologies to sell the first genetically engineered animal that people can eat.

The company’s plan is to transform its research facility in Prince Edward Island into a commercial hatchery to produce GM salmon eggs. The eggs would then be sent to an inland fish farm in Panama, where the GE Atlantic salmon, called AquAdvantage, would be raised and processed before being shipped as table-ready fish to the U.S.

Last year, a preliminary analysis by the U.S. Food and Drug Administration concluded that the salmon — engineered to grow twice as fast as normal fish thanks to a growth hormone gene from the Chinook salmon and a genetic on-switch from the ocean pout — are safe to eat. The FDA also said in its preliminary analysis that the GE salmon were not expected to have a significant impact on the environment.

The FDA’s environmental impact report is now being reviewed by the White House, even as opponents continue to raise concerns about possible escapes and the threat to wild fish stocks.

Even if the U.S. approves AquaBounty’s application to sell GE salmon there, the company will still need approval from Environment Canada to manufacture the GE fish eggs in Prince Edward Island. Approval falls under the Canadian Environmental Protection Act (CEPA).

It poses a dilemma for Environment Canada, which has to determine whether to concern itself only with the production and transportation of GE fish eggs from P.E.I. to Panama when considering AquaBounty’s hatchery application, or whether the federal government also has a duty to consider wider potential effects GE fish could have on this country or the global environment if the fish ever escaped the Panamanian facilities and migrated into Canadian or international waters.

According to the internal records released under access to information law, prepared last year in anticipation of a formal application from AquaBounty to operate its hatchery, Environment Canada concluded that the narrower oversight option — while “easily enforceable by inspecting shipments at the port of export” in Canada — “falls short” of meeting Canada’s legal obligations under CEPA “because it does not fully consider potential effects within Canada.”

Noting there’s also a “broad legislative requirement under CEPA to assess potential risks to the global environment,” Environment Canada recommended that the scope of the environmental risk assessment to take a “fulsome approach.” At a minimum, any risk assessment should provide “for the full protection of the Canadian environment, in particular Canadian fish stocks,” the document states.

But this would raise problems because wider oversight of the process — to include keeping an eye on the Panamanian fish farming operation — could well be beyond the capability of Canadian authorities.

“If approval were contingent upon continued adherence to adequate physical containment at Panamanian grow-out facilities, Environment Canada enforcement officials may face challenges in monitoring and enforcing continued adherence to these physical containment measures in Panama,” the document says.

“Without presupposing the outcome of the risk assessment, but recognizing that approval may be contingent upon continued adherence to physical containment measure in Panama, there may be some challenges for Environment Canada to enforce the regulations,” it concludes.

Lucy Sharratt, co-ordinator of the Canadian Biotechnology Action Network and a critic of AquaBounty’s GE fish, said it looks like the federal government is boxed in.

“If they do find that there’s a risk from grow-out in Panama, then they actually have to deal with that risk and this is the question: if Environment Canada cannot monitor and enforce safety in Panama, then we cannot approve the GE fish egg production here. The document seems to recognize that Environment Canada knows that they cannot monitor and enforce safety in Panama, not adequately.”

She added: “If Environment Canada feels that it’s too complex to monitor safety in Panama, will they just exclude that consideration because it’s not enforceable or will they recognize that there’s a global risk and therefore Canada needs to take responsibility for the GE salmon eggs that we could approve?

“We don’t want to be the source of global risk to wild salmon stocks.”

Internal records from the Department of Fisheries and Oceans, released previously to Postmedia News under access to information laws, have included departmental scientists saying: “There is a potential risk of fish migrating back to affect Canadian fish stocks.”

Both AquaBounty and Environment Canada declined to say whether the company has filed a formal application to manufacture GE fish eggs for commercial purposes at the company’s facility in P.E.I.

Health Canada also said the department does not disclose whether it has received an application to approve the AquAdvantage salmon for human consumption in Canada.

Friday, 14 October 2011

Polling, Voting and Democracy

There's a lot of head scratching going on about declining voter turnout in recent elections throughout Canada. One thing the media seems to avoid discussing is  the corrosive role that polling has on elections.

