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Global ‘water war’ threat by 2030

Global ‘water war’ threat by 2030 – US intelligence

The Mekong river. One of the predicted sources of international conflict and site for controversial dam.

Nations will cut off rivers to prevent their enemies having access to water downstream, terrorists will blow up dams, and states that cannot provide water for their citizens will collapse. This is the future – as painted by a top US security report.

­The Office of the Director of National Intelligence (ODNI), the organization that oversees US intelligence agencies such as the CIA and FBI, was commissioned by President Barack Obama to examine the impact of water scarcity worldwide on US security.

And while the prospect of “water wars” has been touted for decades, it may start to become reality within a decade. The ODNI predicts that by 2040 water demand will outstrip current supply by 40 per cent.

­Impoverished volatile states will be worst off

Water shortages “will hinder the ability of key countries to produce food and generate energy, posing a risk to global food markets and hobbling economic growth.” North Africa, the Middle East and South Asia will be hit the hardest, the report states.

And while the coming shortage is a manageable problem for richer countries, it is a deadly “destabilizing factor” in poorer ones. As a rule, economically disadvantaged countries are already prone to political, social and religious turmoil, and failure to provide water for farmers and city dwellers can be the spark for wider “state failure.”

Among those most vulnerable to this scenario are Sudan, Pakistan and Iraq, which are all locked in debilitating civil conflicts, and Somalia, which has effectively ceased to function as a state. ODNI envisages countries restricting water for its own citizens to “pressure populations and suppress separatist elements.” The report predicts many ordinary citizens will have to resort to the kind of purification tablets currently used by soldiers and hikers to obtain clean water.

Most dangerously, there are whole clusters of unstable countries fighting for the same waterways.

The report lists the Nile, which runs through Uganda, Ethiopia, Sudan and Egypt, the Jordan, which runs through Israel and several Arab countries, and the Indus, which is shared by Pakistan and India.

These areas are managed by special commissions, and the report states that “historically, water tensions have led to more water-sharing agreements than violent conflicts.” But once there is not enough water to go around, these fragile pacts may collapse, with “more powerful upstream nations impeding or cutting off downstream flow.”

Even without outright fighting, the ODNI says countries will use water as a tool of political leverage, similar to how gas and oil are used today.

Infrastructure projects will become increasingly politicized: “States will also use their inherent ability to construct and support major water projects to obtain regional influence or preserve their water interests,” the report claims.

Laos’ proposed $3.5 billion Mekong Dam has already been the subject of an international dispute with Cambodia and Vietnam, who say the dam will obliterate their fisheries and agriculture.

­Water terrorism threat

And even international compromise is not likely to be enough to ensure water safety.

“Physical infrastructure, including dams, has been used as a convenient and high-publicity target by extremists, terrorists, and rogue states, threatening substantial harm and this will become more likely beyond the next 10 years.”

The report states that an attack on a single point in a water supply, such as a canal or desalinization plant is sufficient to deprive hundreds of thousands of clean water. In return, governments will have to implement costly safety measures that are likely to be of limited use, due to the extensive length of rivers that have to be protected.

The ODNI says there is a decade to tackle the problems before they spiral out of control. It suggests revising international water treaties and investing in superior water purification technologies that will make the increasingly scarce resource plentiful again.

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Were Native Americans Really Environmentalists?

The traditional story is familiar to American schoolchildren: the American Indians possessed a profound spiritual kinship with nature, and were unusually solicitous of environmental welfare.

According to a popular book published by the Smithsonian Institution in 1991, “Pre-Columbian America was still the First Eden, a pristine natural kingdom. The native people were transparent in the landscape, living as natural elements of the ecosphere. Their world, the New World of Columbus, was a world of barely perceptible human disturbance.”

If we are to avert environmental catastrophe, the not-so-subtle lesson goes, we need to recapture this lost Indian wisdom.

As usual, the real story is more complicated, less cartoonish, and a lot more interesting.

In his 1992 book Earth in the Balance, then-Senator Al Gore cited a nineteenth-century speech from Chief Seattle, patriarch of the Duwamish and Suquamish Indians of Puget Sound, as evidence of the Indians’ concern for nature. This speech, which speaks of absolutely everything in the natural world, including every last insect and pine needle, as being sacred to Seattle and his people, has been made to bear an unusually heavy share of the burden in depicting the American Indians as the first environmentalists.

The trouble for Gore is that the version of the speech he cites is a fabrication, drawn up in the early 1970s by screenwriter Ted Perry. (Perry, to his credit, has tried without success to let people know that he made up the speech.) Still, it was influential enough to become the basis for Brother Eagle, Sister Sky, a children’s book that reached number five on the New York Times bestseller list in 1992.

