Off the keyboard of RE
Published on the Doomstead Diner on May 2013
Discuss this article at the Doomsteading Table inside the Diner
Note from RE: This article is another re-edit of discussions held on Reverse Engineering in June 2009 on the concepts of Rewilding, Primitive Living and Tribal Formation. As with Part I of this series I will be adding substantial new material to this post.
One of the long running arguments on Peak Oil revolved around whether we were bound in the end to return to the Stone Age. I generally argued that Stone Age devolution wasn’t necessary, we could return Sustainably to 1750s era technology, sail powered boats, horse drawn Plows, etc. I am rethinking that idea to some extent now.
One of my postulates was that all the metals we use, Iron, Steel, Aluminum etc are endlessly recyclable. They never really DISAPPEAR, they are always here in one form or another. As Iron Rusts, you can always smelt it back into usable form. At least you can so long as you have enough ENERGY to do so.
So let us look at the progress of Civilization through the Bronze Age and Into the Iron Age and finally the Plastic Age of Oil. In the early days, all the Blast Furnaces which created the Bronze tools were powered by Wood Furnaces mostly. What happened as a result? Many forests were burned down to produce a few Bronze Spear Points. As the Iron Age came about, lots of Coal was burned to smelt out the Iron. What happens when you run OUT of coal to recycle rusting iron? Eventually you do not have enough Energy to keep recycling the stuff into a useful form.
In the Medium term, say the next 1000 years or so, a Power Down to 1750s era technology seems likely and possible to me. However, really LONG term, once the total supply of fossil fuels has been depleted or becomes uneconomic to extract, it seems unlikely that there will be enough easily accessible Energy source to continue to run Forges and smelt metals. It would depend on mostly how much energy you could collect on a daily basis from the Sun, excluding either Geothermal or Fission processes which themselves are both dependent on having ICE machines for doing drilling and mining. You might small scale still smelt some metals, but overall I do not think you could collect enough energy to do this on a mass scale.
From this analysis, it appears to me that over the LONG term, most if not all Metals won’t be accessible or usable. That DOES sorta mean Stone Age technology, but not QUITE. Sailboats made of Wood are still possible, Sails made of Hemp fiber are still possible. Energy can still be collected to a certain extent, and the Work done by people can continue to build greater structres for energy collection. It will always take a lot of Human Labor and Maintenance tough to keep such structures functioning. For a good long while (perhaps the next 1000 years) we will be able to Scavenge the products of the Oil Era to maintain a lower level of technology based in large part on metals. Eventually though, most of that will disappear.
Long term, it probably is Stone Knives and Bearskins, as Spock said in “City on the Edge of Forever”. The buildup of our technologies has been wholly dependent on Energy even BEFORE Oil came to Rule the World, first the Forests got depleted and then the Fossil Fuels got depleted. Without some inexhaustible form of energy such as Fusion Power on earth, all we really have is the energy raining down from the Sun each day, and since the days when the first Bronze Spear Point was forged, that has NEVER been enough in one place to keep producing Bronze Spear Points. We had to keep GROWING, keep burning forest, keep digging up coal to keep producing all those Metals. We can never do that again really, we have to REVERSE ENGINEER our way OFF the METALS Jones as much as off the Oil Jones.
However, that does NOT mean the Stone Age of the Cavemen. Its more like Eskimos who made Kayaks using bones and sealskin. More like Lakota who had Teepees, more like Polynesians who had dugout Catamarans they explored the Pacific with. A tough life to be sure, with far fewer people on the Earth, but IMHO that is where we are bound for long term. Building what we can with our knowledge base out of RENEWABLE materials on the earth. Sorry, no more IPhones and no more Laptops, but you still will have a TeePee to shelter you from the elements, you still will be able to fish up a salmon with a Hemp woven net. At least so long as we have not already insured the death of ALL ocean life, in which case we are all TOAST. If that is not the case, I for one welcome the idea of a sustainable culture based on Stone Age technology. The Metals simply caused more problems and more destruction and ever bigger and more violent Wars. Over time here, we will leave the Metals behind, as we soon will leave the Oil behind. Only a few will be left at the end of this, but with luck they will be a better human, more in concert with GAIA,more a part of the total Ecosystem of the Earth operating in Harmony with her rhythms.
It will take EONS to get from here to there in all likelihood, and here at the Beginning of this exercise in Reverse Engineering, we will suffer a lot of pain. You can however be greatful for the fact you were the beneficiary for the last 100 or so years of Technology Burning Brightly before the Candle got extinguished. You probably will not live to see it completely go away either. Your children and their children though will have enormous adjustments to make. Eventually though they will FORGET the time of Oil, the time of conspicuous Consumption of the resources of the Earth. Those that make it through will be in Harmony with Nature, and GAIA will be better off for it.
I won’t be walking the Earth when this all comes to pass, but it will. I will See it from the Other Side. See you there also, my friends.
So, much to ponder on with respect to Reverse Engineering towards a Tribal Society, but it is not like it hasn’t been considered before. Below an entry from Wikipedia on How to Create a Tribal Society:
HOW TO CREATE A TRIBAL SOCIETY
“Here is some advice on how to create a tribal society for you and your friends. Whether its just for fun or if you’d like to get away with some of your close personal friends, this will tell you how to live primitively with the only rules being the ones you and your other tribe mates want.
1. Decide who else will be included in your tribe. You’ll need guys and girls. Around ten people will be a good start. Make sure all of these people are willing to come, otherwise it will be kidnap. Dont choose people who will be likely to whine or two people who hate each other. You really don’t want arguing!
2. Decide on a chief or several people to be a council to make decisions. Everyone needs to agree on this and having more than one person might be a good idea to keep anyone from becoming too controlling. If you do have one person, be sure that she/he is supported by the entire tribe. They need to be fair and want the best for your group.
3. Find a good location. It needs to be somewhere secluded so that no one will accidentally stumble on the village, it also needs to be near a source of fresh water and food. You will want to live some where with animals (if you will be hunting) wood (weapons, buildings etc.) and water.
4. Research history about the area. Study about native americans in your region. How did they eat and drink? What did they use as shelter? Also study about mistakes that communities made. One example is how a comunity failed because they lived upland, dumped waste upland, and fetched water from downhill. You can guess what happened. The poisons in their waste were in their drinking water, and they all died.
5. Decide on your village type. If it’s in a forest, you might consider tree houses to live in, in a desert, try underground dwellings or caves. There are all sorts of village types to use.
6. Before beginning any work on your village, decide on laws and punishments for those who break the laws. You will need this!! Example: If anyone steals, they will have to return twice the value of the object. Hopefully you wont need to use them!
7. Begin construction of the village, use only resources that can be found naturally in the area you’re building. You might want to still live in your current home while in construction.
8. After the village is built, gather or make things you’ll need. Again try to use natural resources, some things you’ll need are: blankets, clay jars for water, clothing to fit your surroundings, and weapons for use against wild animals (don’t bring guns or knives, use stones and slings, staffs, or any other weapon you can make using your surroundings).
9. Decide how you will cook and collect food. When considering how to collect food you have to decide whether hunting, foraging or farming would be best for your tribe, perhaps a combination would suit you best. Cooking food is also important, a communal fire pit is a good idea, be sure that the fire is far enough away from the shelters to be safe.
10. When you and the rest of your tribe are ready move out to the village.
* Make sure all of the people you are taking with you are in agreement about EVERYTHING, even a small dispute could cause trouble. * Know what edible plants are in the area of your tribe. * Make sure someone knows where you are going, just in case. * Make sure EVERYONE agrees, THIS IS NOT OPTIONAL. * Remember if your’re going to be isolated you will eventually have to have kids or your tribe will die out. Make sure you’re not opposed to this idea.”
RE- I’m still lurking but I had to comment on this great post. The fact that you have to recognize your own limitations is key. A lot of people don’t have that ability and that is what eventually causes problems. We have here in Texas the beginnings of a tribe. We have a leader and a council. One of the council members can sell any idea the leader and council agree needs to be sold. We are few (about 12 right now) and are developing 100 acres about 2 hours away from the city. i just hope we can get it done in time. more later….. — DEMOCRACY IS TWO WOLVES AND A LAMB VOTING ON WHAT TO HAVE FOR LUNCH. LIBERTY IS A WELL ARMED LAMB CONTESTING THE VOTE.
*12 people is a nice Core Group to start with, and 100 acres is a good size piece of dirt, assuming there is a good water supply? Not sure 2 hours out of the city is enough, though it depends on the city I suppose. Whereabouts are we talking about (generally speaking if you are Security conscious)?
*Note from RE: My opinions on Starter Size have changed over the years. Read through to the end to see how.
James Dakin has a rather inflammatory analysis of tribal dynamics for his Friday blog entry:
“Now, I’m going to write this post and inevitably some moron who somehow managed to hold on to his loyal minion status despite being dumber than a box of rocks is going to make a comment on how I’m a redneck cracker Klucker racist. Even with the following statement: racism is merely a tribal marker to help distinguish members of a group from outsiders. Yes, I understand it might be easy for me to sit and preach, being in the white male position and never having been exposed to discrimination other than being white in Hawaii, being a white male applying to a quota system job and being male in a divorce. The most blatant forms of racism are easy to condone. We speak of ignorance, since the speaker hasn’t mastered the highly educated method of hiding their true feelings. But, racism is a part of human nature. You can’t change it. Tree hugging, Birkenstock wearing, Volvo driving, non-meat eating Democratic voting asshats will implore us all to just get along. They’ll turn carpet muncher or enter into an inner-racial marriage ( before you throw accusations my way remember I’ve had two Mexican brides myself ) just to prove how enlightened they are. Just like the crude stereotypical redneck, they have no idea that playing the racist card is merely a survival trait.”
Well, I did not find this inflammatory at all, its common sense once you grasp the Tribal model. Its quite true that there are two separate Value Systems in place, the one for all People who are Members of the Tribe, and another for all People who are Not Members.
I thought I made this clear enough when I wrote about what would happen to two classes of people who tried to come here to the LGF when TSHTF. For my FRIENDS, I would WELCOME them, their assistance in helping the Tribe Survive is of Great Value to me. For my ENEMIES, they won’t get within 500 yards of the Perimeter, I’ll drop them on the spot without so much as a “How do you do?”. LOL.
Jimmy brings up the inevitable Racism question, which really is most valid in the US where we have become “multi-cultural” over the last 300 years as first Blacks were imported as Agricultural Slaves, then Chinese were imported as Railroad Slaves, then EVERYBODY got imported as slaves to keep the Ponzi running. NOW that it’s failing, they wanna Deport them all. LOL.
I lived in NYC for my early years, in a neighborhood called “Hell’s Kitchen.” Its just a short ways up from Chinatown, a stone’s throw from where the World Trade Center came crashing down. In those days in Hell’s Kitchen you had White Gangs and Puerto Rican Gangs and Black Gangs, you ALWAYS have Gangs form up of people with similar characteristics who come from similar backgrounds with similar beliefs. If that is not the most CAPTAIN OBVIOUS thing possible, I do not know what is.
As we spin down here, the likelihood in many places that have multicultural populations that they will divide up, but not necessarily always in a pure Racial distribution. In our current society, it has been going on long enough that similar economics and life experiences will bind Tribes together as much as Race does. Racism will play a part in the forming up of Tribes, but not the ONLY part by any means. Beyond that you have to consider the various CASES of being in different regions with different Racial distributions.
For instance, it might be really bad to be Black in Indianapolis, while it is really bad to be White in Chicago. Having visited Hawaii recently, I don’t think it would be good to be White OR Polynesian. They are gonna eat each other up.
This is one of those things that isnt a Moral question at all really, its a PRACTICAL question. Would *I* as a White Person have a real good chance at being an Accepted member of a Tribe of Aboriginal Australians, and would it be a good idea for me to move to the Outback just because its sparsely populated? How fucking STUPID would that be?
If you are a Black Person, a smart thing to do would be to go where there are LOTS of Black people relatively speaking, you won’t STICK OUT like a Sore Thumb! If you are a White person, go somewhere there are LOTS of White people, relatively speaking. If you have your choice here, pick Alaska over Sweden. We got more freaking White People per capita than anywhere else on EARTH.
Of course as it spins down, its not ENOUGH just to be White or Black to make the Grade in your Tribe. A next step is your Religion. You might live in Baghdad and look just like your neighbor, but he is Sunni and you are Shiite. You might live in Kabul, but you are Buddhist and your neighbor is Muslim. Then there is your Caste. In Calcutta, you might be Brahman or Sudra, in Boston you might be Old Money or New Money, whatever. The closer the people you affiliate with are to you in ALL respects, Race, Religion, Caste, Politics etc, the more cohesive your Tribe is. A Tribe is a COLLECTIVE. You do not function well in a Collective by being DIFFERENT. You function in a collective by conforming to the needs of the collective above your own individual needs. That is of course anaethema to the Individualist paradigm we are sold on in our decaying system.
Remember the words of Locutus of Borg. “Resistance is Futile”. The Collective ALWAYS wins in the end. The trick here is to join up with a Collective of sufficient size and strength that is the closest match to your Individual point of view and place in the society. Bad idea to be a Rich White Boy joining up with a bunch of Gang Bangers from Harlem. Bad idea to be a Black Lawyer in Hyannis Port. As you Tribe Up, you want to be as Homogenous as possible here in ALL things, from the way you LOOK to the way you THINK and even to how you FEEL. Then you can operate as a UNIT,and everything inside the Unit is Good, everything outside the Unit is Evil. Long as your Unit is strong, RESISTANCE IS FUTILE. So said Locutus of Borg, and it is the TRUTH.
