The Cost of Doing Business…
Off the keyboard of Steve from Virginia
Published on Economic Undertow on December 2, 2012
Discuss this article at the Waste Based Society Table inside the Diner
Building the 1955 Oldsmobile and other GM car bodies at a ‘Body By Fisher’ factory in Detroit. Fisher started building horse-drawn wagons before the turn of the 19th century then turned to the horseless carriages. From 1908 though the 1920s, the company built bodies for many manufacturers including Ford Motor. Eventually Fisher became an semi-independent unit within General Motors. During the 1950s and 60s auto heyday, Fisher employed more than a 100,000 unionized workers in dozens of facilities across the country, building car bodies for GM.
This promotional film suggests the timeless quality of General Motors products even thought the products were designed to be obsolete within short periods. Americans were expected to ‘keep up with the Joneses’ and buy new cars whenever the manufacturers introduced new models, every three years. Extremely durable vehicles such as Henry Ford’s ‘Model T’ were undesirable as the makers had ever-increasing amounts of production to absorb. Makers needed their affluent customers to buy frequently, to ‘move up’ from basic models such as those made by Chevrolet to more expensive models made under the Oldsmobile, Buick and Cadillac nameplates. Older models would be traded in and resold to those who were less affluent. What made the process work was car loans, anyone could qualify as the car itself was security for the loan.
Along with the loans came insurance as a burgeoning industry. Lenders did not wish to lose the worth of their security in crashes. If a car was damaged, the insurance would pay for repairs. If the car was totaled the survivor would obtain a replacement. With insurance, car crashes were good for business.
Cars made during the immediate postwar period had infinitesimal warranties, it was ‘buyer beware’ at all times. Components failed spectacularly including transmissions, brakes and steering gear. Fisher’s highly-engineered craftsman-like bodies could not withstand corrosion. Few examples of GM’s ‘permanent quality’ from 1955 remain, most are rusted away and recycled, others were destroyed in collisions.
The emphasis on safety is ironic because American cars of this period onward were death-traps, among the most dangerous vehicles ever built.
Cars were top-heavy and bulky, overpowered with large cast-iron block engines. Pre-war models had large engines because smaller versions did not produce enough power or were noisy, vibrated excessively or were difficult to operate. Large engines were smoother and more powerful at lower RPMs. Engines improved after the war due to better material and higher craft standards, yet the large engine did not give way. Makers simply advertised their models’ increased horsepower and driving performance.
The heavy engine in the front of the car powered the rear wheels by way of the transmission and drive shaft. Consequently, cars tended to understeer. That is, the driver would turn the steering wheel to go around a curve and the car would tend to continue straight because of the arrow-head like weight in the front. The driver would compensate by turning the wheel more. At the same time, auto suspensions were primitive affairs little changed from the horse-and-wagon era. The solid rear axles were carried on leaf springs with little play, coil spring front suspensions tended to have much more travel … for a more-comfortable ride on poor quality roads. The result was a suspension that could not keep all four wheels on the road under all circumstances. The heavy vehicle weight and poor suspension had cars leaning away from turns. Body lean would unload the ‘inside’ wheels: the cheap, polyester cord bias-ply tires would lose grip. Even slow turns of 35mph under certain conditions would have the car sliding straight off the road into an obstacle or rolling over.
Brakes were also poor. The drum brakes found on most American cars faded with repeat applications. Brake linings would overheat and the hydraulic brake fluid would boil. Fittings and hoses would leak leaving drivers with nothing to stop the car but a hand brake with little more stopping power than the failed foot brakes.
If there was a wreck there was little protection for car occupants. With few exceptions, manufacturers did not offer seat belts, even as an option. The rotary door latch seen in the film was not strong enough to keep the door closed in the event of a collision. Under stress, the door would pop open, the occupants would be pitched out of the open door with the car rolling over on top of them. The steering column was a solid steel shaft that extended from the steering box forward upward and back toward the driver’s heart. In a collision the car body would detach from the frame and slide forward or the steering box would be driven backwards. The column would impale the drivers’ seat penetrating through the driver on the way. Alternatively, the heavy seat would break loose from the floor and ram the driver forward against the steering column.
One of the tasks of emergency workers was to saw through steering columns in order to remove drivers from car crashes with the columns pierced through their bodies.
The cheap door latches and lack of restraints left passengers ejected in all directions in serious crashes. The thumb-push door latch shown in the film was a killer as even modest collision force and inertia would ‘push’ the button and open the door.
Car wrecks during this period were gruesome affairs. Front seat passengers in a forward collision were simply ejected through windshields, leaving their faces, scalps, breasts, testicles and other body parts hanging from shattered glass. Paralyzing neck injuries from both front and rear collisions were common, so were multiple amputations. Quality auto bodies by Fisher would crumple in collisions trapping victims inside to bleed to death. An overturned car would have its roof collapse with the weight of the car crushing occupants inside.
Starting in the 1950s almost every US car was capable of speeds over 80 mph. Passenger restraints were limited to simple lap straps as in airplane seats: in crashes, belted occupants would be hurled forward to slam faces and heads against steel dash panels, against unpadded front seats or against control knobs that would penetrate their skulls. Door releases, window cranks and interior accessories became lacerating or impaling weapons in crashes. Gas tanks and fuel systems were unprotected and poorly mounted: collisions resulted in car fires with occupants trapped inside burning coffins. The same doors that were self-opening during modest collisions tended to become unopenable if the car was underwater or burning, particularly if the car was upside down. Injured passengers needed to maintain some presence of mind to drag themselves out of windows and away from flaming or sinking vehicles.
The fins, wheel hub spinners and chrome sheet-metal bumpers so favored by auto fashion designers became sword blades that maimed and killed all within reach. The manufacturers didn’t care, highway deaths were simply the cost of doing business.
Figure 1: the US highway death rate-per-10,000, (Wikipedia, click on for big). Here we can see the twin heydays of the US auto industry: from 1908 through the 1920s and the 1950s and early 60s. The chance of death around every curve during a high-speed run down a lonely highway was — and is — part of the glamor of auto ownership. Risk, danger and fear: car death was a component of F. Scott Fitzgerald’s Great Gatsby as it was to James Dean’s ‘Rebel Without a Cause’. ‘Easy Rider’ offered vacuous rage and murder on the highway as a metaphor for the meaningless Vietnam war and the consequent culture divide. Car chases and crashes became a boring/predictable element of motion pictures and television shows. Automobiles, anomie and hormones were — and still are — the ingredients of American rock-and-roll … all of these things were — and are — good for car sales.
Making and selling automobiles is a bloody business: designs in the 1920s and 30s periods were intended to ease/standardize manufacture rather than provide passenger protection. Car bodies were made with wooden components which could not withstand the forces of higher-speed impacts. At the same time, roads were poorly engineered, almost all were narrow and unmarked. Off the road was the ravine or unyielding obstacle. Cars off the road with injured occupants might not be found for days. Except in cities or developed areas there was little enforcement of traffic laws … if there were traffic laws. Most roads even city streets were unlit, some were paved with cobblestones, others with irregular concrete slabs. The first high-speed, limited access road in the US did not appear until 1940, in Pennsylvania.
