Saturday, May 14, 2022

Ukraine and Putin's Murders

 Where Do We Go From Here?


It seems there are two main thrusts that must be carried out in our response to Putin’s proclivity for murder.  

First, as we have seen taking place, Ukrainians and International friends are working hard to make Putin holster his weapon and/or remove his weapon from his grasp.

Second, we must understand how this murderous regime came about and work diligently and effectively to prevent this from happening in our own government.  

For these efforts, I am grateful to be included in all the thinking of the friends who have followed and/or contributed to our email thread.  I wish to also thank those who took the time to study the Putin war and found many relevant and related issues, then passed those studies on to me.  

1. James sent me George Kennan’s long telegram from his Charge d’affaires office for the US State Department embassy in Moscow in 1946 distinguished effective democratic government from ineffective democratic government as the singular means to protect the people of the democracy over the long term, indefinitely, in fact.   This solidly packed document is instrumental in driving us to seek Mr. Kennan’s understanding of the situation he addresses, his reasoning and the philosophical principles he stands on. 


His critical message to his government was that the best defence against authoritarianism is good democratic government that bears witness to the answer to the question, “Whose government is this?”.  The answer is from each and every member of this democratic society - mine, yours, ours.  

2. Duane’s questions, as well as in particular David G’s and David V’s responses, about imposing a no-fly-zone over Ukraine led to more than one email discussion thread about the military, political, international relations strategy, all within a human rights and democratically framed philosophical context, on how to end the war.  These discussions are thorough and heartfelt, truly educational.  

https://theconversation.com/ukraine-nato-and-the-us-aim-to-destroy-the-russian-military-it-looks-as-if-they-may-have-the-means-to-do-it-182255?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20May%203%202022%20-%202280622674&utm_content=Latest%20from%20The%20Conversation%20for%20May%203%202022%20-%202280622674+CID_c0a7bed190520c2ce607ac09ced47684&utm_source=campaign_monitor_uk&utm_term=Ukraine%20Nato%20and%20the%20US%20aim%20to%20destroy%20the%20Russian%20military%20%20it%20looks%20as%20if%20they%20may%20have%20the%20means%20to%20do%20it 

What can be the end game for NATO in stopping Putin's invasion of Ukraine?  What must be the end game for NATO in stopping Putin’s invasion of Ukraine?   

3. Democratic processes must be well anchored in principles arising from democratic political philosophy.


As we have witnessed in Alberta, Canada and the United States, democratic processes can be thwarted to disable even the most basic article of democracy, the vote. 

4. Establishing an effective philosophical framework for structure of government and all its processes is a necessity for the survival of any state. 


How a state can implode - effective governance matters to any state’s survival.

5. Again, we address the discussion of political and military strategy for ending Putin’s war and enlarge it by addressing the existential threat posed for all life on earth, not simply limiting territorial aggression in pursuit of self aggrandisement, in this instance, Putin’s self aggrandisement. 


Military balancing acts must be carefully thought through, addressed and followed up on, all while understanding and responding to the implementation of political and military strategies playing out on the ground. 

6. We have discussed the character of Putin in our discussions.  This piece helps us with that understanding, at least in the narrow context of his murderous bent. 


Studying the political development of the person who likes to have the fastest gun in the shootout when that person is armed with a comprehensive and complete military complex - murder at scale. 

7. Jerry forwarded a fascinating study of the Russian psyche within the context of its relatively recent history, the last one-hundred twenty years or so.  The file Jerry found for my edification is an audio-file some thirty hours in length.  This incredible work contains first person interviews of Russians from across the great breadth and depth of that country with their views on life experienced generally and living with various iterations of government through that period.  The statements have been translated into English with, I believe eight different voices reading every interview with intonation.  I have only worked through the first three of eighteen sections, which took about five hours of fascinating listening.  This report has been transcribed, I believe, but I am not certain that the transcription is in word-for-word agreement with the audio-file.  In any case, the voices add strength to the messages of these individuals’ statements.  Anyone wishing to understand the thinking, emotions, relationships of the Russian people, this is a place to start.  