Fast forward 4 years to today, and all these concerns are still with us, nowadays in even more sharp relief than they were back in 2009. In her recent post What Would it Take to get to a Steady State Economy, Gail Tverberg of Our Finite World details once again all the difficulties involved in downshifting off the Oil Economy.
In our recent Blog-a-thon about the modern day Mountain Man Eustace Conway, all the difficulties of separating yourself from the decaying state and monetary system were glaringly apparent, and not even all the Diners can agree on whether his methodology is good or bad, necessary or unnecessary.
Even more than the Energy and Goobermint Regulations issues you have to deal with though is a much more involved problem, which is that of the nature of Human Relationships and Personalities, which shape themselves inside the societies they form up under. While it is comfortable and natural for say a Kalahari Bushman to live under Tribal codes, taboos, rules and restrictions, this doesn’t come second nature to a Metrosexual Stockbroker from the City of London. LOL. Redefining codes which can work to transition Homo Industrialis to Homo Neo-Tribalis is the most difficult of problems, even more difficult than figuring out where all the Energy & Food to perpetuate the species will come from.
When I first began this adventure of observing the Collapse of Industrial Civilization and trying to figure out Means & Methods of Survival, the first and most popular (still is) means applied is that of the Individual or Extended Family Doomsteader, where fairly well-to-do people with means enough to do so purchase their own Rural Doomstead in the 50-100 Acre territory, set it up as a Permaculture Farming arrangement and then in many cases arm themselves to the TEETH with AR-15s, sawed off Shotguns and RPGs and ready themselves to defend their Gardens from Waves of oncoming Zombies exiting the Big Shities. LOL.
While this Mad Max type End Game scenario may play itself out, it is probably not the most likely one. More likely is there will be Political Reformations as large Nation-States Collapse and reform into more Local Regional Units. Stuff like occurred in the old Soviet Union circa 1917 after the collapse of the Romanoff Dynasty with Collectivization is a likely possibility in many neighborhoods. Here in the FSofA, Fascist takeover of individual Doomsteads by TBTF Corporations like Monsanto and Conagra is a likely scenario, in fact it has been occurring for a long time already.
Sorry, a Dozen or even 2 Dozen people on a Doomstead is not going to be able to Protect & Defend said Doomstead either from Zombies or the Political Machinations of the State as it devolves. To have some ability to negotiate this period successfully, you will need your OWN Political Unit of decent size, at least sufficient to hold weight inside your local neighborhood. My conclusion thus was the best means of Survival through the Downspin is Tribal Formation, seeking to create Tribes at MINIMUM the size of Dunbar’s Number, around 150, but better in the neighborhood of 500-1000 Human Souls.
Discussions here inside the Diner have evolved and refined the concept some now, and a number of us have begun the Sustaining Universal Needs (SUN) Project here on the Diner, to define social parameters and physical needs for a Community of this size to form up as a Planned Community, beginning first in Cyberspace as a Phyle, then migrating out to the Real World as a Tribe on Physical Property. It remains a Work in Progress, and we invite other interested parties to work with us in developing this plan. We hope to have a general Prospectus for a new Non-Profit Organization up in the next few months. You will read more about it here on the pages of the Doomstead Diner as it progresses. Meanwhile, we seek ideas and input from all folks now aware of the Ongoing & Oncoming Collapse of Industrial Civilization.
From the Keyboard of Surly1
Originally published on the Doomstead Diner on May 12, 2013
Discuss this article here in the Diner Forum.
Plenty of doom and doom-related happenings on the domestic and international front this week, so let’s go right to the videotape:
Across the pond in Greece, where Question Mark and the Austerians are administering the same sort of save-the-rich economic policies that plutocrats like Pete Peterson so dearly wants to bring to the FSA, youth unemployment has reached a staggering 60 per cent.
While the overall unemployment rate rose to 27 percent, according to statistics service data released on Thursday, joblessness among those aged between 15 and 24 jumped to 64.2 percent in February from 59.3 percent in January. Youth unemployment was 54.1 percent in March 2012.
“It is by far the highest youth unemployment rate in the euro zone, highlighting the difficulties young people face in entering the labor market despite government incentives to create jobs,” said economist Nikos Magginas at National Bank.
Athens has lowered the minimum monthly wage for those under 25 years by 32 percent to about 500 euros to entice hiring.
Note that last succulent little datapoint, and keep it in your pocket when the solons in DC look up from Benghazi! BENGHAZI!! BENGHAZI!!!!!!!!! long enough to recommend a lowering of the minimum wage, or pass a bill to eliminate overtime wage payments.
As our friend Joe P. posted earlier in the week, researchers have once again discovered the glaringly obvious, a link between racism and stupidity. Whouda thunk it?
Findings taken from numerous research projects strongly indicate that prejudice, racism and intolerance are more likely to be present in individuals with greater cognitive rigidity, less cognitive flexibility and lower integrative complexity.Despite their important implications for interpersonal behaviors and relations, cognitive abilities have been largely ignored as explanations of prejudice.
We proposed and tested mediation models in which lower cognitive ability predicts greater prejudice, an effect mediated through the endorsement of right-wing ideologies (social conservatism, right-wing authoritarianism) and low levels of contact with out-groups. In an analysis of two large-scale, nationally representative United Kingdom data sets (N = 15,874), we found that lower general intelligence (g) in childhood predicts greater racism in adulthood, and this effect was largely mediated via conservative ideology.
A secondary analysis of a U.S. data set confirmed a predictive effect of poor abstract-reasoning skills on antihomosexual prejudice, a relation partially mediated by both authoritarianism and low levels of intergroup contact. All analyses controlled for education and socioeconomic status.
Original here. This is well known by those in power, who have thoughtfully provided these people their own reality-free 24-hour Cable News Network.
“If voting changed anything they would make it illegal”
Although I am a pretty political creature, I tend to eschew politics on the Diner blog. The reasons for that are that there is a time and place for everything, and secondly, I share the apparent presupposition of most Diners that electoral politics is a sham and dumb show conducted every four years to keep we muppets amused. With that in mind as background, I proudly ginned up the following segue, citing as additional evidence of mass stupidity the reelection of Terry Sanford in South Carolina this week. South Carolina has been the crazy uncle living in the attic of American politics ever since, oh, say 1859. But it never trotted out its stuff more aggressively than it did this week, and elevating the serial philanderer, trespasser, liar, adulterer, and misuser of state funds to noble office. Proof positive that debating cardboard cutouts of Nancy Pelosi in. the absence of having anything to say for yourself is really all you need to be elected in South Carolina. This person says it best, the unvarnished, unpolished, wholly unedited letter from a mad-as-shit South Carolinian:
Dear Fellow South Carolinians of the First District,
What the fuck are you people thinking? Mark Sanford, really? Way to keep us in the running, as the shitass craziest state of the nation. One more fuck-up like this and we’ll surpass even Florida — home of child killers, cannibals and roach eaters! The “Palmetto State”, my ass. I think the “Facepalm State” is becoming increasingly more accurate here.
I have to hand it to you though–go big or go home, right? On the same ballot where you elected Mark Sanford, that two-timing turd, you also voted–by a majority of 65%, no less–to protect the sanctity of marriage from scary gay people. Why shart quietly when you can shit the whole bed, am I right? The irony is intoxicating and it makes me puke.
We all know that South Carolina is a conservative bastion–no Democrat has won here in 30 years. Elizabeth Colbert Busch had the qualifications, ran a strong campaign and was leading Sanford in the polls late into the campaign. Realizing that Sanford couldn’t beat Colbert Busch, one-on-one, he had to invoke the name of that Satanist Minx, Nancy Pelosi as the straw man to gain traction. And with all of the cognitive skills of Pavlov’s dogs, you clownfuckers fell for it.
Where is the outrage of 1998, when the Clinton administration was nearly tanked over a blow job? And who was leading the charge in the furor against Clinton’s infidelity back then? None other than fucking white Grimace, himself, Newt Gingrich–you know, that other adulterous goat diddler that you elected as Republican presidential nominee last year.
So what gives, South Carolina? Is this insanity a cry for help or is it, more likely, a stunt for more attention? Were we paying too much attention to Mississippi again? You’re like the pretty blonde with the dazzling smile that boils the pet rabbit at the first hint of rejection.
And don’t pretend like this recent spate of cray-cray is a fluke, either. We also have you to thank for Joe “You lie!” Wilson, and racist hypocrite Strom Thurmond who fathered a child with his parents’ 16 year old black housekeeper. “There’s not enough troops in the army to force the Southern people to break down segregation and admit the Nigra race into our theaters, into our swimming pools, into our homes, and into our churches” But you’re totally down with porking them ain’t ya, eh, Strom?
There is much to love about South Carolina: the food, the gentility of its people, the mellifluous accent, and we can certainly appreciate colorful characters. We dig eccentricity! But hypocrisy is unbecoming, and so is stupidity in the face of facts.
Too bad Congressman-elect Sanford won’t be able to luxuriate in the after-glow of his win. He’ll be tied up in court defending the charge of trespassing onto his ex-wife’s property. I wonder if he’ll repay the state of South Carolina the money he used for his Argentinian booty call. Surely he will because he’s all about “family values” and responsible government spending.
I just snorted mint julep through my nose! You know what, First District? All y’all can kiss my motherfucking ass– that’s right, all y’all ignorant motherfuckers!!
A Formerly Proud South Carolinian
A truly well done rant. Wish I had said that.
As the journalists would say, “add stupidity.” We offer up this article on the overreach of law enforcement. Free Lilly-May Allen!!!
A girl aged ten was told by police that she could be arrested for causing criminal damage – over a game of hopscotch.
Lilly-May Allen was playing with a friend on a grid she had chalked on the pavement in front of her home when a marked police van pulled up.
An officer warned the girls that using chalk on the pavement was criminal damage and they could be arrested for it, before driving off.
But the girls did not understand what they had done wrong and Lilly-May is now reluctant to play outside, according to her father.
After Lilly-May told her parents about the incident, they called the police to clarify the law, but officers refused to confirm whether drawing a hopscotch grid in chalk on the pavement was an offence – even though it washes away in the rain.
The girl’s father, Bob Allen, 51, who runs his own karaoke business, said: ‘The policeman said to her that what she had done was criminal damage and she could be arrested. He then drove off.
‘She didn’t come into the house for a while and didn’t tell us straight away because she thought I was going to tell her off for being naughty.
‘She couldn’t even remember what the policeman had told her it was – only criminal something.’
He added: ‘She is only ten and didn’t know what she had done wrong.
‘I rang up the police and asked if chalking up a hopscotch grid was an offence and they wouldn’t say yes or no and said it was a grey area.
‘I’m angry and upset and if it was against the law then the policeman should have knocked on our door and said something.’
Mr Allen, who lives in a three-bedroom semi-detached home in Ramsgate, Kent, said the incident on Monday had knocked his daughter’s confidence about playing outside.
As as long as we’re piling on the gobshites in what is rapidly becoming the “stupidity” edition of The Week That Was in Doom, let us turn to that gift which keeps on giving, Sen. James Imhofe (R-Saturn):
“The Obama Administration’s cover up of Benghazi is the greatest conspiracy of all time, even greater than the Protocols of the Elders of Zion, which happens to be totally true by the way.”
All this in a week where the Heritage Foundation managed to put out a factually laughable report attributing trillions of dollars to the future costs of immigration. The fact that the report was a tissue of bad assumptions lashed together by a proven bigot seemed to be no impediment.
James DeMint resigned from the Senate (as a representative of South Carolina) some months ago — so he could get a big pay raise to be the head of the conservative Heritage Foundation.
What better place to be rewarded with seven-figures at a think tank, when this is your big thought:
DeMint said if someone is openly homosexual, they shouldn’t be teaching in the classroom and he holds the same position on an unmarried woman who’s sleeping with her boyfriend — she shouldn’t be in the classroom.
Naturally as head of the Heritage Foundation, DeMint used his first big project — critiquing immigration reform to keep those big “ideas” flowing.
One of the co-authors of the Heritage Study claming immigration reform would add $6.3 trillion to the deficit, Jason Richwine, advocated barring immigrants from entering the United States based on their IQ in 2009.
Really getting their Confederate Dollars’ worth the Heritage Foundation.
Yesterday I posted about how former Senator, freak, and current Heritage Foundation President Jim DeMint managed to put out a factually laughable immigrant bashing report put together in large part by a bigot.
But the bigot, Jason Redwine, is so much, so very much more:
The Heritage Foundation’s Jason Richwine, who co-authored the think tank’s study claiming immigration reform will cost trillions of dollars, contributed two articles to a “nationalist” website about Hispanic incarceration rates, Yahoo News reported Thursday. Richwine came under fire after the Washington Post reported Wednesday that his Harvard dissertation argued Hispanics have lower IQs than Caucasians and that the United States should screen immigrants based on their IQ scores.
Meanwhile in reality, which is NOT a whiter shade of pale:
A record seven-in-ten (69%) Hispanic high school graduates in the class of 2012 enrolled in college that fall, two percentage points higher than the rate (67%) among their white counterparts, according to a Pew Research Center analysis of new data from the U.S. Census Bureau.
Looks like it is time for resign again Jim DeMint.
South Carolina again. Caveat emptor.
In other doom-related news this week, the Center for Food Safety has caught the FDA admitting that chicken meat contains arsenic. Skip the chicken when taking mom to Sunday afternoon dinner for Mother’s Day today.
Attorneys at Center for Food Safety (CFS) filed a lawsuit on behalf of CFS, the Institute for Agriculture and Trade Policy (IATP) and seven other U.S. food safety, agriculture, public health and environmental groups to compel the Food and Drug Administration (FDA) to respond to the groups’ three year-old petition which calls for immediate withdrawal of FDA’s approval of arsenic-containing compounds as feed additives for food animals. Filed the same day Consumer Reports released an alarming study on antibiotic resistance in turkey, the lawsuit highlights yet another gaping hole in FDA oversight of animal feed additives.