The public furor over seat belts during the 1960s was remarkable. Manufacturers resisted belts because of the implication that both cars and drivers were unsafe. Belts also cost money which the cheap manufacturers were loathe to spend. Throughout the fifties and early sixties, drivers wanting belts had to order them from aftermarket manufacturers and have them installed privately. Eventually seat belts were offered as options on luxury models.
During the 1960s, manufacturers started putting largest V-8 engines from luxury sedans and station wagons into smaller commuter-cars. The higher power combined with lower vehicle weigh increased potential vehicle speed. Buyers looking for the larger engines could also buy four-speed manual transmissions, stiffer front suspensions and wider ‘performance’ tires. The US ‘muscle cars’ were still primitive compared to European performance sedans, they were nevertheless able to kill thousands of American teenagers ‘looking for a thrill’ on public highways.
The US industry was complacent. A feature of US automobiles was poor fuel economy. Starting in the 1920s most American vehicles would travel about 15 miles or less on a gallon of gasoline. Following the gas shortages of the 1970s, the public demanded more economical vehicles which Detroit found itself unable to produce.
The casual disregard for human life on the highways continued until the mid-1960s when German and Japanese imports started appearing in US markets with safer, more economical designs. Ralph Nader published his ‘Unsafe at Any Speed’, which lambasted the industry … General Motors in particular. Foreign manufacturers offered standard models with seat belts and collapsible steering columns, strong unit-bodies that protected the passengers, disc brakes, four-wheel independent suspension, radial tires, smaller engines and better attention to vehicle assembly. Insurance companies and legislatures began mandating these and other common sense safety features in all cars.
Cars gained redundant brake systems so the failure of one system would not leave the car without brakes. Fuel systems were isolated from crash areas. Manufacturers designed and installed energy-absorbing crumple zones, air bags, lap-and-shoulder belts for all passengers as standard equipment, padded dashboards, stronger door latches, recessed dash controls and better steering. Starting in 1973, cars in California were required to have pollution controls to recycle unburned fuel back into the fuel system … this led to computerized engine controls and catalytic converters. Detroit management knew of these ‘innovations’ and had in fact invented some of them, manufacturers knew how to build safer, economical cars immediately after the war, they simply refused to do so, focusing instead on restyling conventional models and advertising.
During the 1970s, highways were re-engineered, surfaces were widened with pull-off areas and force-dissipating Armco- and Jersey barriers installed along right-of-ways to keep careening vehicles on the highway. Bridge abutments, culverts, poles and sign-posts were removed to the side away from the travel lanes, exit- and turn areas were made more gradual. Stop signs, lighting, ‘traffic calming’ devices were installed including medians, curbs, speed bumps and rumble-strips were installed to deter traffic and annoy drivers into slowing down. Law enforcement campaigns against impaired drivers has also made the roads safer. Enter the speed camera.
Since the 1950s use of cars has mushroomed. Benefits gained by safer designs were overcome by the massive increase in car numbers, the wear on infrastructure, the numbers of older, mechanically defective vehicles, the increase in elderly, impaired or unschooled drivers along with the disparity in vehicle sizes. Small economy sedans and motorcycles share crowded roads with heavy transport trucks and bloated ‘light vehicles’ such as SUVs.
Grant Wood, “Death on the Ridge Road”.
Auto manufacture has spread around the world and Detroit has been passed by. A deadly industry currently faces its own demise. The auto industry narrative its entirety can be seen in Detroit for those with the wit to look for it: birth, an adolescent ‘heyday’ of public enthusiasm and industrial expansion, a long maturity leading to senescence and final ruin. With the unraveling of the auto industry comes the unraveling of everything that is dependent upon it. Just as Detroit has fallen, so too will fall Japan and Germany, Korea and the other auto-manufacturing centers. They must fall because fuel is too valuable to waste in non-productive gadgets and because the debt needed to build and buy the gadgets has become too costly.
In an industry’s infancy, debt is taken on to buy the tools of production and for customers to pay for the industry’s products. With the passage of time, the debt an industry takes on buys increased competition. Debt also flows to the owners away from tools. At the end, debt taken on by the industry services the debts taken on previously, nothing remains for any other purpose. The auto industry helped win the Second World War by making a vast inventory of war goods with public financing. After the war, the US government assisted the reconstruction of overseas’ competitors who devastated the industries in Detroit, then the city itself.
The Fisher factory today is a shell used by the City of Detroit to store impounded automobiles. In place of the thousands of workers who labored in Fisher Body’s plants, there are now computers to design and build the tooling, robots to assemble the parts into finished cars. One of the intended products of industry was plentiful jobs: industrialization is a complete failure with regard to jobs.
In 2009, both General Motors and Chrysler faced liquidation but were bailed out instead. Ford Motor avoided the others’ fate by borrowing from the Treasury and the Federal Reserve discount window. Auto industry overproduces because too much credit has been directed toward it. Cars in their making and operation are extraordinarily costly, in particular the petroleum needed to run the cars and all that has to do with them. Although pollution costs have not been accounted for, they do exist and they are significant. As it was with safety belts, the industry steadfastly ignores these costs as if ignorance can make them disappear.
Cars have killed 3 million Americans in the past 100 years, more than all American wars put together. According to the World Health Organization, cars have killed 1.2 millions persons world-wide per year since 2007. Each death is someone who will never buy another car. Car making is a bloody business, but one that has wormed its way into public affection. The car business’ time is passing, in the end the heyday of the car will be no different from the heyday of the clipper ship. The cost of doing business is the demise of the car business itself.
Japan=Detroit
Off the keyboard of Steve from Virginia
Published on Economic Undertow on November 22,2012
Discuss this article at the Epicurean Delights Smorgasboard inside the Diner
When you wish upon a star … the auto industry … you don’t get a pony you get Detroit. This is the lesson the world is in the process of learning right this minute.
Kyle Bass speaking about debt. Like most analysts, Bass blames Japan’s fix on excessive debt …
“Thematically, the bottom line is … the total credit-market debt to GDP globally is 350%, it’s $200 trillion dollars worth of debt … against global GDP of roughly $62 trillion … “
Nobody bothers to ask why there is so much debt in the first place. The question is a finance analyst taboo … something not discussed, like underwear with dollar-signs printed on it.
The reason for the silence is that industrialization is unable to retire its debts. If machines could pay for themselves and ‘earn’ a profit they would be doing so already and there would be no debts at all. That machines cannot pay their own way is self-evident.
The debts taken on to make the ‘machine idea’ work are impossible to retire because they are too large. @ $200 trillion and 350% — plus additional hundreds of trillions in non-tendered liabilities — even if the world’s industries were to function magically ‘properly’ the debt burden is out of reach. What is available to service and retire debt is the modest marginal increase in GDP year-over-year: this increase itself is borrowed!
Debts cannot be serviced — much less retired — with the economies at death’s door: future GDP growth is theoretical.
Repayment is a fairy tale … it is also the cudgel of creditor repression. If there was the merest prospect of growth, economies would not bother with debt repayment but would take on even more … Not only does industry require debt but the waste-based industrial economy will always and under every circumstance increase its debts until it is physically incapable of doing so.