Polls are lifeblood for the media during election campaigns, the source of endless stories and columns. I understand the justification for doing them and publishing the results: political parties use polling to shape their policies and promises, the media wants to be as informed as the parties are about what people are thinking, and having gathered the information why would the media play gatekeeper and not share the results with the public. I get all of that, I'm just not convinced that the rush to declare a "winner" days and weeks before the actual vote is healthy in a democracy ( pollsters do use very powerful statistical models to make these predictions, although relying on the phone book to generate genuine polling samples is an increasing problem because so many have given up a home phone for a cell phone, and you can't get a cellphone number published in the phone book).

It's one thing to try to predict who's going to win the big game, or a horse race, but keeping people engaged in an election campaign, and engaged enough to go out an vote is far more important. Two things at least result from the avalanche of polls leading up to a vote: some will think the result is a forgone conclusion so what's the use in voting on election day, and even more insidious is the notion that the polls say a party is going to win, and I want a government member from my district, so no matter what I think of this party's leader or policies, I'm better off going with a winner. Neither of these is good for democracy.

I realize a lot of this sounds naive and simplistic, and, with the interweb, any inkling of banning or controlling polls is farcical, and I do support polling on what people think about important issues, that's the kind of information political parties use to develop policies, and it should help the media plan how it covers things. I'd like to see both the media and the public ignore the "who's going to win" dance, and both work a little harder at explaining and understanding the important issues of the day.  What are we doing when Kim Campbell says an election campaign is no place for a serious discussion of complex issues? Stephane Dion may not have been the inspiring politician many were hoping for, but to lose even the the ability to discuss the important policy proposals in the "Green Shift" (carbon tax, shift in tax policy to help families cope, something like what Australia is doing now) as well because he was defeated,  is very discouraging.  No political party will attempt to propose anything that can't be captured in a 30 second sound bite, and given the many challenges we face,  that's idiotic.

For what it's worth a bit more on Australia's move to a carbon tax:

Carbon tax bill is good news for Australia

Once the dust settles, the majority in Australia are likely to find that the bill will benefit them

          o Bryony Worthington
          o, Wednesday 12 October 2011 23.23 BST
Thanks to a narrow victory for the government, Australia now looks likely to join the EU and New Zealand in introducing a comprehensive policy to make carbon polluters pay for the damage they cause. This is very good news. It has been an uphill battle, with the opposition and business lobby all but claiming that the sky would fall in should the bill be passed.

But once the dust settles and the lamenting subsides, the majority of people of Australia are likely to find that the bill passed on Wednesday benefits them. Much of the money raised from the carbon price of £15 per tonne of emissions will be recycled in the form of tax breaks and compensatory payments.

It will also be used to stimulate investment in new clean energy technologies leading to new jobs and increased inward investment. Hopefully over time this will boost Labour and the Greens' popularity, so ensuring that the policy is protected – despite opposition leader Tony Abbott's "blood promise" to repeal the legislation.

Australia's energy system is among the most polluting in the world thanks to its heavy reliance on coal, but Australia's climate is vulnerable to the impact that climate change brings. Acting to reduce emissions is in the country's self-interest in the longer term, especially if it can act as an inspiration for other countries to follow.

South Korea and China are looking to introduce emissions-trading schemes and all eyes in the global carbon market are now firmly looking eastwards. There could be significant advantages for Australia's financial institutions in being amongst the first to participate in this market, just as London has benefited from being the hub of the European carbon market.

The carbon price is fixed for three years, unlike in the European system where prices have reached rock bottom thanks to an oversupply of pollution permits. This has interesting implications for the EU, which has long basked in the glory of being able to claim that it is leading the world on climate change. If the bill passes into law, Australia will be able to fairly claim that it has now taken the lead.

Being out in front has its advantages and confers a moral superiority but there will always be forces of conservatism who will be made to feel uncomfortable. It is therefore more important than ever that countries in the early adopters group work together to defend their actions and encourage more into the fold.

No one, in Europe or Australia, can now claim to be going it alone, and with luck soon many more will step up and join the race to the top. As Australia has shown this will not be easy, but we must defy those who would rather participate in a race to the bottom where ultimately everyone is a loser.