Earlier versions of the speech, also cited by environmentalists, are suspect for reasons of their own. But experts say that the intention of Chief Seattle is clear enough, and that it wasn’t to say that every created thing, sentient and non-sentient, was “holy” to his people, or that all land everywhere had an equal claim upon their affection. “Seattle’s speech was made as part of an argument for the right of the Suquamish and Duamish peoples to continue to visit their traditional burial grounds following the sale of that land to white settlers,” explains Muhlenburg College’s William Abruzzi. “This specific land was sacred to Seattle and his people because his ancestors were buried there, not because land as an abstract concept was sacred to all Indians.” Writing in the American Indian Quarterly, Denise Low likewise explains that “the lavish descriptions of nature are secondary” to the purpose of Chief Seattle’s argument, and that he was saying only that “land is sacred because of religious ties to ancestors.”

Environmentalists who have cultivated the myth of the environmental Indian who left his surroundings in exquisitely pristine condition out of a deeply spiritual devotion to the natural world have done so not out of any particular interest in American Indians, the variations between them, or their real record of interaction with the environment. Instead, the intent is to showcase the environmentalist Indian for propaganda purposes and to use him as a foil against industrial society.

The Indians’ real record on the environment was actually mixed, and I give the details in my new book, 33 Questions About American History You’re Not Supposed to Ask. Among other things, they engaged in slash-and-burn agriculture, destroyed forests and grasslands, and wiped out entire animal populations (on the assumption that animals felled in a hunt would be reanimated in even larger numbers).

On the other hand, the Indians often succeeded in being good stewards of the environment — but not in the way people generally suppose.

Although we often hear that the Indians knew nothing of private property, their actual views of property varied across time, place, and tribe. When land and game were plentiful, it is not surprising that people exerted little effort in defining and enforcing property rights. But as those things became more scarce, Indians appreciated the value of assigning property rights in (for example) hunting and fishing.

In other words, the American Indians were human beings who responded to the incentives they faced, not cardboard cutouts to be exploited on behalf of environmentalism or any other political program.

In some tribes, family- and clan-based groups were assigned exclusive areas for hunting, which meant they had a vested interest in not overhunting, and in making sure enough animals remained to reproduce for future years. They likewise had an incentive not to allow people from other families and clans to hunt on their land. In the Pacific Northwest, Indians assigned exclusive fishing rights that yielded a similar kind of stewardship: instead of catching all the salmon, some were left behind with an eye to the future. Whites who later established control over salmon resources unfortunately neglected this important Indian lesson.

Indians have not always recalled that lesson themselves. Consider the Arapahoes and Shoshones on Wyoming’s Wind River Reservation, who in recent years (and with the help of all-terrain vehicles and high-powered rifles) have all but wiped out entire animal populations. Whatever happened to their spiritual kinship with nature?

In fact, this is the predictable result when wildlife is said to belong to everyone. There is no incentive to preserve any stocks for the future, since anything you might leave behind will simply be killed by someone else. Without property rights in hunting, there is no way (and no incentive) for anyone to prevent such short-term, predatory behavior. That’s why Indian tribes assigned these exclusive rights — it was the best way to preserve animal species and provide for the future.

Say, doesn’t this lost Indian wisdom bear repeating?

SOURCE

Hedge Farm! The Doomsday Food Price Scenario Turning Hedgies into Survivalists

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By Foster Kamer
May 17, 2011 | 8:16 p.m

Hedge Farm! The Doomsday Food Price Scenario Turning Hedgies into Survivalists

On the rare occasion that New Yorkers talk about farming, it’s usually something along the lines of what sort of organic kale to plant in the vanity garden at the second house in the Adirondacks. But on a recent afternoon, The Observer had a conversation of a different sort about agricultural pursuits with a hedge fund manager he’d met at one of the many dark-paneled private clubs in midtown a few weeks prior. “A friend of mine is actually the largest owner of agricultural land in Uruguay,” said the hedge fund manager. “He’s a year older than I am. We’re somewhere [around] the 15th-largest farmers in America right now.”

“We,” as in, his hedge fund.

It may seem a little odd that in 2011 anyone’s thinking of putting money into assets that would have seemed attractive in 1911, but there’s something in the air-namely, fear. The hedge fund manager and others like him envision a doomsday scenario catalyzed by a weak dollar, higher-than-you-think inflation and an uncertain political climate here and abroad.

The pattern began to emerge sometime in 2008. “The Hedge Fund Manager Who Bought a Farm,” read the headline on one February 2008 Times of London piece detailing a British hedge fund manager’s attempt to play off the rising prices of grains in order to usurp local farmland. A Financial Times piece two months later began: “Hedge funds and investment banks are swapping their Gucci for gumboots.” It detailed BlackRock‘s then-relatively new $420 million Agriculture Fund, which had already swept up 2,800 acres of land.

Even Michael Burry, the now-defunct Scion Capital founder and star protagonist of Michael Lewis’ The Big Short-who bet against the housing bubble in 2008 with credit default swaps to enormous profit-gave a rare interview on Bloomberg TV last year, explaining that he’s thrown his hat into “productive agriculture land with water on site” as it’s going to be “very valuable in the future.” (Like most of those asked to comment for this story to The Observer, Burry declined to discuss his investments in farmland.)