Arsenic is commonly added to poultry feed for the FDA-approved purposes of inducing faster weight gain on less feed, and creating the perceived appearance of a healthy color in meat from chickens, turkeys and hogs. Yet new studies increasingly link these practices to serious human health problems.
. . .
“FDA leadership is asleep at the switch, if not turning a blind eye to public health,” said David Wallinga, MD, a physician with the IATP. “Seven years ago, IATP blew the whistle on FDA’s indifference to arsenic being needlessly fed to chickens and turkeys. More than a decade ago, we sounded the alarm on how FDA let the routine feeding of drugs to chickens and turkeys help ensure that Americans would eat meat often contaminated with bacteria resistant to multiple antibiotics. We are filing suit because nothing much has changed.”
Some years ago I read a biography of Rasputin, who reportedly dosed himself with arsenic every day as a preventative against assassination. Rasputin was astute enough to realize that his proximity to the Czarina placed him in mortal danger from opportunists in the Czar’s court. In the fullness of time, they did indeed assassinate Rasputin, but he shrugged off the initial doses of poison like after dinner brandy. Disposing of Rasputin required the assassins to shoot him multiple times, wrap him in chains and throw his body into the river. I offer this anecdote in the hopes that regular dosings of arsenic will have a similar salutary effect for those of us who dine regularly at the Doomsday Diner. Bon appetit!
Elsewhere, in a thoughtful and detailed look at the excesses of the FSA Security State, Peter Van Buren writing for Tom dispatch describes appalling detail just how deep the Washington rabbit hole really goes with respect to whistleblowers. A truly Kafkaesque tale.
Robert MacLean is a former air marshal fired for an act of whistle-blowing. He has continued to fight over seven long years for what once would have passed as simple justice: getting his job back. His is an all-too-twenty-first-century story of the extraordinary lengths to which the U.S. government is willing to go to thwart whistle-blowers.
First, the government retroactively classified a previously unclassified text message to justify firing MacLean. Then it invoked arcane civil service procedures, including an “interlocutory appeal” to thwart him and, in the process, enjoyed the approval of various courts and bureaucratic boards apparently willing to stamp as “legal” anything the government could make up in its own interest.
And yet here’s the miracle at the heart of this tale: MacLean refused to quit, when ordinary mortals would have thrown in the towel. Now, with a recent semi-victory, he may not only have given himself a shot at getting his old job back, but also create a precedent for future federal whistle-blowers. In the post-9/11 world, people like Robert MacLean show us how deep the Washington rabbit hole really goes.
The Whistle Is Blown
MacLean joined the Federal Air Marshal Service (FAMS) in 2001 after stints with the Air Force and the Border Patrol. In July 2003, all marshals received a briefing about a possible hijacking plot. Soon after, the Transportation Safety Administration (TSA), which oversees FAMS, sent an unencrypted, open-air text message to the cell phones of the marshals cancelling several months of missions for cost-cutting reasons. MacLean became concerned that cancelling missions during a hijacking alert might create a dangerous situation for the flying public. He complained to his supervisor and to the Department of Homeland Security’s inspector general, but each responded that nothing could be done.
It was then that he decided to blow the whistle, hoping that public pressure might force the TSA to reinstate the marshals’ flights. So MacLean talked to a reporter, who broadcast a story criticizing the TSA’s decision and, after 11 members of Congress joined in the criticism, it reversed itself. At this point, MacLean had not been identified as the source of the leak and so carried on with his job.
A year later, he appeared on TV in disguise, criticizing the TSA dress code and its special boarding policies, which he believed allowed marshals to be easily identified by other passengers. This time, the TSA recognized his voice and began an investigation that revealed he had also released the 2003 text message. He was fired in April 2006. Although the agency had not labeled that message as “sensitive security information” (SSI) when it was sent in 2003, in August 2006, months after MacLean’s firing, it issued a retroactive order stating that the text’s content was indeed SSI.
A Whistleblower’s Catch-22
That disclosing the contents of an unclassified message could get someone fired for disclosing classified information is the sort of topsy-turvy situation which could only exist in the post-9/11 world of the American national security state.
The full story will reward the reader. Suffice it to say that at the same time Guantanamo now holds “86 prisoners who have been carefully vetted by the U.S. military, the FBI, the CIA, and so on, and found to have done nothing for which they could be charged or should be imprisoned and who have been cleared for release– there is no place to release them to, especially since the majority of them are Yemenis and President Obama has imposed a moratorium on transferring any prisoner to Yemen.”
Thus indefinite detention, which is constitutionally prohibited, and which should properly be anathema to the American justice system, is the legal legacy we are leaving our children and grandchildren. That relatively few Americans are aware of or care about this should be startling. “No charges, no trials, but never getting out of prison: that would once have been associated with the practices of a totalitarian state.”
“At the same time no one, not George W. Bush, Dick Cheney, Donald Rumsfeld, Condoleezza Rice, or other top officials involved in setting up such a global system of injustice, sweeping up the innocent with the guilty, and subjecting them to horrors without end (including now force-feeding) will ever be brought to justice in an American court, nor will anyone involved in the system of rendition, torture, or abuse.” The Obama legacy will be that of having institutionalized the worst anti-constitutional excesses of the Bush years, and having sold them with a charming, intelligent brown face. Had John McCain as President tried to do the same thing, liberals and fellow travelers would have stopped this country in its tracks. In 2008 people went to the ballot box to elect Obama as a repudiation of the Cheney-Bush regime. Upon leaving offoce Obama will not only have institutionalized the incursions of the Bill of Rights to which we most objected, but also having insured that no accountability will ever be visited upon the neocons who let us into a pointless, illegal, and immoral war.
And then Carl Herman, or whoever posts things up over at the estimable Washington’s Blog, wraps it all up in a ball for us in a post sure to appeal to doomers of all stripes with Why America Fell So Far … So Fast.
All Empires Crash Soon After They Reach Their Peak
Thomas Jefferson said, “Dissent is the highest form of patriotism.” And because I love my country, I frequently criticize America’s shortcomings in the hopes of making her better.
But the truth is that the United States is not unusual … it is just like all other empires which have hit their peak and then quickly crashed.
. . .
The indications are always the same:
- The financialization of the economy, moving from manufacturing to speculation;
- Very high levels of debt;
- Extreme economic inequality;
– And costly military overreaching.
. . .
PhD economist MarcFaber states:
How [am I] so sure about this final collapse?
Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.
[Quoting 18th century Scottish historian Alexander Fraser Tytler:] The average life span of the world’s greatest civilizations has been 200 years progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage”
[Where is America in the cycle?] It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical “society cycle.” … The U.S. is somewhere between the phase where it moves “from complacency to apathy” and “from apathy to dependence.”
In other words, America’s rapid fall is not really that novel after all.
This article also cites Jared Diamond’s excellent book “Collapse”, whose conclusions I will not discuss here, is that will be the subject of another post that I had been planning for quite some time. The article over on Washington’s blog is quite good. Don’t miss it.
Closer to home, Tamerlan Tsarniev has reportedly been interred at a burial site in a Muslim cemetery outside of Richmond Virginia. You might well think the dead are dead, let them rest in peace, whatever their transgressions in this life.
The Virginia woman whose actions led to Boston Marathon bombing suspect Tamerlan Tsarnaev being buried about 30 miles north of her Richmond home said the angry backlash from local officials, some cemetery neighbors and online critics has been unpleasant, but she has no regrets.
“I can’t pretend it’s not difficult to be reviled and maligned,” Martha Mullen told The Associated Press in a telephone interview Friday. “But any time you can reach across the divide and work with people that are not like you, that’s what God calls us to do.”
Some of my neighbors think otherwise. A so-called “friend” opened up a thread on his Facebook page in criticism that allowed the butt-picking-finger-sniffing contingent to reveal its howling id. Stunning. As HL Mencken once observed, “No one ever went broke underestimating the intelligence of the American public.” The reflexive hysteria even manifests itself on the local Craigslist site. I found myself yesterday shopping for an old beater truck, which I could use to haul mulch for Contrary. Under the “rants and raves” section I found these offerings from my esteemed fellow citizens:
- That piece of shit deserves to be dug up and tossed in a trash pile like every other man, woman, and child that worships islam
- Now that we know he’s buried so close to here (a 2 hour drive), I know what I will do. I’m gonna eat me a big slab of pork baby back ribs and a laxative. Then I’m gonna drive up there, drop my pants and shit my bowels on his grave.
- people they brought that pig shit that bombed Boston to Virginia and secretly buried him on OUR SOIL!!!!!!!!
I say we start a petition to have him and every other muslim UNBURIED and thrown in the trash dump of any state EXCEPT Virginia
Muslims are pissed cause he wasn’t buried in the place he died in? fuck islam, fuck muslims, I’m pissed cause that pig shit is buried here in Va.
- its our new slogan Welcome to Virginia where we will handle other states garbage
All above (sic).
In closing, I offer you this piece of wisdom: never think it can’t get worse. It can, and will. Your neighbors will insist.
Off the keyboard of Jim Quinn
Published on The Burning Platform on April 23, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
“The real hopeless victims of mental illness are to be found among those who appear to be most normal. Many of them are normal because they are so well adjusted to our mode of existence, because their human voice has been silenced so early in their lives that they do not even struggle or suffer or develop symptoms as the neurotic does. They are normal not in what may be called the absolute sense of the word; they are normal only in relation to a profoundly abnormal society. Their perfect adjustment to that abnormal society is a measure of their mental sickness. These millions of abnormally normal people, living without fuss in a society to which, if they were fully human beings, they ought not to be adjusted.” – Aldous Huxley – Brave New World Revisited
The political class set in motion the eventual obliteration of our economic system with the creation of the Federal Reserve in 1913. Placing the fate of the American people in the hands of a powerful cabal of unaccountable greedy wealthy elitist bankers was destined to lead to poverty for the many, riches for the connected crony capitalists, debasement of the currency, endless war, and ultimately the decline and fall of an empire. Ernest Hemingway’s quote from The Sun Also Rises captures the path of our country perfectly:
“How did you go bankrupt?”
Two ways. Gradually, then suddenly.”
The 100 year downward spiral began gradually but has picked up steam in the last sixteen years, as the exponential growth model, built upon ever increasing levels of debt and an ever increasing supply of cheap oil, has proven to be unsustainable and unstable. Those in power are frantically using every tool at their disposal to convince Boobus Americanus they have everything under control and the system is operating normally. The psychotic central bankers, “bought and sold” political class, mega-corporation soulless chief executives and corporate controlled media use propaganda techniques, paid “experts”, talking head “personalities”, captured think tanks, and the willful ignorance of the majority to spin an increasingly dire economic descent as if we are recovering and getting back to normal. Nothing could be further from the truth.
There is nothing normal about what Ben Bernanke and the Federal government have done over the last five years and continue to do today. Truthfully, nothing has been normal since the mid-1990s when Alan Greenspan spoke the last truthful words of his lifetime:
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
The Greenspan led Federal Reserve created two epic bubbles in the space of six years which burst and have done irreparable harm to the net worth of the middle class. Rather than learn the lesson of how much damage to the lives of average Americans has been caused by creating cheap easy money out of thin air, our Ivy League self-proclaimed expert on the Great Depression, Ben Bernanke, has ramped up the cheap easy money machine to hyper-speed. There is nothing normal about the path this man has chosen. His strategy has revealed the true nature of the Federal Reserve and their purpose – to protect and enrich the financial elites that manipulate this country for their own purposes.
Despite the mistruths spoken by Bernanke and his cadre of banker coconspirators, he can never reverse what he has done. The country will not return to normalcy in our lifetimes. Bernanke is conducting a mad experiment and we are the rats in his maze. His only hope is to retire before it blows up in his face. Just as Greenspan inflated the housing bubble and exited stage left, Bernanke is inflating a debt bubble, stock bubble, bond bubble and attempting to re-inflate the housing bubble just in time for another Ivy League Keynesian academic, Janet Yellen, to step into the banker’s box. This genius thinks Bernanke has been too tight with monetary policy. It seems inflated egos are common among Ivy League economist central bankers who think they can pull levers and push buttons to control the economy. Results may vary.
The gradual slide towards our national bankruptcy of wealth, spirit, freedom, self-respect, morality, personal responsibility, and common sense began in 1913 with the secretive creation of the Federal Reserve and the imposition of a personal income tax. Pandora’s Box was opened in this fateful year and the horrors of currency debasement and ever increasing taxation were thrust upon the American people by a small but powerful cadre of unscrupulous financial elite and the corrupt politicians that do their bidding in Washington D.C. The powerful men who thrust these evils upon our country set in motion a chain of events and actions that will undoubtedly result in the fall of the great American Empire, just as previous empires have fallen due to the corruption of its leaders and depravity of its people. Creating a private central bank, controlled by the Wall Street cabal, and allowing the government to syphon the earnings of workers through increased taxation has allowed politicians the ability to spend, borrow, and print money at an ever increasing rate in order to get themselves re-elected and benefit the cronies, hucksters and bankers that pay the biggest bribes. None of this benefit the average American, who sees their purchasing power systematically inflated and taxed away. This is not capitalism and it is not a coincidence that war and inflation have been the hallmarks of the last century.