We look to understand the Russian psyche that Putin is exploiting for his murderous exercise. 

8. Propaganda, what is it?  How does it work? 


Lies are the greatest threat to good government. We must understand the machinations of propaganda and propagandists to be able to recognise it when it comes to us and to know how to prevent its spread and its destructive force. 

9. We have recent experience with propaganda at work as it interferes with our peace and order, deliberate misinterpretations of what personal freedoms are, deliberate misinterpretations of even the roles of government institutions are continuing to run unabated. 


Freedom denied, the transformation of freedom as a basic human right serving as a great good in support of humanity into a great evil in destruction of humanity. 

10. What is it to live with democracy?  What does it mean to participate in democratic governance?  


David H pointed to “Mackenzie King in the Age of Dictators”, Roy MacLaren, McGill-Queen’s University Press, 2020.  This history of Mackenzie King and his time chronicles, among other things, the difficult relationship governments, particularly in North America and Europe, had with the whole notion of what democracies work like, look like throughout King’s time and beyond.  My view is that it points out, incidental to the history presented within the book, that newly established democratic governments were ill-defined, simply the previous form of governance but with leadership roles elected rather than inherited.  We are still evolving into what a democratically governed society really is. 

11. Peace in society means we collaborate with each other, support each other, protect each other from egregious harm.  We can see it is one thing to “do our own thing”, it is another thing when “doing our own thing” threatens the person of those around us. 


By definition, democracy succeeds effectively one person at a time.  This is an individual’s inhuman experience of the great right of freedom turned into the great evil of freedom. 

12. Conclusion
After studying all this and watching the disgusting actions of Putin with armaments he treats as his own personal weapons, we know that that fire must be put out and we focus our efforts to do that.  Perhaps just as importantly and perhaps with as great a sense of urgency, we must develop our democratic institutions and operations to prevent these kinds of injustices from arising in the first place.

I personally believe we never have established effective foundations of democratic governance to prevent people from feeling left out, alienated from their own society.  We have simply imposed the vote on selection of the modern equivalent of the feudal masters, whatever their modern titles may be, without first empowering ourselves with the critical thinking, lifelong experiential learning that we all require for our personal development and the development of the society we live with. 

I do not thank Putin for incidentally pointing out the urgency with which we must address this issue because to do so would offer some consolation for his murderous bent.  However, I do suggest we use his example to motivate ourselves as we tackle this critical issue now to make certain Ukrainians' sacrifices of their lives in defence of us all never be taken for granted, never be wasted, ever be honoured. 

Mike Klein - May 14, 2022 


Sunday, April 24, 2022

Capital in Agriculture

Is Capital Chasing Its Own Tail?

 

The essence of this story began with the cost of a new combine harvester.  The current farmer ordered a new top-of-line John Deere combine and a new 45 feet wide header - the part that cuts the crop and feeds it into the combine - which is sold separately. 

 

Header - $150,000

Combine - $1,200,000.  (Source - conversation with current purchasing farmer)

 

Now in order for the combine to make sense, it must be operating at full capacity all the time, it cannot be waiting for the truck(s) to take the crop away from the combine.  That means a requirement for 3 semi-trailer grain trucks.

 

Highway tractors - perhaps 5 years old - perhaps 250,000 tp 700,000 km - $200,000 to $300,000 each (here using the low estimate) 3 X $200,000 

$600,000 (source - scanning through truck trader type sites)

 

Grain trailers - Perhaps 5 years old - 1,000-bushel capacity each - $40,000 each - 3 X $40,000 

$120,000 (source - scanning through trailer trader type sites)

 