Three years later, the purchase of farmland both in America and abroad by outside investors has increased-so much so that in February, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, warned against the violent possibilities of a farmland bubble, telling the Senate Agriculture Committee that “distortions in financial markets” will catch the U.S. by surprise again. He would know, because he’s seeing it in his backyard: Kansas and Nebraska reported farmland prices 20 percent above the previous year’s levels and are on pace to double values in four years. A study commissioned by the Organization for Economic Cooperation and Development and released in January estimated the amount of private capital currently committed to farmland and agricultural infrastructure at $14 billion. It also estimated that future investments will “dwarf” what’s currently being thrown into land, by two to three times. Further down, the study makes a conservative projection that the amount of capital potentially entering the sector over the next decade will fly past $150 billion.

When asked if this is an end of the world scenario, the hedge-fund manager replied, “It really is. I tell my fiancée this from time to time, and I’ve stopped telling her this, because it’s not the most pleasant thought.’

This is happening in part because investors see their play as a hedge against hyperinflation. While the rest of the world uses the current calculation of the Consumer Price Index as a proxy for the cost of goods, some farmland investors are using a different equation, one from 1980. These investors assert inflation should be calculated the way it was before the Boskin Commission’s 1996 reworking of the CPI formula-in which case, it would be much, much higher.

“The CPI supposedly today is something like 1.5 percent,” says the hedge fund manager. “We think the actual rate of inflation is something closer to 6 or 7 percent on an annual basis. It’s also not about what it’s been over the last 10 years; it’s about what it’s going to be over the next 10 years.”

Projections show both the value of food and water to grow dramatically in the future. Anyone rich in both will have the only wealth that matters. Remember, he who has the Gold makes the rules. Or, he that can feed his family survives.

So the logic is that not only is the dollar worth far less than we think it is, but everything is more expensive and will only move further in that direction. Especially food, the value of which may have risen due to population increases, especially in places like China, where a consumer-happy middle class has finally started to emerge.

The rising cost of food can be seen even in New York’s yuppiest enclaves, where prices are high to begin with. Bloomberg food critic Ryan Sutton has been running a blog called The Price Hike wherein he measures the shifting costs of food at the plate in Manhattan restaurants. Mario Batali’s Del Posto is charging 21 percent more per meal since October. Gordon Ramsay at The London? Sixty-nine percent more since last month. Michelin favorite Bouley? Forty percent. The Breslin, at the Ace Hotel? Thirty-three percent. And so on.

But farmland isn’t an option for most investors. Farming is still mostly made up of family-run businesses, in the U.S., at least. Much of the farmland being purchased in America is purchased at estate sales. Pure-play farming isn’t a readily available product.

You can invest in John Deere for equipment; you can invest in Monsanto for seeds and agricultural tech. You can even invest in Kraft, which puts the plants on the supermarket shelf. But for now, it’s difficult to invest in a one-stop-shop farm. Additionally, there isn’t much arable land out there, it’s not increasing, and the quality of the land varies from parcel to parcel. And to make money off a farmland investment, you can’t just sit on it. You have to know what to do with it. “If you farm it like we do, you can generate a yield,” says the hedge fund manager. “We think the farmland will be worth 5 to 10 percent more every year, and on top of that, you get the commodities yield.” In other words, hedge funds are growing, picking and selling corn.

Asked if the American public would eventually see a chance to invest in Old McHedgeFund’s farm one day, the manager replied in the affirmative: “Yes. Without a doubt.” He estimated it would be only a few years before this happened. Just two weeks ago, Bloomberg Businessweek reported that El Tejar SA, the world’s largest grain producer, is planning on selling $300 million of bonds this year before a planned IPO. The plans for the IPO will be fast-tracked pending the sale of the bonds. If farming IPOs begin to emerge en masse, then farming-already often a dicey proposition simply on the basis of its being difficult to do correctly, the volatility of the weather and the possibility of entire crops going bad-may be vulnerable to a bubble.

There is, of course, a slightly more sinister reason to develop a sudden interest in agriculture. Last year, Marc Faber recommended to anyone: “Stock up on a farm in northern Norway and learn to drive a tractor.” He sees a “dirty war” on the horizon, playing on fears of a biological attack poisoning food supplies. Those sort of fears drive capital into everything from gold (recently at an all-time high and a long-time safe haven for investors with currency concerns) to survivalist accoutrements. In this particular case, one might buy the farm in order to avoid buying the farm.

That may seem extreme, but even the lesser scenarios are frightening to some. When asked if this is an end-of-the-world situation, the hedge fund manager replied: “It really is. I tell my fiancée this from time to time, and I’ve stopped telling her this, because it’s not the most pleasant thought.” He pauses for a moment. “We just can’t keep living the way we’re living. It’ll end within our lifetime. We’re just going to run out of certain things. We’ll just have to learn how to adjust.”

[email protected]

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