Wednesday, 12 October 2011

Two Bits of Good News

People with the most money don't always win, and that's a good thing. The nine baseball teams with the biggest payrolls (New York teams, Boston, Philadelphia, the Chicago teams, Los Angeles, etc.)  have all been eliminated, either failing to make the playoffs, or losing in the first round. As a long-suffering Montreal Expos fan, and admirer of Moneyball-like managing of small market teams, it's a pleasure to see smaller payroll but well managed clubs still playing.

On a more serious note (for some) are the Wall Street demonstrations popping up around the world now (London next??). It's been almost organic, watching how the media first tried to ignore, then trivialize, now cautiously lionize the anti-Wallstreet efforts. (the next phase will be to tear down what it's built up).  I don't deny the central role that "capital markets" play in capitalism, but we've been witness to something very different from the "efficient use of money". Perhaps Matt Taibbi's now famous, and certainly chilling description, captured it best:

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates."

A couple of pieces on the on-going demonstrations, and Taibbi's full Rolling Stone article at the end.

Finally Making Sense on Wall Street

Countercultures and alternative systems can be nurturing, educational, illuminating, inspiring — and these are not small things — but they do not bring about fundamental change. Food co-ops, for example, make a difference, but they won’t much alter the way Big Food operates. Historically, the route to fixing broken systems goes through struggle, confrontation and even revolution.

Those scenarios are spreading because, as Naomi Klein wrote in The Guardian last week, “[E]veryone can see that the system is deeply unjust and careening out of control.” The struggle for positive change is being defined by groups as diverse as the revolutionaries in Tunisia and Egypt, the strikers in Greece (“Erase the debt and let the rich pay”), the indignados in Spain, the misled but occasionally well-intentioned members of the Tea Party, and certainly those occupying Wall Street (and, in case you missed it, some 1,500 other places, and growing, as of this writing). Now it’s even being embraced by the Democratic leadership.

What we need are more activists who are interested in food than “food activists.” Whether we’re talking about food, politics, healthcare, housing, the environment, or banking, the big question remains the same: How do we bring about fundamental change?

Some criticized the Wall Street occupiers for having no demands (“Anyway … it’s not the Brookings Institution,” quips The New Yorker’s Hendrik Hertzberg), but their position is clear: the Obama administration bailed out Wall Street without reforming it, allowing it to thrive while median income falls. (Europe is following suit: investors will make a killing on Greece and the other “Club Med” countries, at the expense of the social welfare of the continent’s non-rich.)

Indeed, at first the occupiers appeared to be building a counterculture. But on Sept. 29 they accused Wall Street of supporting foreclosures, encouraging inequality, undermining the agricultural system and poisoning the food supply, stripping employees of healthcare, pay and negotiating rights, determining “catastrophic” economic policy, blocking alternate energy sources, and more. (I didn’t see “sabotaging efforts to deal with climate change” in their declaration, but it noted — not without humor — that “these grievances are not all-inclusive.”) Who among us, except those who benefit from these practices, is not in agreement with at least some of this?

“We Are the 99 Percent” encourages us to demand of those in power, “Are you with the 99 percent or not? And what are you doing about it?” And the “99 percent” slogan is not only all-embracing but nearly correct: the system is working for far more than one percent of us, of course, but how much more? We are the most class-divided of all the world’s “developed” nations, though in my current travels through five European countries I’ve seen and heard about life-altering cuts everywhere.

Protest is such a no-brainer that support for the occupiers now comes even from labor union leadership, along with every progressive in the country. Happily, the right is unhappy. Herman “Get a Job” Cain calls Occupy Wall Street “un-American,” which is just stupid. Mitt “Put the Dog on the Roof” Romney calls it “class warfare,” but that’s as American as the struggle for justice; it’s just that the wrong class is winning. In fact there’s no more American action than this one; its roots are in the populist, suffragist, labor, civil rights, women’s, anti-war, environmental and even food movements. Unlike the Tea Party, funded as it is by wealthy reactionaries like the Koch brothers, “Occupy” is sustained by energy, frustration, anger, perception, pizza and apples paid for by supporters or donated by farmers and, ultimately, by its daily growth.

