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Sunday, March 30, 2014

General Commentary: Global Warming and the Stamp Market

   There is a popular anecdote known as the boiling frog story, which has the premise that if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death.This story allegorically applies to the current environmental crisis popularly known as "Global Warming" or "Climate Change." There is no dispute among legitimate climate scientists that, minimally, the crisis threatens to severely degrade the quality of life for humans on the planet.Yet our leaders pay it lip service and take but token action, our corporations either trivialize it or dismiss it, and there is a general  air of complacency or fatalism on the part of the general public

   Over the past 540 million years, there have been five major mass extinctions in which over 50% of animal species died. In the most comprehensive of them, the Permian-Triassic Extinction Event
of 252 million years ago, up to 96% of all marine species and 70% of terrestrial vertebrate species became extinct. While the causes of this extinction is a matter of dispute, one of the suggested mechanisms was the sudden release of methane clathrate from the sea floor, which may occur when the temperature of the oceans rises significantly. This possible result of the global warming trend is the worst case scenario: vast quantities of methane bubbling out of the sea resulting in a rapid average temperature increase of 5 degrees or more and a decrease in the amount of oxygen in the atmosphere.

    There is very little mention of global warming on any of the popular investment TV shows. It does not factor into the stock analysis or projections of economic growth on "Fast Money" or Jim Cramer's "Mad Money." Larry Kudlow, whose show combines the topics of politics and finance, disparages those who are concerned about it as hysterical alarmists, and denies that their concern is backed by scientific research.

   To some extent, this is understandable. Aside from the fact that well-funded lobbyists and astroturf groups representing the fossil fuel and chemical industries are actively promoting denial and inaction, no one really knows how bad the problem will become, or whether humans have the capacity to cooperate effectively to either solve or cope with it. It is as if we were all living on a flat island watching a larger than usual wave forming in the distance, and no one knows how much damage it will do. From an investment perspective, governments mandating massive expenditures on combating the problem by transforming the system of energy consumption from what we've got now to something more sustainable would create opportunities and millions of jobs, but it's questionable whether there exists the vision and will to accomplish this in time.

   In any case, from an investment perspective, including one which focuses on stamps, it's pointless to consider the worst case scenarios (extinction of the human race, or a longer and more horrible repetition of the Dark Ages), because should either of these occur, the best investments will prove to be suicide kits (in the case of extinction) or weapons, biohazard suits, canned food, bomb shelters,  narcotics, and cannibal cookbooks, should a remnant of humanity find itself living in a hot, poisoned wasteland. It's more reasonable to assume that either we'll somehow rise to the challenge in time, or that we'll do so after some damage has been done, and life goes on.

   Nevertheless, since we don't know the magnitude of the consequences of our little experiment, it's worth considering some scenarios which are pretty negative. Here is a world map which shows how the world would look if the planet's icecaps were completely melted. In the Americas, countries which are significantly affected include the U.S., which is left with  diminished East and Gulf Coasts, Brazil, and Argentina. Floridians may look forward to taking scuba lessons.

 In Europe, all of the non-landlocked countries lose significant amounts of territory to the risen seas, with the exceptions of Norway and Iceland. Denmark is gone, and the Low Countries are now very low indeed. We will bid au revoir to Paris, London, and Berlin.

    As for South and East Asia - currently the centers of economic growth in the emerging market countries, well, let's just say that hopes for continued prosperity will be put on hold for a while. India, Bangladesh, Burma, Thailand, Cambodia, Vietnam, China, Malaysia, and Indonesia will all lose significant amounts of territory.

  In the Pacific, rising sea levels would endow Australia with two sizable lakes, including one on the eastern edge of its Outback. This new bounty may help to compensate for the more frequent incidence of heat waves, droughts, fires, severe storms, and flooding.
   Again, this is a pretty dire projection, and it may be more reasonable to assume that there will be some (but not total) loss of the polar icecaps and coastal areas.Yet climate change has other, generally negative, effects as well. Countries in Africa, South Asia, and Latin America stand the greatest chance of diminished agricultural productivity. These include many of the currently "emerging market" countries which were formerly impoverished Third and Fourth World dictatorships, and to that condition, for which few harbor nostalgia, they will return, but with more famine than before.

   There is an ancient Chinese curse: "May you live in interesting times." We may expect that if humans do not take effective action to avert a climate catastrophe, the situation will become far too diverting for many people to be interested in collecting stamps. We may expect a far more dangerous, unstable world in which the middle class is decimated, peaceful democracies degenerate into murderous police states, and despair fuels recruitment by apocalyptic terrorist groups.

  The Stamp Auction Bidders and Consignors Union (SABACU) is a forum for discussing stamp auctions, and represents the interests of stamp auction bidders and consignors in their dealings with stamp auctioneers. All stamp collectors and dealers are welcome to join.  

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