High speed grain handling and storage on the farm

Bins - for this farm, the size requirement would likely be on the large side meaning the cost per unit of volume would be lower than a set of smaller bins so the cost per bushel would be perhaps $4.25 installed.  I suspect many farmers would prefer a bin large enough to handle all of a day’s work without having to move the conveyor from bin to bin during the day, or at least as few times as possible.  How large might that be?  The combine could be filling a truck every 40 minutes.  That’s then 1,000 bushels every 40 minutes.  If the combine is operating only in daylight hours, only when the crop is not moist from overnight dew, that would likely be from 8:00 am to 8:00 pm, so 12 hours or 720 minutes divided by 40 minutes comes to 18 truckloads, or 18,000 bushels. So, an 18,000-bushel bin would be approximately $76,500.  How many bins does the farmer need?  No idea, but let’s guess harvest lasts the 20 days of prime harvest weather, then that would be 20 X 18,000 or 360,000 bushels: or 20 X $76,500 = $1,530,000.  (Source - scanning through farm cost estimator and bin seller sites) 

 

Elevating conveyors - highly variable prices depending on all sorts of factors - no estimate, however guessing the elevating conveyor is $15,000 and the tractor used to power it is $35,000, that comes to $50,000.  (Source - scanning through elevating conveyor and used tractor trader sites) 

 

Total capital outlay for harvest and grain handling and storage for this imaginary farmer - $3,650,000. 

 

Spread that outlay across the crop production of 360,000 bushels - $10.14 per bushel.

 

The capital equipment here is likely to last:

 

5 years for the combine and conveyor

 

10 years for the trucks and trailer and conveyor tractor

 

30 years for the bins

 

So amortising these costs over 10 years of crop means replacing the combine and conveyor once, so 2 combines and 2 conveyors 

$2,700,000 + $30,000 = $2,730,000. 

 

Trucks, trailers and conveyor tractor purchased once

$720,000 

 

1/3 for the bins as they are used 10 years but last 30 years 

$510,000 

 

Total $3,960,000.

 

This example is grossly simplified in that trade-in values are not accounted for, inflation in cost of equipment is not accounted for and the estimates are slightly vague, the actual costs incurred may differ materially.  However, I think the point is interesting in any case.  

 

3,600,000 bushels of grain incurs a capital equipment and plant cost over 10 years of $3,960.000 or $1.10 per bushel.  

 

The farmer now has to add the cost of seeding equipment, chemical spraying and fertiliser applicators, and a field tractor.  We’ll assume the same trucks and bins are used for seed.

 

No operating costs are included, such as fuels, seed, chemicals, and fertilisers.  No wages have been included.  No costs of land is included.  (If we assume the farmland yields 40 bushels per acre, that farm needs 9,000 acres of land.  (If that land is priced at $1,000.00/acre, that’s $9,000,000 that needs to earn a profit, in interest as it were.  Obviously if it’s upwards of $2,000.00/acre, that’s $18,000,000 requiring a return at the same rate.  If it is 4.0%, that’s $360,000 per year or $1.00/bushel for $1,000/acre land, or double that for $2,000/acre land.)  No farm shop and machine storage buildings, no pickup trucks or other service vehicles, no fuel storage and no chemical and fertiliser storage and handling facilities are included.  No interest costs are included.  No insurance or other overheads are included.  Cost of depreciation of the harvest equipment is included.  The CRA’s Capital Cost Allowance may differ from these estimates as indeed may the accounting rules applied to depreciation.  

 

My point is this, the first $1.10 per bushel of grain that the farmer realises through sale of that grain simply covers the cost of acquisition of harvest, grain handling and storage of that grain.  The price per bushel as of November 2021 according to indexmundi.com was $397.70 per metric tonne divided by 36.744 bushels per metric tonne comes to $10.02.  This is not farm gate price, so cost of shipping and handling are not considered.  Rail freight is estimated at $1.38 and handling cost on the prairies and in the ocean terminal taken together might easily exceed $0.60 so the estimated costs of getting our farmer’s grain to outgoing vessel on salt water is $2.00.  Then there is the cost of marketing through Archer-Daniels-Midland, Bunge, Cargill and/or Louis Dreyfus.  (These ABCD’s control approximately 80% of the world food trade.)  I do not know what they require for margins for their marketing effort.  I will, however, assume $1.00 per bushel.  That leaves a little less than $6.00 to cover all other costs and provide profit on capital.  