“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It is no coincidence that the century of total war coincided with the century of central banking.” – Ron Paul
As you can see, the bankruptcy of our country and our culture began gradually, accelerated after Nixon closed the gold window in 1971, really picked up steam in 1980 when the debt happy Baby Boom generation came of age, and has “suddenly” reached maximum velocity as we approach the true fiscal cliff. There were many checkpoints along the way where fatefully bad choices were made. They include the New Deal, Cold War, Great Society, Morning in America, Dotcom New Paradigm, Housing Wealth Retirement Plan, Obamacare, and present belief that creating more debt will solve a problem created by too much debt. The Federal Reserve allowed interventionist politicians to fight two declared wars (World War I, World War II), fight five undeclared wars (Korea, Vietnam, Gulf, Afghanistan, Iraq), conduct hundreds of military engagements around the globe, occupy foreign countries, begin a war on poverty that increased poverty, begin a war on drugs that increased the amount of available drugs, and finally start a war on terror that has increased the number of terrorists and pushed us closer to national bankruptcy. The terrorists have already won, as the explosion of stupidity and irrational fear has allowed those in power to acquire more power and dominion over our lives.
“We live surrounded by a systematic appeal to a dream world which all mature, scientific reality would reject. We, quite literally, advertise our commitment to immaturity, mendacity and profound gullibility. It is as the hallmark of the culture. And it is justified as being economically indispensable.” - John Kenneth Galbraith
When I critically scrutinize the economic, political, financial, and social landscape at this point in history, I come to the inescapable conclusion that our country and world are headed into the abyss. This is most certainly a minority viewpoint. The majority of people in this country are oblivious to the disaster that will arrive over the next decade. Some would attribute this willful ignorance to the normalcy bias that infects the psyches of millions of ostrich like iGadget distracted, Facebook addicted, government educated, financially illiterate, mass media manipulated zombies. Normalcy bias refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to inform the populace about the impending disaster. The assumption that is made in the case of the normalcy bias is that since a disaster hasn’t occurred yet, then it will never occur. It also results in the inability of people to cope with the disaster once it occurs. People tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.
The unsustainability of our economic system built upon assumptions of exponential growth, ever expanding debt, increasing consumer spending, unlimited supplies of cheap easy to access oil, impossible to honor entitlement promises, and a dash of mass delusion should be apparent to even the dullest of government public school educated drones inhabiting this country. I don’t attribute this willful ignorance to normalcy bias. I attribute it to abnormalcy bias. In a profoundly abnormal society, adjusting your thinking to fit in appears normal, but is just a symptom of the disease that has infected our culture. There is nothing normal about anything in our society today. If you were magically transported back to 1996 and described to someone the economic, political, financial and social landscape in 2013, they would have you committed to a mental institution and given shock therapy.
Even though we’ve been in a 100 year spiral downwards, things still appeared relatively normal in 1996 when Greenspan uttered his “Irrational Exuberance” faux pas that so upset his Wall Street puppet masters. The ruling class had not yet repealed Glass-Steagall (pre-requisite for pillaging the muppets), created the internet bubble, fashioned the greatest control fraud in world history (housing bubble unrecognized by Ben Bernanke), or taken advantage of mass hysteria over 9/11 to begin the never ending war on terror and expansion of the Orwellian state. The citizens, and I use that term loosely, of this country have allowed those in control of the government and media to convince them the situation confronting us is just a normal cyclical variation that will be alleviated by tweaking existing economic policies and trusting that Ben Bernanke will pull the right monetary levers to get us back on course. The stress inflicted on their brains in the last thirteen years of bubbles and wars has made the average person incapable of distinguishing between normality and abnormality. What they need is slap upside of their head. Is there anything normal about these facts?
- The Federal Reserve’s balance sheet in 1996 consisted of $422 billion, of which 91% were Treasury securities. Today it consists of $3.25 trillion, of which only 56% are Treasury securities, and the rest is toxic home mortgages, toxic commercial mortgages, and whatever other crap the Wall Street banks have dumped on their books. Their balance sheet is leveraged 57 to 1 and Bernanke has promised his Wall Street bosses he will add another $750 billion before the year is out. Is there anything normal about a central bank adding twice as much debt to its balance sheet in less than twelve months than existed on its entire balance sheet in 1996?
- The National Debt at the end of fiscal 1996 was $5.25 trillion. It increased by $250 billion that year. The GDP of the country was $7.8 trillion. Our national debt as a percentage of GDP was only 67% and our annual deficit was only 3% of GDP. At the time, the country was worried about these outrageous levels of debt. Today the National Debt stands at a towering $16.8 trillion. It has increased by a staggering $1.12 trillion in the last twelve months. The GDP of the country today is $15.7 trillion. Our national debt as a percentage GDP has soared to 107%. Our annual deficits now exceed 7% of GDP on a consistent basis. Our budgets are on automatic pilot, with the $20 trillion level to be breached by 2016. Is it a normal state of affairs when the GDP of your country rises by 100% over seventeen years, while your debt rises by 320%?
- Total government spending (Federal, State, Local) in 1996 totaled $2.7 trillion, or 35% of GDP. Today total government spending is $6.3 trillion, or 40% of GDP. In 1979, before the belief in government became a religion, total government spending was only 31.5% of GDP (27% in 1965). Are you receiving twice the service from government than you received in 1996? Are you safer from terrorists due to the massive expansion of the police state? Are your kids getting a much better education than they did in 1996? Have the undeclared wars benefitted you in any way, other than tripling the price of gas? Are the higher wage taxes, real estate taxes, school taxes, sewer fees, utility fees, phone fees, gasoline taxes, permit fees, and myriad of other government charges worth it? Is it normal for government to account for almost half of our economy?
- In 1996 personal consumption expenditures accounted for 67% of GDP, while private domestic investment accounted for 16% of GDP and we ran small trade deficits of 1% of GDP. Today, consumer spending accounts for 71% of GDP (despite the storyline about consumer retrenchment), while domestic investment has contracted to 13% of GDP and our trade deficits have surged to almost 4% of GDP. The Federal government has expanded their piece of the GDP pie by 130% since 1996, with the Department of War accounting for the bulk of the increase. Saving and capital investment is now penalized in this country. Is it normal for a country to borrow, consume and bleed itself to death?
- Consumer credit outstanding totaled $1.2 trillion in 1996, or $4,500 per every man, woman and child in the country. Today, the austere balance is now $2.8 trillion, or $8,800 per every man, woman and child inhabiting our debt saturated paradise. The more than doubling of consumer debt would be acceptable if wages were rising at a similar rate. But that hasn’t been the case, as wages have only advanced from $3.6 trillion in 1996 to $7.0 trillion today. With even the massively understated CPI showing 50% inflation since 1996 and 23% more Americans in the working age population (45 million), real wages have advanced by 30%. Using a true measure of inflation, real wages have fallen. Total credit market debt in 1996 was $19 trillion, or 243% of GDP. Today total credit market debt sits at an all-time high of $56.2 trillion, or 358% of GDP. Is it normal for credit market debt to increase at three times the rate of GDP?
- In 1996, personal income totaled $6.6 trillion, with wages accounting for 55% of the total, interest income on savings accounting for 12% and government entitlement transfers accounting for 14%. Today personal income totals $13.6 trillion, with wages accounting for 51% of the total, interest income on savings plunging to 7% due to Bernanke’s “Screw a Senior Zero Interest Policy”, and Big Brother entitlement transfers skyrocketing to 18%. In what Orwellian dystopian society is taking money from wage earners and redistributing it to non-wage earners considered personal income? Is it normal for a government to punish savers and makers in order to benefit the borrowers and takers?
- Prior to the financial collapse and during the mid-1990s prudent risk-averse savers could get a 4% to 5% return on money market accounts. Since the Wall Street created worldwide financial collapse, Ben Bernanke, at the behest of these very same Wall Street banks, has reduced short term interest rates to 0%. The result has been to transfer $400 billion per year from the pockets of savers and senior citizens into the grubby hands of bankers that have destroyed our economy. The prudent are left earning .02% on their savings, while the profligate bankers can borrow for 0% and earn billions by re-depositing those funds at the Federal Reserve. In what bizarro world this be a normal state of affairs?
- Total mortgage debt outstanding in 1996, before the epic Wall Street produced housing bubble, was $4.7 billion. Today, even after the transfer of almost $1 trillion of bad debt to the balance sheet of the American taxpayer, the amount of mortgage debt is an astounding $13.1 trillion. Despite home values rising since 1996, there are 20% of all households still in a negative equity position. Total household real estate equity was 60% in 1996, plunged below 40% in 2009, and has only slightly rebounded to 47% today because Wall Street dumped the bad mortgages on the backs of the American taxpayer. Is it normal for mortgage debt to triple and home equity to plunge in a rationally functioning world? Is it normal when 25% of all existing home sales are distressed sales and another 30% are sales to Wall Street hedge funds like Blackrock?
- In 1996 there were 200 million working age Americans, with 134 million (67%) in the labor force, 127 million (63.5%) employed, and 66 million (33%) not in the labor force. Today there are 245 million working age Americans, with 155 million (63%) in the labor force, 143 million (58%) employed, and 90 million (37%) supposedly not in the labor force. The number of working age Americans has increased by 22.5%, while the number of those employed has advanced by only 12.5%. The population to employment ratio has reached a three decade low as millions have given up, been lured into college by cheap plentiful government debt, or developed a mysterious ailment that has gotten them into the SSDI program. Is it normal for millions of Americans to leave the labor force when the economy is supposedly recovering?
- In 1996 there were 25.5 million Americans on food stamps, or 9.6% of the population, costing $24 billion per year. Today there are 47.8 million Americans on food stamps, or 15% of the population, costing $75 billion per year. Historically, the number of people in this program would rise during recessions and recede when the economy recovered, just as a safety net program should function. According to our government keepers the economy has been in recovery since late 2009. The number of people entering the food stamp program has gone up by 7 million since the recession officially ended. This is not normal. Either the government is lying about the recession or they are screwing the taxpayer by encouraging constituents to enter the program in an effort to gain votes. Which is it?
- The price of oil averaged $20 per barrel in 1996 and it cost you $1.20 per gallon to fill your tank. Oil averaged $85 per barrel in 2012 and currently hovers around $90 per barrel. Most Americans are now paying between $3.50 and $4.00 per gallon to fill their tanks. This result seems abnormal considering the propaganda machine is proclaiming we are on the verge of energy independence. After two Middle East wars, 6,700 dead American soldiers, 50,000 wounded American soldiers, and $1.5 trillion of national wealth wasted, this is all we get – a tripling in gas prices and creation of thousands of new terrorists?
You have to have a really bad case of normalcy bias to be able to convince yourself that everything that has happened since 1996 is normal. Every fact supports the reality that we’ve entered a period of extreme abnormality and our response as a nation thus far has insured that a disaster of even far greater magnitude is just over the horizon. Anyone with an ounce of common sense realizes the social mood is deteriorating rapidly. We are in the midst of a Crisis period that will result in earth shattering change, but the masses want things to go back to normal and don’t want to face the facts. The cognitive dissonance created by reality versus their wishes will resolve itself when the next financial collapse makes 2008 look like a walk in the park. But, until then most will just stick their heads in the sand and hope for the best.
Loving Your Servitude
“Liberty is lost through complacency and a subservient mindset. When we accept or even welcome automobile checkpoints, random searches, mandatory identification cards, and paramilitary police in our streets, we have lost a vital part of our American heritage. America was born of protest, revolution, and mistrust of government. Subservient societies neither maintain nor deserve freedom for long.” – Ron Paul
The most disgraceful example of abnormality that has infected our culture has been the cowardice and docile acquiescence of the citizenry in allowing an ever expanding police state to shred the U.S. Constitution, strip us of our freedoms, and restrict our liberties. Our keepers have not let any crisis go to waste in the last seventeen years. They have also taken advantage of the willful ignorance, childish immaturity, extreme gullibility, historical cluelessness, financial illiteracy and techno-narcissism of the populace to reverse practical legislation and prey upon irrational fears to strip the people of their constitutionally guaranteed liberties and freedoms. If you had told someone in 1996 the security measures, laws, and police agencies that would exist in 2013, they would have laughed you out of the room. Every crisis, whether government created or just convenient to their agenda, has been utilized by the oligarchs to expand the police state and benefit the crony capitalists that profit from its expansion. The character of the American people has been found wanting as they obediently cower and beg for protection from unseen evil doers. The propagandist corporate media reinforces their fears and instructs them to submissively tremble and implore the government to do more. The cosmic obliviousness and limitless sense of complacency of the general population with regards to a blatantly obvious coup by a small cadre of sociopathic financial elite and their army of bureaucrats, lackeys and jackboots is a wonder to behold.
The 1929 stock market crash and ensuing Great Depression was primarily the result of excessively loose Federal Reserve monetary policy during the Roaring 20’s and the unrestrained fraud perpetrated by the Wall Street banks. The 1933 Glass-Steagall Act was a practical 38 page law which kept Wall Street from ravenously raping its customers and the American people for almost seven decades. The Wall Street elite and their bought off political hacks in both parties repealed this law in 1999, while simultaneously squashing any effort to regulate the financial derivatives market. The day trading American public didn’t even look up from their computer screens. Over the next nine years Wall Street went on a fraudulent feeding frenzy rampage which brought the country to its knees and then held the American taxpayer at gunpoint to bail them out. The Federal Reserve arranged rescue of LTCM in 1998 gave the all clear to Wall Street that any risk was acceptable, since the Fed would always bail them out. Just as they did in the 1920’s, the Federal Reserve set the table for financial disaster with excessively low interest rates and non-existent regulatory oversight.