More Kyle Bass:
“So … this is a debt super-cycle that is coming to an end. It’s coming to an end at different end-points for different countries … A lot has happened in Japan in the last 12 months, in fact, in the last two months we believe they crossed that proverbial Rubicon … we think that you’ve seen 20 years … of conjecture regarding Japan’s eventual demise and now we see a point where in the last couple of months what you see a continued deterioration in their balance of trade. It’s actually running at about negative- $100 billion on-the-dollar … a hundred-billion dollars, or close to ten-trillion yen … and we think given this resurgence of Chinese nationalism over the Senkaku crisis … you are going to see that (trade imbalance) move another … one-and-a-half or two percentage of GDP … or another $100 billion dollars. To put that into perspective, what that means is we could see full current-account negativity in Japan in October (actually, November)… that’s something nobody is ready for … We think about it: we have a secular decline in the population happening, you have a balance of trade literally being re-written and falling off a cliff … and their GDP is tracking negative 3.5, negative 4 percent.
In other words, Detroit.
Japan has reached the point where it cannot borrow any more because it has already borrowed as much as it possibly can. As long as Japan borrows the (borrowing) cost is manageable. Debt is a treadmill, once on you can never step off or slow down. Japan will learn that as the borrowing slows the real cost ramps. Repayment does not work because doing so increases the worth of the money used to repay. Returns on Japan’s industries are not an issue: they never did matter because they never existed. What matters is the narrative of ‘progress’ and ‘innovation’ which for Japan has soured: the narrative is collateral. The country has become hopelessly old-fashioned … passé and unworthy of credit. Japan tries on new narratives but the only ‘innovation’ in the cupboard is more quantitative easing (QE).
Like the Motor City, Japan hitched its fortunes to the automobile industry. The car business has succeeded by more efficiently devouring its own capital basis. Since the ‘peak oil’ low in 1998, the incredible basis has been repriced, there is a scarcity premium added. It does not matter whether capital is officially recognized as scarce or not! What matters is the market price of capital relative to other goods. Resource capital is now too pricey to waste. The waste-based enterprise is stranded by its capital costs and there is nothing the establishment can do about it!
In Japan and elsewhere, the strategy to ‘manage’ debt has been to always add more of it until the cost becomes prohibitive ridiculous. Instead of debt, labor costs are cut by eliminating jobs … even though labor costs have little to do with the debt and are not the cause of it. Businesses borrow to pay executives and business owners, not labor which is expendable.
Michael Hudson suggests that the burden of taxation has been swapped for interest payments/economic rents to financiers. Instead of flowing toward governments- then cycling back toward the public, funds flow toward banks and to tycoons. The consequence is not taxation without representation, there is taxation without the means to pay the taxes: a strategy of pauperization that leaves the labor force dependent on meager handouts and indebted to both business and government.
– Detroit is a ‘company town’ dependent upon a single industry. It gained net cash flow from outside the city/the rest of the world. Japan is a ‘company country’ dependent upon manufacturing of so-called ‘high value’ goods including automobiles.
– Japan requires export trade income — net cash flow from the rest of the world — in order to service debts and subsidize their industries. The government can borrow from the central bank but for only a short time. Then it must either stop borrowing or pay higher prices on international credit markets and subject itself to credit embargo. Detroit obviously cannot borrow from its central bank because it does not have one. It is already subject to credit embargo.
– Detroit and Japan ‘play the resource spread’: buying resources then repackaging a portion of these into costlier forms so as to subsidize their own consumption. The increase in input costs has made spread(s) impossible to finance as the needed debt is too costly.
– Detroit is almost 90% African-American, Japan is 90% Japanese. Both cultures are rigidly resistant to changes in the status-quo. In Detroit, difficulties are blamed on Negroes rather than automobiles. Time will tell whom the Japanese will blame their difficulties on … certainly not the automobiles, which are the real culprit.
– Aging Detroit’s population is entering retirement, workers have few assets outside of real estate (personal homes). Japan’s population is nearing retirement, workers are converting non-monetary assets into currency by selling Japanese bonds, that is, they are not lending as much.
– Both Detroit and Japan have little in the way of native resources, both seek to exhaust the resources of others. Detroit has exhausted available resources and Japan is on the way to doing so.
– Both economies feature smokestack-manufacturing industries that have migrated to China and other low-wage countries … associated wage arbitrage has reduced discretionary incomes of both Detroit- and Japanese workers.
– Managements of both places are inept and cruel, beset with cronyism and corruption … leading to catastrophic consequences. It is hard to say which place is more ruined. Neither ‘systems’ allow imagination or risk, any persons exhibiting imaginative tendencies are excluded. Conventional managers are allowed to fail conventionally until they are unable to do so by the extent of their failures.
– Legacy obligations are carried forward with increasing amounts of new debt required to service and retire (roll-over) the older maturing debts. Japan’s lending capacity is entirely consumed meeting the burdens of existing debt. Detroit has almost no capacity to borrow at all and is dependent upon begging.
– Japan’s so-called ‘Bubble Economy’ was a hedge against rising energy costs … a hedge that was unraveled by increased energy costs. Hedge versus expedient: Detroit’s success was the reason for Japan’s economic strategy in the first place. The auto industry’s destroys the capital the industry requires over the longer term. It has also foreclosed the future, destroying capital that was-and is needed for actual productive enterprises … that have not be imagined yet! Motown’s strategy has been to deploy successive expedients .. good for the moment and costly afterward.
– Monetary policy — in the form of multiple rounds of bond-buying/quantitative easing and super-low interest rates — has failed/is irrelevant. The desire has been to create monetary/currency inflation: Japan is mired in deflation! The end-game for Japan is identical to the end-game in deflationary Detroit: ruin.
Figure 1: Japan’s crude oil consumption: the failure at Fukushima and the resulting shutdown of the country’s nuclear park left an expensive energy deficit that the country must close by importing petroleum and liquified natural gas. Every yen diverted to the petroleum suppliers is a yen extracted from other sectors of the Japanese economy … including debt service.
The world is not in danger of becoming Japanese with its 20-year deflation. Instead, the danger is Japan becoming Detroit, (James Howard Kunstler):
Finally, I have one flat-out prediction, one I have made before but deserves repeating: Japan will be the first society to consciously opt out of being an advanced industrial economy. They have no other apparent choice really, having next-to-zero oil, gas, or coal reserves of their own, and having lost faith in nuclear power. They will be the first country to enter a world made by hand. They were very good at it before about 1850 and had a pre-industrial culture of high artistry and grace – though, granted, all the defects of human psychology.
Japan is trapped. It must maintain enough of a functioning industrial economy to support its fleet of crumbling nuclear reactors for an indeterminable period of time, perhaps centuries. Imagine Detroit with reactors.
Industrialization is supposed to bring more goods at lower costs to customers who have to work less in order to enjoy more. From cradle to grave, modernity promises more of everything for everyone.
Goods are not enjoyable or useful. For example: the promised mobility has degenerated in a set of unremarkable yet rigid rules. It is the traveling in drainage canals from noplace to noplace, from one slum to another slum in pursuit of … low quality, unsatisfactory goods!