Like my colleague Gail Collins, I was part of a like-minded movement that peaked more than 40 years ago. I had really long hair; I went to a lot of meetings; I ran a tiny newspaper. After I had children, developed a career and gained the trappings of a successful American life, things seemed less black and white. Probably they are.

But if ever there were a time for outrage, this is it. And in stark contrast to those of us who came of age in the ‘60s and ‘70s — before the decline of American economic hegemony — today’s youth have a frighteningly more difficult future. But it’s not just young people, as the We Are the 99 Percent tumblr reveals. These are the stories, writes Washington Post columnist Ezra Klein, of “people who played by the rules, did what they were told, and now have nothing to show for it.” How many Americans fall into that category, and how many more are on the precipice?

The occupation of Wall Street may end with the first extended cold rain. But the renewed understanding that collective struggle is a key component in meaningful change — inspired by things as diverse as the Tea Party and a Tunisian fruit vendor — could not be more important. A movement that questions everything — from food justice to economic justice — is a fine start, and if Occupy Wall Street can push the Democrats as the Tea Party has pushed the Republicans … well, hooray.

October 11, 2011
Something’s Happening Here

When you see spontaneous social protests erupting from Tunisia to Tel Aviv to Wall Street, it’s clear that something is happening globally that needs defining. There are two unified theories out there that intrigue me. One says this is the start of “The Great Disruption.” The other says that this is all part of “The Big Shift.” You decide.

Paul Gilding, the Australian environmentalist and author of the book “The Great Disruption,” argues that these demonstrations are a sign that the current growth-obsessed capitalist system is reaching its financial and ecological limits. “I look at the world as an integrated system, so I don’t see these protests, or the debt crisis, or inequality, or the economy, or the climate going weird, in isolation — I see our system in the painful process of breaking down,” which is what he means by the Great Disruption, said Gilding. “Our system of economic growth, of ineffective democracy, of overloading planet earth — our system — is eating itself alive. Occupy Wall Street is like the kid in the fairy story saying what everyone knows but is afraid to say: the emperor has no clothes. The system is broken. Think about the promise of global market capitalism. If we let the system work, if we let the rich get richer, if we let corporations focus on profit, if we let pollution go unpriced and unchecked, then we will all be better off. It may not be equally distributed, but the poor will get less poor, those who work hard will get jobs, those who study hard will get better jobs and we’ll have enough wealth to fix the environment.

“What we now have — most extremely in the U.S. but pretty much everywhere — is the mother of all broken promises,” Gilding adds. “Yes, the rich are getting richer and the corporations are making profits — with their executives richly rewarded. But, meanwhile, the people are getting worse off — drowning in housing debt and/or tuition debt — many who worked hard are unemployed; many who studied hard are unable to get good work; the environment is getting more and more damaged; and people are realizing their kids will be even worse off than they are. This particular round of protests may build or may not, but what will not go away is the broad coalition of those to whom the system lied and who have now woken up. It’s not just the environmentalists, or the poor, or the unemployed. It’s most people, including the highly educated middle class, who are feeling the results of a system that saw all the growth of the last three decades go to the top 1 percent.”

Not so fast, says John Hagel III, who is the co-chairman of the Center for the Edge at Deloitte, along with John Seely Brown. In their recent book, “The Power of Pull,” they suggest that we’re in the early stages of a “Big Shift,” precipitated by the merging of globalization and the Information Technology Revolution. In the early stages, we experience this Big Shift as mounting pressure, deteriorating performance and growing stress because we continue to operate with institutions and practices that are increasingly dysfunctional — so the eruption of protest movements is no surprise.

Yet, the Big Shift also unleashes a huge global flow of ideas, innovations, new collaborative possibilities and new market opportunities. This flow is constantly getting richer and faster. Today, they argue, tapping the global flow becomes the key to productivity, growth and prosperity. But to tap this flow effectively, every country, company and individual needs to be constantly growing their talents.