 

Reports are that fewer and fewer people can afford to gain access to farmland to allow them to start farming.  So what is driving the demand for farmland that is driving the price ever upward?  The reason I make this point is that there is a trend to investing in farmland as an interesting investment opportunity for retirement funds or other purposes.  Investors must insist on receiving a return on their investment and it must be at least partially in the form of cash as well as earning through appreciation of the assets, ie land price inflation.  It is becoming ever more difficult for anyone to consider starting out in farming at least partially due to the fact of appreciation in land prices.  Do these prices reflect the value of the productivity of the land more than the demand for land as an investment opportunity?  In other words, when I invest in farmland, the value of my portfolio is growing because of two factors; first -, profitable productivity and second - increasing demand for investment opportunities driving up bid prices.  

 

The rise in capital required to engage in farming has been rising for decades to enable an ever-greater number of acres to spread overhead costs over, including risk.  Conventional wisdom has this happening to mitigate the risk of market price fluctuations and weather.  This conventional wisdom tells farmers they must reach a size that allows for ever tighter margins per unit of production as that seems to be the trend.  However, does that not also mean getting closer and closer to a negative margin per unit, multiplied by an ever-increasing number of units because of increasing farm size, bringing every risk that much closer to bankrupting the farm.

 

Fortunately, governments, taxpayers, have seen fit to offer significant subsidies to the entire agrifood sector to mitigate the risk of losing society’s capacity to produce food.  

 

So what is the driver attracting massive investments in farmland?  Is it the profit earned from agricultural production through farm operations?  Is it the long-running inflation in farmland prices?   I suspect we may have much more of the latter than the former, which seems like capital chasing its own tail around the farmyard.  

 

Come to think of it, fewer and fewer people can afford to buy a residence.  What is driving the demand for residences that is driving the prices ever upward? 

 

Maybe we have a capital problem here.

 

How might this have come about?  Are there any other broad, economy-wide situations we might learn from?

 

Let’s see.

 

The last time we had a society-wide housing demand driving prices, there were actually individual buyers lining up to take on highly complex credit arrangements to make the purchase possible.  The subsequent payments were, however, not easy to afford.  Foreclosures became rampant and the entire financial system was plunging into a deep freeze.  Taxpayers dived in to fix the financial system by saving financial institutions from bankruptcy.  So there was still no credit to be had for a great many people, but the financial system was saved through great infusions of taxpayer money.  The Great Recession was turned around and employment again rose. 

 

Now financial institutions found themselves flush with cash and were looking for investment opportunities.  The most obvious of those appeared in the share and stock exchanges.  Those markets rose to impressive heights.  

 

Then fund managers gathered cash together and began to invest in real estate.  The return was always better than the cost of inflation, so it was real, perhaps not exciting, but real.  Funny thing happened.  As more and more people began to invest in the stable security of residential real estate, prices began to rise.  Now we have investment funds, flush with cash, buying residences, driving up demand even though individuals needing a residence could increasingly not afford to get into the market.  What seemed to be the demand driver?  Investment funds perhaps.  As they participated in this in increasingly large numbers and increasingly large amounts of capital, they might have been able to keep buoying up those prices, thereby generating a return on their investment portfolios.  Fewer and fewer individual buyers, perhaps, but always a supply of lessees.  

 

Is it possible that this is related to the rise in number of billionaires?  

 

Citizens’ earnings and earning capacity being sent to bail out financial institutions, who then had the cash so felt compelled to do what they could afford, invest in the stock market, real estate and farmland.  

 

Now there is a movement afoot to raise interest rates to help quell inflation caused in large part by supply chains breaking down due to pandemic infections.  However, raised interest rates will add cost to debt servicing to pay for these newly inflated residential real estate prices.  I expect this new burden of corrective action in the financial system will fall most heavily on the average person, at least proportionately.  This person is also likely to be a taxpayer, again with a burden falling disproportionately more heavily on the average person. 

 

It might be time for wise people to figure out how to rejig the economy to have those who caused the greatest burdens also pay for the repairs.  

 

Thank you, Tom, for triggering all this thinking. 

 

M G Klein