The systemic costs of ‘goods’ are unaffordable to the system. The customers discover they cannot work because they are unemployed or they find the work is too hateful to bear. There is no enjoyment utility: the ever-multiplying poor struggle to survive while the rich increasingly and for good reason fear the poor.
Meanwhile, waste — which is the real product of modernity — overwhelms the natural life-support system for rich and poor alike. Modernity cannibalizes the capital the system needs to run. The waste products and the loss of capital — and their associated increase in costs — is why modernity is failing. The problems discussed by Kyle Bass and other analysts are all symptoms of extinguished capital.
The managers desperately seek solutions that don’t change anything because of the perceived costs of change. What they miss right under their noses is to resist change is to become Detroit … or worse. Changes are inevitable, they will occur as a result of intent or as a result of system breakdown … which in turn forecloses the possibilities of creative alternatives. It is best to seize the day … to assign costs where they belong and start making the hard choices about what we need to give up … so what remains can be made available to ourselves and our offspring. What is needed isn’t anything extraordinary, only restraint.
The establishment has nothing left, they are scraping the bottom of the ‘solution’ barrel. Everything is offered but energy conservation and doing with less. This is total nonsense … the end of it is at hand. There isn’t enough room on Planet Earth for unlimited humans + cars + associated ‘other goods’. Something has to go, otherwise, the world = Detroit.
Waste Based Society III: Solutions and Alternatives
Are there viable solutions and alternatives to the Energy intensive Waste Based Society we currently live in, which do not entail a return to Paleolithic levels of technology? Diner and TAE Commentariat member A. G. Gelbert outlines a myriad of technologies which might be employed to maintain a higher technological base for society.
RE
Discuss this article inside the Diner
Solutions and Alternatives to the Waste Based Society
by A. G. Gelbert
We are cursed with a rather effective propaganda machine that defends the status quo and works mightily to provide allegedly iron clad arguments exposing our desperate dependence on fossil fuels and the enormous debt we owe to them for our ‘wonderful civilization’. The media has cleverly weaved fact and fiction to present plausible arguments against the practicality of going cold turkey on fossil fuels and 100% on renewables. Not one word about the fact that fossil fuels are easy to meter and conveniently provide a constant revenue stream for the rich along with governmental control of a populace that simply cannot move or function without daily use of fossil fuels ever seems to be mentioned. Not one word about how renewables cannot be metered or taxed easily and how that feature gives everyone a large degree of independence aand flexibility in disaster situations to help themselves or a less fortunate neighbor is mentioned. On the other hand, the continuous and vociferous denial of the link between fossil fuels and environmental problems, regardless of scientific concensus on this very real link, never seems to go away either. The actual history of the industrial revolution involving some very brutal measures to coerce humans to abandon horses, as only one of many coercive measures, for tranportation and farming are always ignored and replaced with a stream of pejorative comments about horse dung in big cities. People did not want to get rid of their horses! I am not simply talking about city ordinances and fines targeting horses. Right around 1865 a big push began to sell farm machinery. Amazingly, a huge horse plague hit the U.S. that year that killed a massive amount of horses. No explanation beyond “Civil War stress” blarney was ever given. These horses were not just city horses in population centers but out in the country as well.
The move to horseless carriages began on the farm with steam power and hydrocarbon lubricants. The automibile came later along with the bone cancer. Bone cancer from the original automoblie fuel, benzene, is seldom mentioned by the media and apparently is considered no big deal in comparison to horse shit odor. Moving on to the early 20th century, Rockefeller has a waste product in his refinery cracking towers (after separating all those great heavy and light lubricants) called gasolene and he talks Henry Ford into modifying the carburators to run on it. Of course the ‘minor’ problem with benzene fuel may have helped make the switch. There were electric cars on the road at the time. Cleveland had wind generators creating electricity at that time! You’ll never guess what happened to them and the electric trolleys all over many towns in the USA. So, enough of that. Everyone here knows how predatory capitalism attempts to game the system to achieve price control and a monopoly. Once much more efficient and sustainable technologies are shoved aside by hook or by crook, the distorted and mendacious meme that our current technology is the result of friendly capitalist competition in the ‘free market’ is pushed. Predation occurs followed by propaganda versions of history. That is the real history of the industrial revolution in regard to our choices of energy production. Renewables got squeezed out, not because they couldn’t compete favorably, but because the pollution and health costs of fossil fuels got ‘externalized’. Along the way, the independence of the mostly agrarian American in energy production and use was crushed.
A love afffair with the car was fostered to the point that in the late 1920′s more Americans had cars than flush toilets. Of course they were better off, ecologically speaking, without flush toilets, but the point is the job of selling Americans on fossil fuels was a done deal by that time. So please remember that nobody was doing us any favors, like the media wants to claim; they were selling us something in order to concentrate wealth and power in a few hands. They were using us as a cash cow to the point of introducing planned obsolecence, rampant consumerism to keep the factories going and simultaneously thwarting moves to sustainability like Henry Ford’s plan to make cars out of hemp plastic in the early1940s. We like new stuff and are always looking for the latest model year of the car or whatever because we have been manipulated by experts to do so. It has absolutely nothing to do with our health, well being or happiness. Bernays really messed us up. Fast forward to the present where the witches brew of ecological harm brought about by industrialization has caught up with us. And NOW, all of a sudden, we just can’t live without all this ‘wonderful’ energy packed fossil fuel economy.
Methinks somebody wants to slap a guilt trip on the chumps so they agree to clean up the mess even though the media keeps claiming there isn’t really that much of a mess. We, the masses, are accused of being wasteful pigs that bred like rats thanks to fossil fuels.
Where to begin? How about the fact that family size has been decreasing, not increasing, througout the industrial revolution? That’s right. The numbers were baked in by 1800 and the wars slowed them down a bit. Louis Pasteur and Lister did a hell of a lot more to create our present population ‘problem’ than fossil fuels. Most of the key scientific advancements in medicine were not exactly high tech and fossil fuel dependent. A human makes it past 5 years of age and he has a huge chance of living out his 3 score and ten. It was the enormous reduction in infant mortality brought about by antiseptic procedures that caused the population explosion, not fossil fuels. It’s a stretch to say that fossil fuels alowed people to obtain clean water to wash their hands before delivering a baby, but I’m sure the media verbal contortionists would toss it out there to further muddy the waters of historical truth.
The much touted plumbing advancements that require machinery and factories powered by fossil fuels, while they did reduce disease in population centers and prolonged life, were setting us up for more fossil fuel use through improper humanure handling. I maintain that the main cause of our population explosion is knowledge of disease microbes, their propagation methods and our changes in hygiene as a result.
Edward Barnays
What about all this waste we now produce that we have been folded, spindled and mentally mutilated through Freud’s nephew Wall Street amygdala reptilian brain control propaganda? They set us up and now WE are the bad guys? They want us to shop till we drop and WE are the problem? And how much ‘waste’ do WE actually produce on a carbon footprint basis compared to the global 1%?