The downward spiral of our empire towards an Orwellian/Huxley merged dystopian nightmare accelerated after the 9/11 attacks. Within one month those looking to exert hegemony over all domestic malcontents had passed the 366 page, 58,000 words Patriot Act. Did the terrified masses ask how such a comprehensive destruction of our liberties could be written in under one month? It is apparent to anyone with critical thinking skills that the enemy within had this bill written, waiting for the ideal opportunity to implement this unprecedented expansion of federal police power. Electronic surveillance of our emails, phone calls and voice mails, along with warrantless wiretaps, and general loss of civil liberties was passed without question under the guise of protecting us. Next was the invasion of a foreign country based upon lies, propaganda and misinformation without a declaration of war, as required by the Constitution. Our government began torturing suspects in secret foreign prisons. The shallow, self-centered, narcissistic, Facebook fanatic populace has barely looked up from texting on their iPhones to notice that we have been at war in the Middle East for eleven years, because it hasn’t interfered with their weekly viewing of Honey Boo Boo, Dancing With the Stars, or Jersey Shore. They occasionally leave their homes to wave a flag and chant “USA, USA, USA”, as directed by the media, when a terrorist like Bin Laden or Boston bomber is offed by our security services, but for the most part they can live their superficial vacuous lives of triviality unscathed by war.
The creation of the Orwellian Department of Homeland Security ushered in a further encroachment of our everyday freedoms. They attempted to keep the masses frightened through a ridiculous color coded fear index. Little old ladies, people in wheelchairs and little children are subject to molestation by lowlife TSA perverts. Military units conduct “training exercises” in cities across the country to desensitize the sheep-like masses, who fail to acknowledge that the U.S. military cannot constitutionally be used domestically. DHS considers military veterans, Ron Paul supporters, and Christians as potential enemies of the state. The use of predator drones to murder suspected adversaries in foreign countries, while killing innocent men, women and children (also known as collateral damage), has just been a prelude to the domestic surveillance and eventually extermination of dissidents and nonconformists here in the U.S. We are already becoming a 1984 CCTV controlled nation. DHS has been rapidly militarizing local police forces in cities and towns to supplement their jackbooted thugs. Obama’s executive orders have given him the ability to take control of industry. He can imprison citizens without charges for as long as he deems necessary. Attempts to control gun ownership and shutdown the internet is a prologue to further government domination and supremacy over our lives when the wheels come off this unsustainable bus.
The last week has provided a multitude of revelations about our government and the people of this country. The billions “invested” in our police state, along with warnings from a foreign government, and suspicious travel patterns were not enough for our beloved protectors to stop the Boston Marathon bombing. After stumbling upon these amateur terrorists by accident, the 2nd responders, with their Iraq war level firepower, managed to slaughter one of the perpetrators, but somehow allowed a wounded teenager to escape on foot and elude 10,000 donut eaters for almost 24 hours. The horde of heavily armed, testosterone fueled thugs proceeded to bully and intimidate the citizens of Watertown by illegal searches of homes and treating innocent people like criminals. The government completely shut down the 10th largest metropolitan area in the country for an entire day looking for a wounded 19 year old. The people of Boston obeyed their zoo keepers and obediently cowered in their cages.
The entire episode was an epic fail. The gang that couldn’t shoot straight needed an old man to find the bomber in his backyard boat. The people of Boston exhibited the passivity and subservience demanded by their government. Since the capture of the remaining terrorist, the shallow exhibitions of national pride at athletic events and smarmy displays of honoring the police state apparatchiks who screwed up – allowing the attack to occur and looking like the keystone cops during the pursuit of the suspects, has revealed a fatal defect in our civil character. We are living in a profoundly abnormal society, with millions of medicated mindless zombies controlled by a vast propaganda machine, who seemingly enjoy having their liberties taken away. Most have willingly learned to love their servitude. For those who haven’t learned, the boot of our vast security state will just stomp on their face forever. We’re realizing the worst dystopian nightmares of Orwell and Huxley simultaneously. This abnormalcy bias will dissipate over the next ten to fifteen years in torrent of financial collapse, war, bloodshed, and retribution. Sticking your head in the sand will not make reality go away. The existing social, political, and financial order will be swept away. What it is replaced by is up to us. Will this be the final chapter or new chapter in the history of this nation? The choice is ours.
“If you want a vision of the future, imagine a boot stamping on a human face – forever.
- George Orwell
“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution” -Aldous Huxley, 1961
Off the keyboard of Michael Snyder
Published on Economic Collapse on April 17, 2013
Discuss this article at the Economics Table inside the Diner
Is the United States about to experience another major economic downturn? Unfortunately, the pattern that is emerging right now is exactly the kind of pattern that you would expect to see just before a major stock market crash and a deep recession. History tells us that when the price of gold crashes, a recession almost always follows. History also tells us that when the price of oil crashes, a recession almost always follows. When both of those things happen, a significant economic downturn is virtually guaranteed. Just remember what happened back in 2008. Gold and oil both started falling rapidly in July, and in the fall we experienced the worst financial crisis that the U.S. had seen since the days of the Great Depression. Well, a similar pattern seems to be happening again. The price of gold has already crashed, and the price of a barrel of WTI crude oil has dropped to $86.37 as I write this. If the price of oil dips below $80 a barrel and stays there, that will be a major red flag. Meanwhile, we have just seen volatility return to the financial markets in a big way. When volatility starts to spike, that is usually a clear sign that stocks are about to go down substantially. So buckle your seatbelts – it looks like things are about to get very, very interesting.
Posted below is a chart that shows what has happened to the price of gold since the late 1960s. As you will notice, whenever the price of gold rises dramatically and then crashes, a recession usually follows. It happened in 1980, it happened in 2008, and it is happening again…
A similar pattern emerges when we look at the price of oil. During each of the last three recessions we have seen a rapid rise in the price of oil followed by a rapid decline in the price of oil…
That is why what is starting to happen to the price of oil is so alarming. On Wednesday, Reuters ran a story with the following headline: “Crude Routed Anew on Relentless Demand Worries“. The price of oil has not “crashed” yet, but it is definitely starting to slip.
As you can see from the chart above, the price of oil has tested the $80 level a couple of times in the past few years. If we get below that resistance and stay there, that will be a clear sign that trouble is ahead.
However, there is always the possibility that the recent “crash” in the price of gold might be a false signal because there is a tremendous amount of evidence emerging that it was an orchestrated event. An absolutely outstanding article by Chris Martenson explained how the big banks had been setting up this “crash” for months…
In February, Credit Suisse ‘predicted’ that the gold market had peaked, SocGen said the end of the gold era was upon us, and recently Goldman Sachs told everyone to short the metal.
While that’s somewhat interesting, you should first know that the largest bullion banks had amassed huge short positions in precious metals by January.
The CFTC rather coyly refers to the bullion banks simply as ‘large traders,’ but everyone knows that these are the bullion banks. What we are seeing in that chart is that out of a range of commodities, the precious metals were the most heavily shorted, by far.
So the timeline here is easy to follow. The bullion banks:
- Amass a huge short position early in the game
- Begin telling everyone to go short (wink, wink) to get things moving along in the right direction by sowing doubt in the minds of the longs
- Begin testing the late night markets for depth by initiating mini raids (that also serve to let experienced traders know that there’s an elephant or two in the room)
- Wait for the right moment and then open the floodgates to dump such an overwhelming amount of paper gold and silver into the market that lower prices are the only possible result
- Close their positions for massive gains and then act as if they had made a really prescient market call
- Await their big bonus checks and wash, rinse, repeat at a later date
While I am almost 100% certain that any decent investigation by the CFTC would reveal that market manipulating ‘dumping’ was happening, I am equally certain that no such investigation will occur. That’s because the point of such a maneuver by the bullion banks is designed to transfer as much wealth from ‘out there’ and towards the center, and the CFTC is there to protect the center’s ‘right’ to do exactly that.
You can read the rest of that article right here.
There are also rumors that George Soros was involved in driving down the price of gold. The following is an excerpt from a recent article by “The Reformed Broker” Joshua Brown…
And over the last week or so, the one rumor I keep hearing from different hedge fund people is that George Soros is currently massively short gold and that he’s making an absolute killing.
Once again, I have no way of knowing if this is true or false.
But enough people are saying it that I thought it worthwhile to at least mention.
And to me, it would make perfect sense:
1. Soros is a macro investor, this is THE macro trade of the year
so far(okay, maybe Japan 1, short gold 2)
2. Soros is well-known for numerous market aphorisms and neologisms, one of my faves being “When I see a bubble, I invest.” He was heavily long gold for a time and had done well while simultaneously referring to it publicly as a speculative bubble.
3. He recently reported that he had pretty much exited the trade in gold back in February. In his Q4 filing a few weeks ago, we found out that he had sold down his GLD position by about 55% as of the end of 2012 and had just 600,000 shares remaining. That was the “smartest guy in the room” locking in a profit after a 12 year bull market.
4. Soros also hired away one of the most talented technical analysts out there, John Roque, upon the collapse of Roque’s previous employer, broker-dealer WJB Capital. No one has heard from the formerly media-available Roque since but we can only assume that – as a technician – the very obvious breakdown of gold’s long-term trend was at least discussed. And how else does one trade gold if not by using technicals (supply/demand) – what else is there? Cash flow? Book value?
5. Lastly, the last public interview given by George Soros was to the South China Morning Post on April 4th. He does not mention any trading he’s doing in gold but he does reveal his thoughts on it having been “destroyed as a safe haven”
It is also important to keep in mind that this “crash” in the price of “paper gold” had absolutely nothing to do with the demand for physical gold and silver in the real world. In fact, precious metals retailers have been reporting that they have been selling an “astounding volume” of gold and silver this week.
But that isn’t keeping many in the mainstream media from “dancing on the grave” of gold and silver.
For example, New York Times journalist Paul Krugman seems absolutely ecstatic that gold has crashed. He seems to think that this “crash” is vindication for everything that he has been saying the past couple of years.
In an article entitled “EVERYONE Should Be Thrilled By The Gold Crash“, Business Insider declared that all of us should be really glad that gold has crashed because according to them it is a sign that the economy is getting better and that faith in the financial system has been restored.
Dan Fitzpatrick, the president of StockMarketMentor.com, recently told CNBC that people are “flying out of gold” and “getting into equities”…
“There have been so many reasons, and there remain so many reasons to be in gold,” Fitzpatrick said, noting currency debasement and the fear of inflation. “But the chart is telling you that none of that is happening. Because of that, you’re going to see people just flying out of gold. There’s just no reason to be in it.Traders are scaling out of gold and getting into equities.”
Personally, I feel so sorry for those that are putting their money in the stock market right now. They are getting in just in time for the crash.
As CNBC recently noted, a very ominous “head and shoulders pattern” for the S&P 500 is emerging right now…
A scary head-and-shoulders pattern could be building in the S&P 500, and this negative chart formation would be created if the market stalls just above current levels.
“It’s developing and it’s developing fast,” said Scott Redler of T3Live.com on Wednesday morning.
Even worse, volatility has returned to Wall Street in a huge way. This is usually a sign that a significant downturn is on the way…
Call options buying recently hit a three-year high for the CBOE’s Volatility Index, a popular measure of market fear that usually moves in the opposite direction of the Standard & Poor’s 500 stock index.
A call buy, which gives the owner the option to purchase the security at a certain price, implies a belief that the VIX is likely to go higher, which usually is an ominous sign for stocks.
“We saw a huge spike in call buying on the VIX, the most in a while,” said Ryan Detrick, senior analyst at Schaeffer’s Investment Research. “That’s not what you want to hear (because it usually happens) right before a big pullback.”
The last time call options activity hit this level, on Jan. 13, 2010, it preceded a 9 percent stock market drop that happened over just four weeks, triggered in large part by worries over the ongoing European debt crisis.
And according to Richard Russell, the “smart money” has already been very busy dumping consumer stocks…
What do billionaires Warren Buffet, John Paulson, and George Soros know that you and I don’t know? I don’t have the answer, but I do know what these billionaires are doing. They, all three, are selling consumer-oriented stocks. Buffett has been a cheerleader for US stocks all along.
But in the latest filing, Buffett has been drastically cutting back on his exposure to consumer stocks. Berkshire sold roughly 19 million shares of Johnson and Johnson. Berkshire has reduced his overall stake in consumer product stocks by 21%, including Kraft and Procter and Gamble. He has also cleared out his entire position in Intel. He has sold 10,000 shares of GM and 597,000 shares of IBM.
Fellow billionaire John Paulson dumped 14 million shares of JP Morgan and dumped his entire position in Family Dollar and consumer goods maker Sara Lee. To wrap up the trio of billionaires, George Soros sold nearly all his bank stocks including JP Morgan, Citigroup and Goldman Sachs. So I don’t know exactly what the billionaires are thinking, but I do see what they’re doing — they are avoiding consumer stocks and building up cash.
… the billionaires are thinking that consumption is heading down and that America’s consumers are close to going on strike.
So what are all of those billionaires preparing for?
What do they know that we don’t know?
I don’t know about you, but when I start putting all of the pieces that I have just discussed together, it paints a rather ominous picture for the months ahead.
At some point, there will be another major stock market crash. When it happens, we will likely see even worse chaos than we saw back in 2008. Major financial institutions will fail, the credit markets will freeze up, economic activity will grind to a standstill and millions of Americans will lose their jobs.
I sincerely hope that we still have at least a few more months before that happens. But right now things are moving very rapidly and it is becoming increasingly clear that time is running out.
Off the keyboard of RE
Published on the Doomstead Diner on April 3, 2013
Discuss this article at the Frostbite Falls Daily Rant inside the Diner
In the most recent elections over in Italy, a bunch of Beppe Grillo MPs were elected, the ruling Party lost some seats, the coalition they had for running Italy fell apart, so for the last Month, Italy has had “No Goobermint”. Wait a minute…
Whaddya mean they don’t have a Goobermint? All those MPs elected are getting paid, right? Cops are still giving out tickets, right?
What they mean by No Goobermint is there is nobody who will sign for Italy for the next loan they need. No “Ruler” who will take responsibility for Axing Pensions and Raising Taxes. WTF in their Right Mind would take responsibility for that? You might as well paint a Bullseye on your forehead.