“We are living in a world where flow will prevail and topple any obstacles in its way,” says Hagel. “As flow gains momentum, it undermines the precious knowledge stocks that in the past gave us security and wealth. It calls on us to learn faster by working together and to pull out of ourselves more of our true potential, both individually and collectively. It excites us with the possibilities that can only be realized by participating in a broader range of flows. That is the essence of the Big Shift.”

Yes, corporations now have access to more cheap software, robots, automation, labor and genius than ever. So holding a job takes more talent. But the flip side is that individuals — individuals — anywhere can now access the flow to take online courses at Stanford from a village in Africa, to start a new company with customers everywhere or to collaborate with people anywhere. We have more big problems than ever and more problem-solvers than ever.

So there you have it: Two master narratives — one threat-based, one opportunity-based, but both involving seismic changes. Gilding is actually an optimist at heart. He believes that while the Great Disruption is inevitable, humanity is best in a crisis, and, once it all hits, we will rise to the occasion and produce transformational economic and social change (using tools of the Big Shift). Hagel is also an optimist. He knows the Great Disruption may be barreling down on us, but he believes that the Big Shift has also created a world where more people than ever have the tools, talents and potential to head it off. My heart is with Hagel, but my head says that you ignore Gilding at your peril.

You decide.

The Great American Bubble Machine
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again
by: Matt Taibbi

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.

Invasion of the Home Snatchers

By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multi-billion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …

But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank's unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.

The Feds vs. Goldman

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year's strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn't one of them.

BUBBLE #1 The Great Depression

Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids —just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his son-in-law Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out short-term IOUs to smalltime vendors in downtown Manhattan.

You can probably guess the basic plotline of Goldman's first 100 years in business: plucky, immigrant-led investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there's really only one episode that bears scrutiny now, in light of more recent events: Goldman’s disastrous foray into the speculative mania of pre-crash Wall Street in the late 1920s.

Wall Street's Big Win

This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an "investment trust." Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and e-trading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regular-guy investors into the speculation game.

Beginning a pattern that would repeat itself over and over again, Goldman got into the investmenttrust game late, then jumped in with both feet and went hogwild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund — which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah — which, of course, was in large part owned by Goldman Trading.

The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn't hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.

In a chapter from The Great Crash, 1929 titled "In Goldman Sachs We Trust," the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leveragebased investment. The trusts, he wrote, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. "It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity," Galbraith observed, sounding like Keith Olbermann in an ascot. "If there must be madness, something may be said for having it on a heroic scale."

BUBBLE #2 Tech Stocks

Fast-forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country's wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor's assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a top-drawer firm that had a reputation for attracting the very smartest talent on the Street.

It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm's mantra, "long-term greedy." One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a long-term loser. "We gave back money to 'grownup' corporate clients who had made bad deals with us," he says. "Everything we did was legal and fair — but 'long-term greedy' said we didn't want to make such a profit at the clients' collective expense that we spoiled the marketplace."

But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin's complete and total failure to regulate his
old firm during its first mad dash for obscene short-term profits.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers were taken public via IPOs, hyped in the media and sold to the public for mega-millions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.

"Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public," says one prominent hedge-fund manager. "The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash." Goldman completed the snow job by pumping up the sham stocks: "Their analysts were out there saying is worth $100 a share."

The problem was, nobody told investors that the rules had changed. "Everyone on the inside knew," the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They'd been intact since the 1930s."

Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. "In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future."

Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a little-known company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.

How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let's say's starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the day trader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit — a six percent fee of a $500 million IPO is serious money.

Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.

"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)

Another practice Goldman engaged in during the Internet boom was "spinning," better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those "hot" opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger first-day rewards for the chosen few. So instead of opening at $20, the bank would approach the CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit's new shareholders by diverting cash that should have gone to the company's bottom line into the private bank account of the company's CEO.

In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman's board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! cofounder Jerry Yang and two of the great slithering villains of the financial-scandal age — Tyco's Dennis Kozlowski and Enron's Ken Lay. Goldman angrily denounced the report as "an egregious distortion of the facts" — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. "The spinning of hot IPO shares was not a harmless corporate perk," then-attorney general Eliot Spitzer said at the time. "Instead, it was an integral part of a fraudulent scheme to win new investment-banking business."

Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn't the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.

Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman's mantra of "long-term greedy" vanished into thin air as the game became about getting your check before the melon hit the pavement.

The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America's recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that "I've never even heard the term 'laddering' before.")

For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent —they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.

BUBBLE #3 The Housing Craze

Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con's mortgage on its books, knowing how likely it was to fail. You can't write these mortgages, in other words, unless you can sell them to someone who doesn't know what they are.

Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Thus, junk-rated mortgages were turned into AAA-rated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance — known as credit default swaps — on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the ex-cons will default, AIG is betting they won't.

There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated — and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.

More regulation wasn’t exactly what Goldman had in mind. “The banks go crazy — they want it stopped,” says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. “Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped.”

Clinton's reigning economic foursome — “especially Rubin,” according to Greenberger — called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.

But the story didn't end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housing-based securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities — a third of which were sub-prime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.

Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to second-mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.

Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners — old people, for God's sake — pretending the whole time that it wasn't grade D horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. "The mortgage sector continues to be challenged," David Viniar, the bank's chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable." In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.

"That's how audacious these assholes are," says one hedge fund manager. "At least with other banks, you could say that they were just dumb — they believed what they were selling, and it blew them up. Goldman knew what it was doing."

I ask the manager how it could be that selling something to customers that you're actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn't amount to securities fraud.

"It's exactly securities fraud," he says. "It's the heart of securities fraud."

Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck holding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank's CDO division made in a day and a half during the real estate boom.

The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets.

And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm's payroll jumped to $16.5 billion — an average of $622,000 per employee. As a Goldman spokesman explained, "We work very hard here."

But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.

BUBBLE #4 $4 a Gallon

By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn't leave much to sell that wasn't tainted. The terms junk bond, IPO, sub-prime mortgage and other once-hot financial fare were now firmly associated in the public's mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years — the notion that housing prices never go down — was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.

Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a "flight to commodities." Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.

That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be "very helpful in the short term," while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.

But it was all a lie. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the short-term supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.

So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

"I had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you have to clear it with Goldman Sachs?'"

The CFTC cited a rule that prohibited it from releasing any information about a company's current position in the market. But the staffer's request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman's current position. What's more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman's capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.

Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions — meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedge fund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."

Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commodities trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn't know when oil prices would fall until we knew "when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives."

But it wasn't the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.

Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. "The highest supply of oil in the last 20 years is now," says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. "Demand is at a 10-year low. And yet prices are up."

Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. "I think they just don't understand the problem very well," he says. "You can't explain it in 30 seconds, so politicians ignore it."

BUBBLE #5 Rigging the Bailout

After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment banking competitor, Lehman, goes away.") The very next day, Paulson green-lighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bank holding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict of interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

The collective message of all this — the AIG bailout, the swift approval for its bank holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."

Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the post-bailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 — with its $1.3 billion in pretax losses — off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 — which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. "They cooked those first quarter results six ways from Sunday," says one hedge fund manager. "They hid the losses in the orphan month and called the bailout money profit."

Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its first quarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using half-baked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.

Even more amazing, Goldman did it all right before the government announced the results of its new "stress test" for banks seeking to repay TARP money — suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn't pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. "They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after," says Michael Hecht, a managing director of JMP Securities. "The government came out and said, 'To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC — which Goldman Sachs had already done, a week or two before."

And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two-thirds of all corporations operating in the U.S. paid no taxes at all.

This should be a pitchfork-level outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."

BUBBLE #6 Global Warming

Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.

The new carbon credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.

Here's how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.

Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigm-shifting legislation, (2) make sure that they're the profit-making slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson's report argued that "voluntary action alone cannot solve the climate change problem." A few years later, the bank's carbon chief, Ken Newcombe, insisted that cap-and-trade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."

The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utah-based firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in green-tech … the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energy futures market?

"Oh, it'll dwarf it," says a former staffer on the House energy committee.

Well, you might say, who cares? If cap-and-trade succeeds, won't we all be saved from the catastrophe of global warming? Maybe — but cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it's even collected.

"If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedge fund director who spoke out against oil futures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want. It's just asinine."

Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees — while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.

It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.

But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.