Well, Senator Bernie Sanders stated recently that less than 1% of the U.S. owns about 40% of the assets (I’m not talking about income increases although they have gotten the lion’s share over the last ten years as well). Yes, I know he talks about banks too but he mentions those 400 or so elite families every now and then. Now figure the carbon footprint of those people and compare it with the rest of us. All those endless films about diapers, milk gallons and so on used in our middle class lifetimes with the obligatory landfill mountains thrown in are nothing compared with the horrendous and gigantic amount of crap these families generate. Isn’t it amazing that when it comes to pollution and wasteful habits, we are ‘all in this together’? No attempt is made to segregate out the worst offenders. On the contrary, the poor and middle class are constantly demonized as being irresponsible useless eaters. It’s all quite Orwellian on the part of the media.
But yeah, we do waste and we have a waste problem that is real so let’s talk about it.
Waste can certainly destroy a society, species or most of the ecosphere if, as many point out, we continue with the ridiculous paradigm that we can industrially do multi-generational damage to the life support systems humans depend on and not define this as suicide. It’s almost like our nuclear nuts and oil fetish fucks have morphed us into a mass version of the heaven’s gate cult. Those people thought they could hitch a ride on a comet by commiting suicide. Every single step in industrializaton has, for anyone willing to do the TOTAL math, NOT been ecospherically cost effective. The fact that a small group of humans has temporarily benefited at the expense of the overwhelming majority of humans and all other earthlings right now, not to mention the obvious acceleration in environmental degradation promising a super bleak future, seems to go right over the heads of way to many otherwise intelligent people.
Just like the heaven’s gate cult, people are addicted to a dream that never was, PERIOD. All talk about this and that from our youth and how much fun we all had and how nostalgic we are for those nicer times is the exact same phenomenum of a drug addict longing for his first high. LISTEN UP! We are a function of the ecosphere. We DO NOT, despite all the best propaganda efforts of our scientific community, understand the mechanism of the ecosphere sufficently to tinker with it, let alone wantonly pollute it with “externalisms”. EXTERNALISMS!? That’s just some economist bullshit! There are NO externalisms inside the life bubble called the ecosphere; it just takes a while to catch up with you when you mine, bomb and toxify with chemicals NIMBY areas for a few centuries. We are there and yet our scientific community and our financial community and our political wheeler and dealer con-artists with their new techno death toys and ‘miracle’ GMO crops and drug after drug to replace patent expirations, new ripoff scams, more war profiteering and emotional button pushing divide and conquer racist crap just DO NOT GET IT (or maybe they do get it and are insanely trying to make hay out of it).
The people in charge of our dysfunctional clusterfuck are akin to that psycho Whiteapple that led the heaven’s gate cult. They will not change to a sustainable paradigm because THAT requires subordination to the reality that we are a product of the ecosphere and the humble acceptance that we do not understand it yet so, until we do, we must henceforth emulate natural processes of cradle to grave recycling in all industrial technology and outlaw destructive activities like war or perish. No, they prefer to insanely reduce the world population by environmental collapse in the ridiculous la-la land elite hope that then the ecosphere will cure itself and they can continue their merry resource extraction paradigm as if nothing happened. It won’t work because these reductionist morons in power with their scientific priesthood of techno nut balls are so full of pride from all their tremendous ‘contributions’ over the last two centuries that they cannot see the monstrous downside of the technology explosion and that, yes, technology can be developed and used in an environmentally friendly manner. They don’t want to do the work. They are supremely irresponsible and supremely greedy and incredibly stupid.
Instead of doing a rethink, they are just flooring the accelerator and increasing their propaganda blitz.
I am not against technology. Since about 1970 we have had the knowledge to use technology to produce an environmentally friendly and sustainable society free of poisons in food and industry in the scientific literature. It has been deliberately supressed time and time again. Imagine what it cost to cover the country with roads and power lines. Well, decentralized power, food and transportation would cost a hell of a lot less. It’s total bullshit that we can’t do this or that we are ‘hooked’ on oil or nuclear or natural gas. We could have switched away decades ago. In the 70s NASA used solar panels to bring electricity to a Navajo community which was not served by the local electric utilities in a southwestern state. It worked great and the utilities went ballistic. They wrote to NASA requesting the solar panel project be stopped because, even though those areas targeted by NASA were not adequately served by the utilities, the fossil fuel free energy would ‘force’ the utilities to lower their rates. NASA stopped the project.
The planet earth DOES NOT have an energy crisis. For you engineering types out there, just do the math on the energy required daily to lift trillions of tons of water vapor out of the rivers, lakes and oceans and deposit this at higher elevations in the form of rain and then try to tell me about how much it COSTS (ZERO!) and how we are running out of energy. What the planet earth has, is a HUMAN GREED AND STUPIDITY crisis among the 1%. But suppose we could dispense with all the agenda laced perjorative propaganda about renewables, agree to clean up the planet and eliminate fossil fuel, nuclear and any other kind of poisonous technology because we have no other choice?
Can it be done? Yes. Will it be done? Probably not. I just heard today (June 11, 2012) on the Thom Hartmann show that phytoplankton replacement in a bay in Maine has dropped 500% over a period of a decade or so. The phenomenum has now been confirmed as occurring globally. Phytoplankton produce approximately 50% of the oxygen on this planet through photosynthesis. They are not regenerating adequately because increased ppm of CO2 (now 400 ppm) is acidifying the oceans and killing them. Can the elite be so insane that they plan to meter our oxygen? I hope not. At any rate, we must accept that the fossil fuel economy is not an exercise in fun conveniences or a requirement to maintain ‘civilization’; it’s killing our oxygen supply now as well. We must switch to renewables.
In regard to available energy to maintain some level of ‘civilization’ with renewables, when I mentioned the world evaporation energy example, I wasn’t alluding to energy collection through hydroelectric power (although dams certainly help as long as salmon runs aren’t thwarted), but using this vast amount of energy available free to shed light on the scientifically bankrupt view of quantifying energy by using bomb calorimeters like we did in college and energy mass per mole in rapid oxidation. Nature has never done it that way. Everything in our culture always wants to scale up a process or else judge it as wanting. That is assbackwards from a sustainable biological process point of view. In our bodies, the reason we have enzymes lowering the energy of activation in myriad chemical reactions occurring per second is to keep us from overheating and/or rapid ph changes that would kill us but the fact is that the enzymes accomplish a task with less energy than a straight forward math computation of the chemical reaction energy requires.
Capillary processes in us are unconcerned with “stream head’” like scientists or engineers are when they want to build a dam yet they work just fine manipulating Bernoulli forces to use the absolute minimum energy needed to move that blood so the heart pump doesn’t have to work as hard against vessel friction and pressure changes. In our techno-love affair, everything we do is geared to centralized and maximum power. For example we really do not need a lot of stream head to power a house because we can gradually pump water up to a reservoir in our house to give us electricity on demand. But the techno math says you need X amount of head for Y amount of kilowatts. That’s only true if you need all of that all the time. Sure, not everyone lives by a river or a stream but that is simply a small example. A giant Sequoia pumps over one hundred gallons of water hundreds of feet up every day through transpiration. The tracheal elements can stretch water molecules 27 atmospheres as long as the vacuum holds. The technology to make artificial tree water pumps has been around for decades but our society is STUCK on the energy density per mole fixation like a teenager that wants a hot car to ride to school instead of a small electric rechargable scooter.