Italy of course is running on Inertia, and so of course also is the FSoA. CONgress hasn’t agreed on a Budget in years here now, they just keep taking Emergency Measures and raise the debt limits if not directly, then by Stealth. Since letting the FSoA Collapse means GAME OVER, the Banksters still print money to buy the worthless Bonds issued by Treasury, keeping the ball in the air another day. What happenned to all the Doomsday Sequester Scenarios? Is the Pentagon handing out Pink Slips? Not insofar as I am aware. They still got plenty-o-money to buy Jet Fuel for the Fighters & Drones patrolling MENA.
Back to the more pressing problem of Italy though, what happens when “Democratic Process” fails to come up with a Goobermint that can decide to do ANYTHING? The general approach so far has been “Caretaker” Goobermints like the one Super Mario “3-card” Monti was running for Goldman, which was so successful it was sent packing in a year. 3-card would sign whatever Goldman wanted him to sign, but sadly the Ities weren’t Cooperating with the diktats. Hard to Goober if the people you Goober don’t buy into your Leadership.
So eventually here you arrive at a point where the Democratic Process just votes into office a bunch of squabbling bureaucrats who because they don’t command control over anybody cannot make deals that stick with the Banking Oligarchy. At this point they are Set Adrift to descend into Failed State status, which then allows the Military Arm of NATO to drop in on “Peacekeeping” Missions, so that any remaining assets can be further Strip Mined.
Thing about Greece and Cyprus, really there is nothing LEFT to be strip mined, not too much left in Italy either. Nothing left but what Food can be produced and shipped off their lands, but as Transportation costs increase, even shipping around food isn’t profitable. So the populations will shrink down to just what the local land will support, which in both cases of Greece and Cyprus isn’t all that many.
The trick here of course is for EVERYONE to get off the bandwagon of Coveting the products of the Age of Oil. Why did humanity get sucked down this toilet to begin with? Because of the CARGO. Jared Diamond writes about Polynesian cultures who were essentially Self-Sufficient,but when Europeans arrived with their Amazing Toys, Metal Knives and Farming Implements, well they just HAD to have them. Only way to GET them was to become part of the Money based Banking system these Europeans used to trade about their goods.
Essentially, every community needs to be self-sufficient in local production for all basic needs, water, food, shelter, clothing. This can’t be done at current populations just about anywhere Industrialization and the Banking system has already infected with the Plague of Money, at least not in aggregate. Further, re-learning how to be self-sufficient in the basics and Reverse Engineering infrastructure to do that with will not occur overnight, which leads to the probability of an Undershoot event following the crash of the current Overshoot.
Here on the Diner, our Foxstead Group is aware of these issues, and together seeks to develop models for integrated self-sufficiency in the Post-Fossil Fuel driven era of Industrialization. The Monetary system WILL COLLAPSE, IS COLLAPSING as we speak in real and rapid time. Building resilient systems BEFORE collapse arrives in your neighborhood is the key, and it can only be done effectively with groups of people all working together to achieve these goals.
Here on the Diner, we welcome all such Kindred Souls who see the Writing on the Subway Walls, and will join with us in the effort to Build a Better Tomorrow. Come visit with us in the Community Owned Doomstead thread and share your ideas on Community Building.
Off the keyboard of Gail Tverberg
Published on Our Finite World on March 29, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
Resource limits are invisible, so most people don’t realize that we could possibility be approaching them. In fact, my analysis indicates resource limits are really financial limits, and in fact, we seem to be approaching those limits right now.
Many analysts discussing resource limits are talking about a very different concern than I am talking about. Many from the “peak oil” community say that what we should worry about is a decline in world oil supply. In my view, the danger is quite different: The real danger is financial collapse, coming much earlier than a decline in oil supply. This collapse is related to high oil price, and also to higher costs for other resources as we approach limits (for example, desalination of water where water supply is a problem, and higher natural gas prices in much of the world).
The financial collapse is related to Energy Return on Energy Invested (EROEI) that is already too low. I don’t see any particular EROEI target as being a threshold–the calculations for individual energy sources are not on a system-wide basis, so are not always helpful. The issue is not precisely low EROEI. Instead, the issue is the loss of cheap fossil fuel energy to subsidize the rest of society.
If an energy source, such as oil back when the cost was $20 or $30 barrel, can produce a large amount of energy in the form it is needed with low inputs, it is likely to be a very profitable endeavor. Governments can tax it heavily (with severance taxes, royalties, rental for drilling rights, and other fees that are not necessarily called taxes). In many oil exporting countries, these oil-based revenues provide a large share of government revenues. The availability of cheap energy also allows inexpensive roads, bridges, pipelines, and schools to be built.
As we move to energy that requires more expensive inputs for extraction (such as the current $90+ barrel oil), these benefits are lost. The cost of roads, bridges, and pipelines escalates. It is this loss of a subsidy from cheap fossil fuels that is significant part of what moves us toward financial collapse.
Renewable energy generally does not solve this problem. In fact, it can exacerbate the problem, because the cost of its inputs tend to be high and very “front-ended,” leading to a need for subsidies. What is really needed is a way to replace lost tax revenue, and a way to bring down the high cost of new bridges and roads–that is a way to get back to the cost structure we had when oil (and other fossil fuels) could be extracted cheaply.
The Way Resource Extraction Reaches Financial Limits
When a company decides to extract a resource such as oil, gold, or fresh water, it looks for the least expensive source available. After many years of extraction, the least expensive sources become depleted, and the company must move on to more expensive resources. It always looks like there are plenty of resources left; they are just increasingly expensive to extract. Eventually an extraction limit is reached; this limit is a price limit.
As easy to extract resources become more depleted, it becomes necessary to invest more resources of every type in extraction (for example, manpower, oil, natural gas, fresh water), in order to extract a similar amount of the resource. I have called this the Investment Sinkhole problem.
The need to use greater resources in the process of resource extraction leaves fewer resources available for other purposes. Prices adjust to reflect this out of balance. If there is no substitute available for the resource that is reaching limits, the economy adjusts by contracting to match the amount of resource that is available at an affordable price. Some economists might call the situation “reduced demand at high price”. What the situation looks like, in terms most of us are used to using, is recession or depression.
Part of the confusion is that many people completely miss the fact that there is a close connection between cheap energy supply of the exact type needed (for example, gasoline for cars, diesel for trucks, electricity for many factory applications) and the ability of the world economy to make goods and services.
If the price of energy of the type a particular manufacturer or service provider uses increases (say gasoline or diesel or natural gas or electricity), that manufacturer or service provider in the short term has no choice but to pay the increased price, because there is no substitute for energy of the right type. If the manufacturer or service provider tries to pass these higher costs on to its customers, there is likely to be a cutback in demand, leading to a need for layoffs. Alternatively, with longer lead time, the company may be able to find a way around the problem of increased costs, by using more automation, or by outsourcing production to a country where costs are cheaper. Any of these responses leads to reduced US employment and recessionary impacts.
What History Says about Prior Collapses
Until fossil fuels came into widespread use, civilizations regularly grew until they reached limits of some sort, and then collapsed. There are many books looking at this issue. David Montgomery, in Dirt: The Erosion of Civilizations talks about the role soil erosion and soil degradation play in bringing civilizations down. Sing Chew, in The Recurring Dark Ages, talks about how ecological stress, deforestation, and climate change have led to long periods of collapse and low economic activity. Joseph Tainter, in The Collapse of Complex Societies, talks about how increasingly complex solutions to the problems of the day lead to ever-higher administrative costs that eventually become too expensive to afford.
Peter Turchin and Surgey Nefedov in the book Secular Cycles take more of an analytical approach. They look at how cycles actually played out, based on financial and other detailed records of the day. Their analysis considered eight economies, the earliest of which began in 350 B. C. E.. The pattern they found looks disturbingly like the pattern that the world has been going through since the widespread use of fossil fuels began about 1800: A civilization starts its existence when a new resource becomes available, for example by deforesting land to be used for agriculture (or in our case, finding ways fossil fuels could be used). A civilization experiences Growth for 100+ years as the population is able to grow with the new resource available to it.
Eventually the civilization reaches a Stagflation period. This happens when the civilization starts reaching limits. Population is much higher, the size of the governing class is much larger, and feedbacks like erosion and soil depletion start to play a role. In my view, Stagflation period began for the United States around 1970, when US oil production began to fall.
Turchin and Nefedov found that during the Stagflation period, population growth slows and wages stop rising. Wage disparity increases, and debt grows. The cost of food and other resources becomes more variable, and begins to spike. The level of required taxes grows, as the number of government administrators grows and as armies increase in size. (Joseph Tainter refers to this growth in government services as a product of increased complexity.)
Eventually, after 50 or 60 years, a Crisis Phase begins, when it is no longer possible to raise taxes enough to cover all of the governmental costs. In this period, wages of commoners drop to such a low level that nutrition declines, leading to epidemics and a higher death rate. Commoners often revolt, leading to government collapses. Wars for resources are sometimes fought. The Crisis Phase lasts a variable length of time, typically 20 to 50 years, with the length of time seeming to be shorter in the more recent cycles analyzed. There is considerable die-off from illness and warfare in the Crisis Phase.
It seems to me that the United States, most of Europe, and Japan are now very close to the point where they will enter the Crisis Phase of a similar cycle.
The Nature of the Financial Predicament We Are Reaching
At the beginning of this post, I mentioned that rising investment costs lead to what I call an investment sinkhole problem, as we extract fuels and ores that require increasingly expensive inputs near the bottom of Figure 1. An examples might be tight oil, that is extracted using “fracking”. While we hear much about the hoped-for higher supply, we don’t hear that the newer types of oil are available only because oil prices are high. They can’t be expected to bring oil prices down. An investment sinkhole means that our dollar of investment doesn’t go as far; it is precisely the opposite of increased productivity.
When we were still far from reaching resource limits, efficiency improvements could more than make up for the loss of efficiency that comes from the Investment Sinkhole effect. But as we get closer to limits, the situation is reversed. Efficiency improvements are outweighed by the ratcheting up of extraction costs, because of the Investment Sinkhole effect. This means that instead of increased wealth being added to the system by efficiency improvements over time, we find the Sinkhole effect predominates. The common worker needs to spend an increasing proportion of his paycheck on necessities, leaving less for discretionary items. The result is recession, or very slow economic growth.
When the Investment Sinkhole problem starts to predominate, financial models suddenly don’t work very. Central banks react by cutting interest rates, in an attempt to stimulate economic growth. They also try to stimulate the economy by Quantitative Easing. This adds more money to the economy, and attempts to reduce longer-term interest rates. Of course, if the problem is really structural, there is no bounce-back to economic growth. The temporary fix becomes a bridge to nowhere.
A Long-Term View of our Financial Problems
In the previous section, we talked about our immediate problems. But what about our longer-term problems?
Today’s financial system is based on the assumption that individuals and businesses can make and keep financial promises. This system worked well, when resource prices were flat or declining, as was the case prior to 2000. It was possible for businesses and governments to take out loans under the expectation of continued prosperity, and for individuals to buy houses and cars under the expectation that they would continue to have jobs, so that they could continue to make auto loan or mortgage payments.
The situation changes dramatically, if the long-term expectation is for oil prices and other commodity prices to keep ratcheting upward. We don’t really have substitutes for oil and other commodities, so if we want to keep obtaining them, we need to pay the ever-higher cost. Even devices such as more efficient cars are affected by higher prices, because they too, use fossil fuels in their construction, and depend on ever more expensive technology.
In a period when commodity prices are ratcheting upward, businesses find it increasingly difficult to forecast whether new facilities will continue to be economic 10, 20 or 40 years. Businesses find that customers gradually have less discretionary income, instead of more, so it becomes increasingly difficult for these customers to afford the products which are being sold. This makes business planning much more difficult.
If a bank makes a long-term loan, it needs to include a much larger provision for the expected cost of loan write-offs. These higher loan write-off provisions causes interest rates to rise, making long-term loans unaffordable for many (or most) people and businesses. Governments are hugely affected as well.
Without access to cheap loans, and with resource prices (especially oil, but sometimes desalinated water instead of well water, and natural gas) ratcheting upward, business failures rise. This leads to more layoffs, and more defaults on mortgages and auto loans. Interest rates on these can be expected to rise as well.
All of these effects mean that debt-financing becomes much less attractive. Debt defaults, such we have just seen in Cyprus and Greece, become more common. This is not a temporary passing phase; it is a permanent long-term situation, caused by the ratcheting up of oil and other commodity prices, as resource extraction becomes more expensive.
In such an environment, the amount of goods and services available tends to decline over time. Continued economic growth changes to continued economic contraction. If governments issue fiat money, it declines in value over time as well. (Money is sometimes defined as a “store of value,” but this becomes less possible.) One way this decline could occur is if those holding money have an expectation for continued inflation. Alternatively, money can be subject to an automatic downward adjustment that reduces its value on a monthly or annual basis.
With such a system, individuals discover that if they have money, the best strategy is to spend it immediately, rather than to try to save for retirement or some distant goal. Investments in stock markets, or in stocks of new companies, are likely to decline.
Without the availability of debt at a reasonable cost, businesses find it much more difficult to expand or to begin from scratch. New businesses tend to be small ones, that can finance their own operations by bootstrapping–that is, self-financing by using the profits on early sales to pay for materials needed for later sales, and hopefully for a little expansion as well.
All of these issues mean that if there is a financial collapse, picking ourselves up afterward will be quite difficult. Our current financial system would need substantial modification to work in such a system. The size of the current financial sector would likely shrink dramatically.
If the various countries of the world set up different financial systems to deal with the new realities, connecting them into a world system is likely to be difficult. Political stability is likely to be lower in a system such as this. How does one arrange long-term contracts, when there is a very real possibility that the government of the country that is party to an agreement may have collapsed, prior to the end of the contract?
What Brings the Whole System Down?
It is easy to think of a long list of things that might bring the system down. In fact, there are so many contenders that if any one of them starts the collapse, it seems likely others will push it on its way.
Clearly one of the issues is the wide gap between US Federal Government revenue and government expenditures.
If the US government (or the government of any of the many countries who are having difficulty balancing their budgets) tries to raise taxes or cut benefits, to get revenue and expense back in line, the outcome is likely to be more recession and more layoffs. Debt defaults are likely to rise, putting banks into financial difficulty. There will then be a need for more bank bailouts, and a rerun of the problems we saw in 2008, but with governments in poorer financial condition to solve these problems.
Another possible way the system could be brought down is by rising interest rates for governments, perhaps because of all of the failures elsewhere around the globe. Rising interest rates will mean that a government’s budget is even more unbalanced than it was before, because the higher interest rates translate to higher government expenses.
These higher government interest rates would quickly be reflected in other interest rates, such as mortgage interest rates and interest on corporate loans. Sale of homes would drop dramatically, as interest rates rise. Prices of homes would likely drop as well. Business investment would drop dramatically. Much of the “stimulus” that the government has put in place would disappear. We likely would be headed back into major recession.
A third possibility relates to the Quantitative Easing that has been done recently, and the artificially low interest rates that have resulted, even for longer-term loans. Investors who have to contend with these low interest rates will try to find ways around them, and in the process, create bubbles in asset prices. These bubbles invariably burst, with bad outcomes. For example, the WSJ recently published an article titled, “Investors pile into housing, this time as landlords.” Of course, when something goes wrong (like mis-estimating returns, or oil prices rising higher, leading to more pressure on renters’ ability to pay), the same investors are likely to pile right back out, puncturing the new bubble. Commercial investors rushing out will pull down property values, leading to yet more mortgage defaults as homeowners again find their loans “underwater”.
A fourth possibility is that oil prices will ratchet upward again. Alternatively, natural gas may rise from its current artificially low price level in the US, to more like European or Japanese levels. Either of these would lead to more financial pressures on citizens, and more debt defaults. Banks would likely again be in difficulty, needing bail outs.
A fifth possibility is that the Euro ceases to be a currency. Alternatively, some of the debtor nations could drop out of the Euro, allowing the Euro to rise for remaining nations, thus putting the remaining nations in a worse position for selling their exports. In either of these scenarios, the European crisis could be exported to the US, partly as reduced demand for our goods, and partly through exposure of banks to European defaults.
A sixth possibility is the effects of ObamaCare will destabilize an already weak economy, as businesses attempt to circumvent its effects by substituting more part-time workers for full-time workers.
A seventh possibility is that pensions start running into real financial difficulty, because of artificially low interest rates. The US government may be called in to bail out pension funds, or the Pension Benefit Guaranty Corporation, at high cost.
An eighth possibility is that states start leaving the United States, because they feel that they would be better off on their own, as taxes and mandatory programs (such as ObamaCare) become increasingly difficult to deal with.
What does the shape of the decline look like?
Many people who base their views on geological depletion of oil expect that the decline will be somewhat slow, matching geological decline. I don’t think geological decline rates will have much to do with the shape of the decline, except for perhaps setting an upper bound as to how well things might, in theory, work out.
The big question in my mind is how well the international financial system will hold together. There is a close corollary question: How successful will be at replacing it on a timely basis if it does fall apart? My concern is that if banks are suddenly closed, businesses of all types will fail. This could include companies extracting oil as well as companies selling electric power and companies providing fresh water.
If there are long-term problems with the financial system, international trade is likely to be greatly reduced. Businesses making trades are likely to want greater assurances that they will actually be paid than is the case today. This could take the form of bilateral trade with trusted partners, or “I’ll ship you Product A if you will ship me Product B,” as a form of barter.
A slowdown in world trade could have dramatic repercussions quickly with respect to our ability to keep basic services in good repair, because we are now dependent on international trade for replacement parts of products we use every day (such as cars and trucks). Nearly everything that is manufactured today incorporates raw materials from around the world, and uses machines that depend on parts from around the world.
Another question is whether there will be huge political disruptions. If banks are closed, someone usually is blamed. We have seen many ways these political disruptions can take place. Some examples might include Syria, Egypt, the Former Soviet Union, and Greece.
One scenario I can imagine is that some parts of a country are subject to more disruption than others. In one part of the country, banks may be closed, while in another part, states may be able to reopen closed banks. Or electricity outages may occur following a storm, and never be repaired, while other locations nearby are doing fairly well. There may be political riots, but these are often located in areas where politicians are located, not in other areas.
Perhaps it is just as well that we don’t know exactly what the decline will look like. Not knowing gives us some chance for optimism.
Off the keyboard of Michael Snyder
Published on Economic Collapse on March 20, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.
The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.
We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.
The following is the global financial pyramid scheme by the numbers…
-$9,283,000,000,000 – The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.
-$10,012,800,000,000 – The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.
-$10,409,500,000,000 – The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.
-$15,094,000,000,000 – U.S. GDP. It is a measure of all economic activity in the United States for a single year.
-$16,749,269,587,407.53 – The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 – The total amount of money that the global elite have stashed in offshore banks (that we know about).
-$50,230,844,000,000 – The total amount of government debt in the world.
-$56,280,790,000,000 – The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.
-$61,000,000,000,000 – The combined total assets of the 50 largest banks in the world.
-$70,000,000,000,000 – The approximate size of total world GDP.
-$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
-$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
Are you starting to get the picture?
Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.
What we witnessed back in 2008 was just a little “hiccup” in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.
Next time it won’t be so easy.
The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.
The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.
And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.
The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.
But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.
The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.
But when you are tempted to believe that everything is going to be “okay” somehow, just go back and look at the numbers there were posted above one more time.
There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?
Off the keyboard of Steve from Virginia
Published on Economic Undertow on March 17, 2012
Figure 1: Does the crude market unravel due to hoarding of funds or is there a ferocious price spike followed by a crash? The EU plays with fire. Chart comparing costs for replacement crude oil to what the customer can afford to pay: by TFC Charts (click on for big). The time remaining to adjust or make positive changes in policy direction has become shorter and more uncertain. The window of roughly two years until fuel supply shocks presumed no policy errors on the part of the establishment.
Discuss this article at the Economics Table inside the Diner
Welcome to the new, improved bank run!
The European Union bosses have levied a tax against bank depositors in Cyprus, the purpose being to maintain the drive-first status quo. By doing so they appear to have stepped off the end of the gangplank (NY Times):
Facing Bailout Tax, Cypriots Try to Get Cash Out of Banks Liz Alderman, NY TimesATHENS — In a move that could set off new fears of contagion across the euro zone, anxious depositors drained cash from automated teller machines in Cyprus on Saturday, hours after European officials in Brussels required that part of a new 10 billion euro bailout be paid for directly from the bank accounts of ordinary savers.After Negotiations, Cyprus Agrees to a Euro Zone Bailout Package (March 17, 2013)The move — a first in the three-year-old European financial crisis — raised questions about whether bank runs could be set off elsewhere in the euro zone. Jeroen Dijsselbloem, the president of the group of euro area ministers, declined early Saturday to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered.
This is naked confiscation of funds from ordinary citizens, there is no correlating increase in worth of the remaining funds or expansion of the Cypriot economy. It is simply shoveling more good money down the euro rat hole to save senior secured creditors to the banks from loss … as well as support the automotive waste status quo.
Athens, Greece is flooded with rainwater as well as with endless streams of traffic. Europeans do not realize that as long as one car is running in Europe and elsewhere, there will be economic decline. Globalization at work: the Europeans are subsidizing fuel demand in China which increases competitive cost pressure in Europe. This decline is spread to Cyprus by way of its banks, an afterthought to the crisis that has engulfed Greece and the other euro-states.
Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than 100,000 euros effective Tuesday, hitting wealthy depositors — mostly Russians who have put vast sums into Cyprus’s banks in recent years. But even deposits under that amount are to be taxed at 6.75 percent, meaning that Cyprus’s creditors will be confiscating money directly from pensioners, workers and regular depositors to pay off the bailout tab.
Problems in Cyprus are not new, the country’s banks have loaned large amounts to Greek businesses and banks, the loans are multiples of Cypriot GDP. As Greece falls further into bankruptcy, so do the Cypriot banks.
Cyprus is also in the cross-hairs of European bank regulators as Russian ‘investment’ funds flow into Cypriot banks from Russia … then back out again. Regulators accuse Cypriot bankers of laundering funds of Russian gangsters and oligarchs. The source of particular funds is unclear but in aggregate, all euros in the hands of Russian depositors are from European energy consumers buying Russian non-renewables including natural gas and crude oil.
The Washington Post says:
Why today’s Cyprus bailout could be the start of the next financial crisis Neil IrwinIt is a bad day to have your money deposited in a bank in the Mediterranean island nation of Cyprus. And it may just mean some bad days ahead for the rest of us.Early Saturday, the nation reached an agreement with international lenders (IMF, European Central Bank and European Union) for bailout help. Part of the agreement: Bank depositors with more than 100,000 euros ($131,000) in their accounts will take a 9.9 percent haircut. Even those with less in savings will see their accounts reduced by 6.75 percent. That’s right: Anyone with money in a Cypriot bank will have significantly less money when the banks open for business Tuesday than they did on Friday. Cypriots have reacted with this perfectly rational reaction: lining up at ATM machines to try to get as much money out in the form of cash before the money they have in their accounts is reduced.
The idea that emerges is that banks — like real estate — are currency traps, that there is no ‘safety’ for funds … anywhere. - A bank run has been underway in Europe for several years. Part of this is the foreign exchange aspect of the eurozone and is structural.
Figure 2: The God-like Unholy Trinity which determines the course of foreign exchange for all countries including those in Europe. A country can have an independent monetary policy, it can maintain a currency peg with another country or countries and it can enjoy the free flow of capital across its borders. It can effect two of these, or two can be denied, but never all three at once.
The worth of money is determined — not by central banks — but by its voluntary exchange for a valuable physical good on demand … at gasoline stations around the world millions of times a day. Even with policy rates set to zero and the all-out lending to governments by central banks there is no independent monetary policy … anywhere. The worth of money is determined by its exchange for crude and crude products and nothing else. The only policies that central banks can effect are those that make matters worse.
The euro is not a currency in the sense that it is the product of a nation named ‘Europe’, rather it is the collection of currencies of individual European nations that all happen to be called the euro. These currencies are all pegged to each other, a source of Europe’s misery as there is no way for the individual euros to be repriced independently of the others. Europe has the pegged currencies and no independent monetary policy: all that remains is the free flow of capital or not across European borders … that is, bank runs.
Bank runs are baked into the cake to some degree because of the use of the European Stability Mechanism (ESM) which is a credit-laundering machine to allow the ECB to make unsecured loans. This is fatal to the central bank because it has insufficient capital and its assets are the same assets that have bankrupted the various commercial banks. Once implemented — due in April — here is no effective lender of last resort in Europe. The ECB is simply another insolvent European commercial lender.
The system is clearly worth more to the Europeans than the funds it contains. The system is embodied in the euro which = gasoline. Stripped to essentials, the Europeans are choosing to drive over maintaining a functioning economy. Granted, the economy has depended upon driving to maintain cash flows, but this waste-based approach is unraveling. Cash flows will be interrupted regardless of what the Europeans choose to do. It would be best for the Europeans to jettison the driving and use the money to re-capitalize a less wasteful economy.
When the euro system fails it will be as a result of eurozone countries being bankrupt, not defects of the euro itself. When a country is bankrupt to the degree it torpedoes the euro that country cannot do better with any other currency! In other words, these countries in Europe could dollarize and they would still be bankrupt.
At this point in the five-year decline in Europe, policy errors are unavoidable. Bank assets in Europe are worthless. They are essentially car loans … along with loans to enable the Europeans to buy fuel which has been burned up for absolutely no return. This is why the countries are bankrupt, not because of the euro which is simply a currency.
Europe has made itself vulnerable to push-back from Russians who are large depositors to Cypriot banks. Russia will pay itself at the front end of the natural gas pipeline: 10% less deposits, 10% less gas. All Putin has to do is order pet Gazprom to turn a valve and the Europeans freeze inside their houses.
Not the first time depositors have been ravaged in Europe: Spanish depositors have been made into stockholders of combined banks after smaller home-loan banks failed. When the combined banks failed in turn the new shareholders were completely wiped out.
From the ‘shooting oneself in the foot and liking it’ department: the entire euro banking system collateral is the same system’s deposits. European banks need more deposits not less! Instead of stifling contagion in Europe as is claimed by the managers, this action looks to be the trigger for Continent-wide bank runs.
It will be very hard for the establishment to put this particular genie back into the bottle. Even discussions about withdrawing the action will be destabilizing as every word will be freighted with consequences to depositors, not just in Cyprus but elsewhere.
The strategy to solving money laundering is to deal with it directly, by prosecuting criminals rather than penalizing ordinary bank customers. It isn’t the customers’ fault that Russian- and other overseas criminals use Cypriot banks, there is nothing ordinary bank customers can do about it, either.
Whatever the Troika hopes to gain by annexing deposits will be lost by the European Central Bank and the banking system as a whole.
Notice that the action took place on a weekend, as was the case during the ‘Lehman breakdown’. Also notice that Cypriot banks are now to be closed on Tuesday as well (Monday is a Cypriot national holiday).
“(Cyprus President Nicos) Anastasiades explained that Cyprus gave way after the ECB threatened to push the island into a disorderly default by withdrawing liquidity support for Laiki, its second-biggest bank, on Tuesday.