Have you heard about the roaring forties? That’s an area of latitude in the oceans of the southern hemisphere that is always turbulent. They alone could power the world’s energy demands after a ten year installation of wave and undersea current power collection systems that are already being deployed off of England and Scotland. In regard to corrosion issues with sea water and maintenance of deep water (massive pressures to deal with), I only ask that you consider technology equivalence hurdles that have long since been surmounted in nuclear power plants (the ultimate in corrosion challenges including hydrogen embrittlement that is not present with sea water) and oil undersea pipelines (pump sea water to a land reservoir and start the power cables from there as a cost effective low maintenance option). At present, ocean oil rigs (which are mostly metal) have sacrificial anodes placed on them so electrolysis in most areas is thwarted. The anodes are replaced as they are used up. And remember all we have learned through space exploration about metallurgy, high temperature insulation during re-entry and don’t forget microwave power transmission technology. We can do all this stuff. It’s really not as hard as putting a robot vehicle on Mars or building a space station in orbit.
It’s telling that Einstein described the photoelectric effect at the very beginning of the 20th century but the US government has had to be dragged kicking and screaming to develop solar panels (we only did it when we needed them in space) but it spent a fortune on the development of the bomb in the 30s while a large part of our populace was going hungry.
Have you ever wondered why the oil lobby never attacks nuclear power but spares no expense to demonize renewables with disingenuous propaganda and mendacity? Think about that a while. If you come to the conclusion that the nuclear power plants were put out there to make bomb material and get you to pay for it and were never, ever considered a viable alternative to fossil fuels for the production of electricity or a serious source of oil lobby competition, you win the prize.
There is also no excuse whatsoever for not using solar and electric power to run every single ship in the ocean. It would be child’s play to switch all automobiles and trucks to full electric as long we had geothermal, wind, tide and ocean current derived power 24/7, not to mention solar panels.
Do you know what oil tankers do after they offload the oil? They fill huge portions of the holds with sea water (for ballast) and then dump it when they get back to reload with oil. This massive pollution goes on day in and day out. We have a guaranteed continuous oil spill as long as we have a fossil fuel ocean tanker economy.
As for fertilizers and food production machinery requiring a massive amount of fossil fuels to feed 7 billlion humans, the fact is that using decentralized permaculture with humanure (after appropriate and low tech local processing to avoid disease pathogens) along with greenhouse technology for nordic climates can replace the fossil fuel required to run tractors, make fertilizer and insecticides and herbicides. I mention farm machinery because there is increasing evidence that plowing needs to be replaced by non-plowing with perennial crops in order to stop the massive top soil loss and lowered nutrition of crop yield (they look the same but don’t have the same nutritional content). Other posters here are up on humanure and they are right. I recommend anyone repulsed by this to think again. Feces are an inseparable part of being human and it’s high time we stopped with this Victorian idiocy of seeing it as bad stuff; it’s part of our salvation as a species. An added plus with humanure through the avoidance of chemical fertilizers is no more ocean dead zones and massive top soil degradation. Also the energy and water savings in not pumping human waste to be treated with chemicals (made with fossil fuels) in a sewage treatment plant would save billons of dollars.
Examples of how renewables can switch us off of fossil fuels quickly: www.euronews.com/2012/05/27/germany-breaks-solar-energy-record www.euronews.com/2012/06/06/solar-plane-completes-maiden-intercontinental-flight www.euronews.com/2012/03/05/sea-solution-to-future-energy-needs www.telegraph.co.uk/earth/energy/renewableenergy/3535012/Ocean-currents-can-power-the-world-say-scientists.html
Pelamis wave power device that looks like a giant snake: www.weirdlyodd.com/10-renewable-energy-sources/
Zero energy balance hotel: www.euronews.com/2012/05/16/go-green-get-growing
I think this can be done in TEN years, not forty: www.euronews.com/2012/05/18/in-40-years-every-home-every-building-will-be-a-power-plant-says-jeremy-rifki
Growing food and the fossil fuel ‘requirement’ is a dependency created by the fossil fuel industry but we CAN shake that dependency without mass starvation and depopulation: www.greenlivingtips.com/articles/85/1/Fuel-and-food.html
“The strategic goal of biofuel is to supplement or even replace fossil fuels, the amount of which is constantly and rapidly diminishing.” haitireconstruction.ning.com/page/biofuel-1
I’ve already mentioned my views on the population explosion and its causes but I wish to point out how the oil lobby has tried to make fossil fuel brownie points out of it.
Remember the green revolution of the 60s, 70s and 80s that supposedly caused the population explosion? The numbers are in. The yields are not statistically different with all the fossil fuel fertilizer, herbicides and insecticides than without them. The green revolution is a lie fostered by, you guessed it, the fossil fuel lobby. Their only valid claim is the fuel for machinery which now turns out to lower crop nutrition from top soil plowing degradation. This degradation is caused by a combination of chemical fertilizers and plowing (bare soil tends to blow away when dry or erode when wet) which leaches the soil of trace minerals needed to produce nutritious and tasty as opposed to bland crops. The way things stand right now, agricultural guidelines in the U.S. state that it’s okay to lose 4 tons of top soil per acre per year from ‘modern’ farming techniques. The government claims it is the price we pay for high ‘yields’. Are you comfortable with that? I’m not. Considering top soil regeneration takes over 100 years, I cannot believe we are doing anything but losing massive amounts every year.
And last but not least, the militaries of the world are the most voracious users of fossil fuel. We sure as hell do not need them to keep 7 billion fed and clothed. The U.S. Navy, in particular, has the top spot as fossil fuel user AND polluter.
We need gradual, decentralized trickle charge or slow pumping energy storage systems for sustainable humanity. Anything else is not viable for the planet. If we want to zip around at high speed and be able to have instant this and that, yes we have an energy crisis. If we want to emulate biological processes and eschew the love affair with higher energy density per mole of fossil and or nuclear poisons killing the planet, we don’t have an energy crisis.
Nature paces everything; so should we.
All that said, there is the 1% with their hubris and arrogance and there is the rest of humanity. The agenda of the 1% is a tad different from the rest of us. I agree the knockdown is coming. The people controlling the levers of innovation and adaptation in our governments and the elite parasites that own them want this knockdown so it will come. I maintain that the false notion of a causal relationship between a large population and a polluted, unsustainable, fossil fuel dependent human society is the driving force behind this elite desire for a knockdown. The elites are the only truly unsustainable population on this earth because of their mega-carbon footprints. So, in true Wall Street Orwellian fashion, they blame the bulk of the 7 billion humans for THEIR piggery and slavish dependency on fossil fuels. The 1% that owns our governments loves the predatory resource extraction paradigm despite the fact that some of them probably suspect that it will cause a population knockdown, not from lack of fossil fuels, but from environmental collapse. Billions of humans dying is considered a good thing by the 1%. They think it will solve the world’s environmental problems and provide a more manageable population of slaves. The 1% probably grumble about minimum gene pool diversity species population required in order to perpetuate homo sapiens. The 1% think robots will take care of all the ‘important’ work while medical technology available to the 1% will provide them with 150 year plus lifetimes. They are wrong and they are the cancer that is destroying humanity.
There’s a way to clean up this world and live sustainably. Killing off several billion is a straw man. It’s typical elite bullshit adding two an two and getting whatever answer keeps them in the catbird seat. The media will continue to block the truth from the people 24/7.
I apologize if I tried to cover too much ground here but this situation we are in has matured for well over a century and we need to see how we got here to understand, if we survive, how to prevent a new set of snakes from selling us snake oil in the future.
Feel free to pass all or any part of this rant with or without attribution. Everything I wrote can be researched free on the internet if you want to post links about horse plagues, NASA correspondence with utilities, Henry Ford and hemp plastic, Rockefeller chicanery, U.S. solar panel development reasons, Americans starving while the bomb was being developed, Bernays propaganda tools, etc.
A.G. Gelbert
Of God, Peak Oil and Turkeys…
Of God, Peak Oil and Turkeys …
Climate change- and Peak Oil deniers are like turkeys who gather in a corner of the farm convincing each other and the other turkeys that this mysterious circumstance called ‘Thanksgiving’ is a fraud. According to rumors that flare up like wildfires through the community then evaporate just as quickly, when this ‘giving of thanks’ event draws near The Great God stuffs the turkeys in a truck (whatever that is), takes them somewhere then has them all put to death! Turkey corpses are then wrapped in plastic (whatever that is) and shipped to supermarkets (whatever these might be). The rumors are highly disturbing to the turkeys even as some of the more perceptive among them notice that turkeys who leave the community never return.
“Pay no attention,” cry the deniers. “This obviously cannot be so: God is the turkeys’ best friend. Every day he brings more and more delicious food, as much as the turkeys can eat. The more food we eat the more we have available to eat. All this food and much more has been provided by God for as long as us turkeys can remember.”
“Certain as one day follows the next, this incredible bounty will go on forever. We dare not change anything or leave. To do so would have us … living like savages in caves!”
“Where are the old turkeys?” asks a thoughtful, young turkey. Where are they indeed: there are old turkeys and bold turkeys but no old, bold turkeys. Recently the climate denying-gobblers had a chance to see that the turkey-god is a farmer with an ax and a calculating mind. This came in the form of Senate testimony from the insurance industry.
It’s one thing for the pimply-faced teenaged brigade of energy company shills/morons to scorn scientists and for middle-American turkeys to believe them. It’s another thing altogether for the shills to smear the insurance industry. The warming-related disasters are costing the top insurance gangsters real money, these costs ricochet through related real estate and finance rackets:
Climate Change: Insurers Confirm Growing Risks, Costs
Stakeholders from the insurance industry met with members of the U.S. Senate to acknowledge the role global warming plays in extreme weather-related losses, and to issue a call for action.
Pat Speer
The politics of global warming have typically involved much debate as to the role climate change plays in growing weather-related risk. Yesterday, however, at a Capital Hill a press conference on the cost of climate change, debate was not on the agenda. Pointing to a year of history-making, $1 billion-plus natural disasters, representatives of Tier 1 insurance companies took a definitive stance with members of the U.S. Senate to confirm that costs to taxpayers and businesses from extreme weather will continue to soar because of climate change.
Representatives from The Reinsurance Association of America, Swiss Re and Willis Re and Ceres, a nonprofit organization that leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address a variety of sustainability challenges, joined Sens. Bernie Sanders (I-Vt.) and Sheldon Whitehouse (D-R.I.) yesterday to discuss the growing financial impact of global warming.
Reality about energy supplies begins to emerge and it’s as ugly for ‘Autoworld’ as Thanksgiving is for turkeys. Peak Oil has blitzed the Greek economy into the dumpster with stunning dispatch, so much so it seems beyond the ability of sensible Greeks to understand what happened to them. Greece isn’t a hedge fund or an over-leveraged investment bank peddling fubar MBS out of a back room but a modern, middle-class nation with a (semi)functioning government and a four-thousand year history: all that except for the history is gone … in a heartbeat. Fall asleep in Greece, wake up in Angola.
During the period of the Asian credit contraction or the Argentina default and crisis Latin America that took place during the late 1990s there were exceptions to malaise. The industrialized economies such as Japan and the US performed well. In 2012, the economy of entire world finds itself stuffed into the back of the truck heading for the freezer.
It really is different this time!
Forget the turkey gobble about ‘Peak oil in 2035′ or ‘energy self-sufficiency’. Without drastic change in attitude, the world is never going to get to 2015 in one piece. From an energy standpoint there is no difference between Germany and Greece … or Japan! Berlin (Tokyo) must sell cars to millions of turkeys or the lights go out. Peak oil drives a stake through the heart of the auto-sexy sales pitch. What happens next? Both Japan and Germany have carefully constructed the model post-modern energy-arbitrage value-added economy: Peak Oil destroys it. What rampages through Greece is getting ready to cum inside quivering Germany, possibly within months.
Ominously, fuel prices are rising to record levels even as the world slips into recession. This is a slowdown in credit expansion, without credit there are few funds available ‘on the sidelines’ to push up crude prices. What this means is that any spare change on the sideline is being burned up for nothing right now.
There are output declines in the UK, outliers in once-booming China, ongoing deflation as well as a new trade deficit in Japan, slowdowns in the countries which have depended on commodities sales to China and India: the EU is collapsing and the US is pincered between the need for more easing to keep debt costs under control and the steadily rising fuel prices amplified by more easing:
Figure 1: here is your Gasbuddy gift, red spreads across the US in the form of plus-four dollar gas prices. What sort of turkey will Gasbuddy bring in the future? Plus-five dollar gas or declining prices and faster declining ability to pay? Best to bet on declining employment and more poverty.
Energy
| PRICE* | CHANGE | % CHANGE | TIME | |
|---|---|---|---|---|
| BRENT CRUDE FUTR (USD/bbl.) | 125.520 | 0.180 | 0.14% | 20:00 |
| GAS OIL FUT (ICE) (USD/MT) | 1,030.000 | 1.750 | 0.17% | 20:00 |
| HEATING OIL FUTR (USd/gal.) | 325.400 | 1.110 | 0.34% | 20:01 |
| NATURAL GAS FUTR (USD/MMBtu) | 2.263 | -0.006 | -0.26% | 19:58 |
| GASOLINE RBOB FUT (USd/gal.) | 333.630 | 1.330 | 0.40% | 20:01 |
| WTI CRUDE FUTURE (USD/bbl.) | 106.640 | 0.300 | 0.28% | 20:00 |
Table from Bloomberg has Brent crude at a economy-crushing $125./barrel. The economic infrastructure has been built around an assumed $20./barrel forever. Crude costing more than $40 per barrel or so strands the entire fuel-wasting enterprise, this includes China. Meanwhile, the high fuel prices represent/require massively expanded credit. The reason for the credit in the first place was because there wasn’t enough cheap crude to satisfy all demand starting ten years ago! Credit access became a substitute for fuel and a way to ration it at the same time.
So far the current mini-spike hasn’t been able to push past last April’s high of $128./barrel for Brent. If the $128 level holds it indicates the world is too broke to afford higher prices. Prices pushing above that level indicate the turkeys’ best chances of buying their way past the consequences of their own waste are being hurled into the fire.
Greece’s oil problems were examined last June:
Figure 2: this chart is from Jonathan Callahan’s Energy Export Databrowser.Greece does not produce any petroleum energy to speak of: a few thousand barrels per day from offshore fields. It has to import fuel from overseas, mostly from Middle East producers such as Iran. Where does Greece get the hard currency to swap for petroleum overseas?From an energy standpoint Greece is insolvent. It once borrowed — euros — from banks to buy fuel. Now it has to borrow from new banks to pay off the old banks AND to buy the fuel. Greece is on the road to oblivion. It buys less fuel even as it falls further into debt. Without some drastic change Greece will not only default but collapse.Like the other countries, Greece obviously failed to earn enough from using the fuel to pay its energy bill otherwise it would not be insolvent.
Last Summer was really the EU’s last chance to put its energy house in order and get serious about conservation. It is too late when economies are stripped out there are no funds with which to ‘buy’ the saved btu’s. Greece from the ground:
“A harder Default To Come”
Wolf Richter
“We owed it to our children and grandchildren to rid them of the burden of this debt,” said Greek Finance Minister Evangelos Venizelos about the bond swap that had just whacked private sector investors with a 72% loss. While everyone other than the bondholders was applauding, the drumbeat of Greece’s economic horror show continued in its relentless manner.
In central Athens, a stunning 29.6% of the businesses ceased operations, up from 24.4% in August; in Piraeus 27.3%, a 10-point jump since March. The whole Attica region lost 25.6% of its businesses. “This worsening of the survival index in the commercial sector … shows that resistance is waning,” said Vasilis Korkidis, president of the National Confederation of Hellenic Commerce. “We must continue the battle of daily survival and keep our shops open,” he pleaded—while fourth quarter GDP was being revised down to -7.5% on an annual basis. The Greek economy has shrunk about 20% since 2008.
Unemployment is veering toward disaster. The overall rate of 21% in December, announced Thursday, was horrid enough, but youth unemployment rose to a shocking 51.1%, double the rate before the crisis. A record 1,033,507 people were unemployed, up 41% over prior year. Only 3,899,319 people had jobs—a mere 36.1% of a total population of 10.8 million!
No economy can service a gargantuan—and rapidly growing—mountain of debt when only 36.1% of its people contribute (by comparison, the US employment population ratio is 58.6%, down from 64.7% in 2000). Hence, another bout of red ink. The “cash deficit” at the end of 2011 hit €24.9 billion, 11.5% of GDP, far above the general budget deficit. Government-owned enterprises, such as the public healthcare sector, couldn’t pay their bills. Total owed their suppliers: €5.73 billion.
What a horror show! Richter doesn’t mention that the only way for Greece to escape its straitjacket is to either borrow more and roll over debt or to repudiate it. There is no way for Greece — or Germany — to repay Greece’s finance debts even if 100% of its citizens hold jobs. The debts are simply too enormous.
Greece Undergoes An Energy Cramdown.
Greece’s GDP has declined right along with energy consumption. This is no accident or coincidence. The fairy-tale increase in GDP that everyone loved so much was powered by credit expansion which leaked into fuel bourses. Credit enabled the virtuous cycle of bull markets and ever-rising asset prices. Customers could meet the cost of expensive fuel (and everything else) by taking on more debt. At the same time credit expanded — as it must — so that internal costs of that credit could be managed.
The problem is that expensive fuel is that it returns the same ‘nothing’ by its use as does the cheap stuff! $20 fuel is a bagatelle to waste, it subsidizes the $50,000 automobile and the $500,000 tract house. $125 per barrel crude oil is burning a Jackson Pollock in the fireplace. The mindless waste on a planet-wide scale digs a bottomless pit that economies are unable to climb out of. The automobiles and tract houses cease to be assets but become liabilities instead: ‘Welcome to Greece’.
Here is what the world’s economists ignore: that our Number One Investment for the past two-hundred years has been non-remunerative waste, paid for with an ‘asset’ that mandates its own ceaseless and perpetual increase. The beneficiaries of this waste have been a handful of very special turkeys. Like them, the economists insist that the waste is ‘productive’ and ‘progress’: that the wasting process is so fundamental to our way of life as to defy scrutiny.
Just like the turkey farmer, credit has been our best friend, the ready enabler of all our wants. The Credit God stuffed us with everything our hearts and stomachs desired, even as these became perverse then self-destructive. Waste for its own sake was elevated to a virtue, it became the basis of our economies.
With supply constrained relative to increasing worldwide demand, fuel costs rise until something important breaks, in 2008 it was the securitization industry and shadow banking, now looks to be repos and sovereign credit. The costs of fuel plus the debt needed to bid for it are breaking costs, countries can no longer borrow. Without credit there are vanishing chances of expanding GDP or to roll-over maturing debt … or to import fuel.
Here is the EU gas buddy (HT Zero Hedge):
Figure 3: Adding insult to injury: gasoline in Greece costs about $8.75 per US gallon, on the way to $50 per US gallon by way of black market profiteering and diminishing fuel supply. In the future, if Greeks want gas they will have to sell their children in order to afford it.
– Europe must borrow in order to obtain fuel even as the continent’s defective borrowing structure breaks down.
– The mercantile states such as Germany have been able to borrow against the accounts of their EU trading partners but now these partners are bankrupt. Unsurprisingly, the German economy is starting to contract.
– Europeans afford high priced fuel by cutting back on car purchases.
– Europe’s liabilities in euros are expanding dramatically along with the euro ‘rescues’ and bank bailouts. Germany has little choice but to exit the euro to escape mounting peripheral liabilities. Defending the euro would be suicide for Germany as would abandoning it: Germany chooses its poison.
– Euro-finance is a Ponzi-scheme, he who exits first escapes with something, the rest hold the bag. UK has exited the euro-concordat already, Spain looks to exit along with the Netherlands, France will exit after Sarkozy is ousted from his presidency. Germany cannot carry the bailout costs these other countries represent. As EU countries exit or default Germany will ditch the euro for the D-mark.
Germany is partially responsible for the multi-trillion euro ECB balance sheet. The collateral held by the ECB for its LTRO is deteriorating: there are margin calls. The central bank’s balance sheet is becoming largely unsecured debt. Germany encounters the First Law of Economics: the cost of managing surpluses becomes greater than the surpluses are worth. Selling all those cars turns out to be more than a dead loss.
Germany has been running persistent current account surpluses with the peripheral states since the introduction of the euro (click on for big).
Figure 4: Europeans have bankrupted themselves with their automobiles. Current accounts don’t lie, the credit imbalances are vendor financing within a fixed exchange rate regime, all for the benefit of German industrial firms. As European managers remain silent about the need to conserve energy, energy conservation as a natural consequence of credit breakdown is scything through the turkeys.
It is astounding that the Europeans would throw Greece into the pit, it is certain that they did not mean to do so, circumstances forced them to it. Too bad nobody is willing to face reality and throw the automobiles into the pit, instead.
Next goes Europe, itself. The Greek default closes the book on Europe in its current form, which is a lost cause. It is the end of the beginning: there is not going to be any ‘recovery’ or way back from the abyss that is now engulfing the continent. Some fragments here and there might save themselves for a little while, then like sparks from a bonfire be swept away by the wind. The crisis must now burn itself out: Europeans, look to yourselves and may your turkey-credit-God have mercy on your souls.