He said Cyprus had a choice between “a catastrophic scenario of disorderly bankruptcy, or a scenario of a painful but controlled management of the crisis”.
According to Cyprus sources, the IMF and German managers wanted a 40% haircut. 7-10% is only the first installment. The Cyprus bank insolvency cannot be cured, only the money interests made whole by the rest.
All EU depositors — in countries with similar finance problems as Cyprus or not — are facing theft of funds. In Cyprus, funds are stolen from depositors and handed to senior secured creditors of the Cypriot banks, preferred shareholders, lenders to the Cyprus state and depositors to Cypriot banks outside of Cyprus. The establishment is afraid the bondholders won’t lend any more. The EU system is broken, nobody knows what to do, there is no reason to lend, anyway.
With the cost of new fuel rising due to geological constraints, with access to credit diminishing due to high energy prices, there has been a rapidly shrinking window of opportunity for the managers to take appropriate actions to strengthen the money- system and to conserve resources/capital. That window is now being slammed shut by foolish managers.
Notice how the ‘system’ works, nothing really changes except the scale: from, “Hiding in plain sight”:
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
Q: How would you describe the economy?
A: It is a system that allows a select few to borrow immense fortunes. The rest of us … you, me, everyone else … repay the debts.
Q: That’s it?
A: That’s it.
The face of Peak Oil. 
We are in the middle of a crisis that has been ongoing for almost five years now: the managers demand the economic system be bailed out. Of whom do they make demands? Entrepreneurs? Innovators? The finest minds of a generation?
A: Pensioners. (Bank depositors.)
The economies must become more productive which means increasing the efficiency of output. Consequently, pensioners are called upon to sacrifice their retirements in the UK, Greece, Ireland, Portugal, in the US … in cities and states pensions everywhere are under attack.
Why not more machines? If machines are productive, wouldn’t deploying more machines solve the economic problems around the world rather than deploying pensioners (and bank depositors)? Technology is supposed to save us but the raiding of pensions — and bank accounts — insists otherwise: the scraping of the bottom of the barrel in real time. It’s an admission that technology won’t work, from the people who are in a position to know.
What happens after the retirements (and bank accounts) are pilfered? Who knows? Nobody has a plan.
The world is shocked to discover a shortage of capital, not for investments but to prop sagging balance sheets. Who could have guessed as capital has been shoveled into the furnaces of ‘development’ for decades? Only economists and bureaucrats believe that we never run out of inputs.
Neil Gough (NY Times)
China’s banks are among the biggest and most profitable financial institutions in the world. But the state-backed banks are also starved for capital after an aggressive lending spree that was encouraged by the government.
Maybe they are profitable and maybe not. “Starved for capital,” suggests not. The operating idea is that capital is money rather than material inputs. These inputs are mispriced so that the money-equations used by industrialists add up to something ‘positive’. Cheating works until it doesn’t any more: substituting debt for unaffordable inputs doesn’t produce anything. Debt isn’t capital and self-delusion isn’t capitalism. Maybe we should call our economic system ‘Delusionism’ and be done with it.
Within the last year (2011), seven of the biggest Chinese banks tapped the markets for 323.8 billion renminbi ($51.4 billion ) in new funds, according to Citigroup estimates. Several financial firms are expected to raise another $17.7 billion in the next few months, with China’s fifth-biggest lender, the Bank of Communications, accounting for $9 billion. Banks around the world have been tapping investors for new funds as they struggle with slumping share prices and waning profits. But Chinese firms have maintained that their profit growth is strong and their balance sheets are solid, raising red flags among some analysts about the banks’ persistent capital needs.
Chinese bankers and business tycoons, each more corrupt than the last: raise that Red Flag high! The Chinese need capital because so many are stealing it and removing themselves overseas.
The problem is that paying out high dividends blows holes in their base capital. Thus, banks need to continue tapping the markets for fresh funds, often diluting minority shareholders by issuing new shares. The finance ministry, the banks’ ultimate controlling shareholder, always buys in, keeping its stakes topped up.
Somebody at the bottom always takes it in the neck. Today, it’s the minority shareholders, tomorrow it will be the senior bondholders or the pensioners or the schoolchildren forced to eat radioactive school lunches. This is part of an ongoing process, not a new feature within delusionism. It was invisible when everyone was busy getting rich: now that the abuses are visible it can only be on account that fewer are getting rich. The endgame heaves into view.
The journey from ATM to ATM to withdraw money is just beginning in Europe, as it was years ago in Argentina. After that comes the banging of pots and pans in the streets, then come bomb attacks on police stations. This is not a good journey for the Europeans to be embarked upon.
 Unidentified cinematographer, ‘The Character Humongous from the film, Road Warrior’.
Off the keyboard of RE
Published on Reverse Engineering in February 2012
Discuss this article at the Frostbite Falls Daily Rant inside the Diner
Note from RE: These were my last couple of Rants on Reverse Engineering before we launched the Diner.
Febuary 17, 2012 Rant
I was reading another one of the gazillion Greek Tragedy threads on ZH where a bunch of the Piglets got into discussing Slavery and the economic cause of the Civil War. Unsurprisingly, not a few of them think Slavery wasn’t so bad as an economic system and of course clearly ALSO figure since they got Gold in their basement safes, they will be Masters not Slaves in the world to come.
It makes you want to PUKE really, but in my case not because I think we will return to Slavery but because these folks just don’t seem to grasp that Slavery won’t WORK as an economic model.
The problem is, as it was really back in the Old South that the COST of feeding, clothing and housing the slaves is greater than the income you can derive from their labor. In fact same problem has hit at the Industrial level now. By burning up a lot of Oil we were able to support a population of 7B slaves; in the absence of Oil we cannot do that.
Let’s say for argument’s purposes you Own Free and Clear 10,000 Acres of Prime Bottom land on the Mighty Mississippi and when TSHTF, you offer starving Chicago residents the opportunity to become your Slave. In return, you will feed, house and clothe say 1000 of them on your land. How much Surplus Food will say 1000 Slaves be producing on your land after you feed them and the Oxen JUST enough to do a day’s work? How much will it cost you to provide shacks or trailers to live in squalor in so they don’t die on you from exposure? How much does it cost to buy all of them 1000 Parkas to wear in the winter so they don’t freeze to death in the unheated shacks? You really think anybody running slaves is going to be taking home a huge Profit here? Of the excess food you MIGHT produce for a while, what exactly are you going to take in payment for that food? Gold Coins? Why? What will the Gold Coins buy you?
That is just the economic problem. What about CONTROLLING 1000 slaves on your 10,000 Acre Doomstead? You’ll need at least 100 Overseers to do that. You better start Prepping Up with Overseers right now and doing classes in Slave management.
Explicit Slavery is not that much different from the Debt Servitude system, both require an extreme SURPLUS in the environment to function. In times of deprivation, slave systems fail just like everything else does. Look at the quote from Revelation I have on the Homepage again:
“Revelation 18:11-13 And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more: 12The merchandise of gold, and silver, and precious stones, and of pearls, and fine linen, and purple, and silk, and scarlet, and all thyine wood, and all manner vessels of ivory, and all manner vessels of most precious wood, and of brass, and iron, and marble, 13And cinnamon, and odours, and ointments, and frankincense, and wine, and oil, and fine flour, and wheat, and beasts, and sheep, and horses, and chariots, and slaves, and souls of men.”
That is how it WENT DOWN in Babylon! In a Civilization Crash, it ALL goes worthless, even the Souls of Men! Why does Pharaoh Let Moses and his People Go? Because Pharaoh can’t AFFORD to keep them fed and clothed and housed, that’s why!
I’m not saying here people will not be enslaved or sell themselves into slavery just for 3 hots and a cot, as long as those things ARE available, many people will do that. In fact, probably 50% of Global Population ALREADY does that on the economic level. If you value Living more than Freedom, Slavery is Preferable to Death. However, when the Masters can no longer AFFORD to enslave you, you got only two CHOICES left. You either buy your ticket to the Great Beyond right there and then, or you follow Moses out into the Desert in search of the Promised Land.
I do not think Slavery is the long term Outcome here. It’s not economically viable and sustainable in a world of limited resources, only in a world of surplus. In the world of limited resources and population overshoot, the long term outcomes are only 2. DEATH or FREEDOM. To find FREEDOM, you will have to walk FAR into the Desert and find a way to survive on the Cactus and the Scorpions and Snakes. You will never find Freedom in the Belly of the Beast, in the Big Shities. There you will only find the Horseman of Death.
If you want to LIVE, prepare yourself best you can for the Journey into the Desert with the Bushmen of the Kalahari, or the Inuit of Nunavut if you prefer a cold climate. those environments will be EVERYWHERE. Slavery is not an Option. The Signpost Ahead in this Greatest Depression doesn’t read “Jobless Men Move on, we cannot take care of our Own”, it reads “SLAVES move on, we cannot feed you or clothe you or house you” You are on your OWN now, the Masters are fresh OUT of resources they will sprinkle down on you to keep you warm and fed.
At the very least here, try to GTFO of Dodge just as soon as you can, or Prep Up a good Bugout Plan for when TSHTF. You have a DEATH SENTENCE in the Big Shities. GTFO of Dodge before the Window Closes. With as many preps as you can carry with you and plenty of Ammo also.
February 14, 2012 Rant
While Athens Burns, Obama-sama delivered unto Congress another utterly ludicrous
“Budget” full of false assumptions on future revenue, all based on even faltier
statistics conjured up out of thin air to justify said budget. It’s not meant to
reflect any reality, just to set up yet another Kabuki Theatre “battle” in the
Anyone with half a brain at this point can see all “Budgets” produced by
Goobermints is complete nonsense. Goobermints with the ability to print their
own money are doing so and distributing out that money in the places the
Lobbyists want them to distribute it to. How much money is or is not collected
in Taxes each year has become close to irrelevant here. The Greeks cannot
collect enough in Taxes to pay their bills and are in the process of being
completely CUT OFF from credit by the Money Masters. The FSofA isn’t yet being
cut off from Credit as a Corporation, but its constituent citizens are being so
Denninger posted yet another graph showing the exponential Increase in Debt
since 1980, with the tacit idea embedded in that we could have avoided all these
problems with “fiscal responsibility” had it been undertaken then rather than
blowing more financial bubbles and so wildly increasing debt levels. No, sorry
Karl, that isn’t true.
Had this great Debt Expansion not been undertaken back then, we simply would
have begun the tailspin downward earlier. The economy based on Oil was already
shrinking in real terms and only the expansion of credit resuscitated it for a
while. Perhaps we might have avoided some of the more extreme consequences we
will get now of the credit collapse, but we still would have faced down a
shrinking economy with ever lower standards of living and faced increasingly
costly energy problems that much sooner.
1980 Amerikans were not prepared to go back to the land any more than 2012
Amerikans are. Through Advertising and Education, Amerikans were all inculcated
into the idea we could have ever increasing Prosperity through Technological
Innovation. The advent of the Personal Computer and the Internet made this idea
a Virtual Reality and Credit Ballooned offering every Geek with a Computer the
opportunity to Strike it Rich in the Dot Com era. Exactly what having the
Internet ever really PRODUCED other than addicts like myself is not real clear
here. It built this huge artifice of Information available at the click of a
mouse button, but just having more information doesn’t make more food available
or put any Oil back into the ground. Energy is constantly being consumed at a
rapid pace to keep all those computers running and routers functioning. Its
burning itself up as we speak/keyboard here of course.
So, we lived a Virtual Reality FANTASY here for around 30 years which kept the
Credit flowing and made a few folks extraordinarily wealthy while just about
everyone else sank ever deeper into debt to buy all the new toys the Geeks put
up on the shelves at Best Buy every year. The Debt problem and the
unsustainability of the paradigm goes WAY further back than 1980 though, and
this is where Karl just does not seem to Get It.
Accessing the Thermodynamic Energy of Oil on the mass scale allowed populations
to grow large and essentially prevent a Malthusian collapse of the Ag Economy
which was having sustainability problems itself going back to the 1600s. Why do
you think there were always so many Wars going on in Europe all through those
years? Finding the New World gave some Breathing Room to this economy for a
while, but finding ways to utilize fossil fuel energy gave a whole lot MORE
breathing room. That Exponential Growth Karl tracks in the Debt was preceded
by exponential growth in World Population which really took off in the 1800s.
The whole problem was Baked in the Cake back then.
The folks who gained control over the issuance of Credit long ago fully
understand the problems of exponential growth. However, the Monetary system
they run DEPENDS on it, and so they have always fostered this sort of growth.
This is how you become exponentially more Wealthy of course. A Slave owner with
just 100 Slaves is only moderately Rich; a slave owner who controls the
production of Millions of Peoples is far richer of course. The contraction of
the system as a whole results in a contraction of the overall wealth, which
cannot be stopped. What can happen and is happening is that any reamining
Wealth in the hands of J6P can be transferred to the Illuminati, but only until
J6P is completely BK. Then further contraction requires Illuminati to be pit
against Illuminati, with smaller Pigmen being Cannibalized by Bigger Ones, until
only the very Biggest of the Fish remain swimming in the pond. Finally, those
very BIG Tuna themselves end up starving, because there just ain’t any little
fish left to eat anymore.
The very TINIEST fish can still survive though, too small to see for Big Tuna.
They survive by swimming into a Coral Reef, where they are relatively free of
bigger predators since the Big Tuna ate all of them up. They live by consuming
the Phytoplankton and Algae.
You too can survive as a Tiny Fish in this maelstrom. The Big fish at the top
of the food chain are going the way of the Dinosaur here, you just have to find
your Coral Reef and Hide out until they all finish each other off. The Meek
Shall Inherit the Earth.
Off the keyboard of John Ward
Published on The Slog on March 16, 2013
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The depositor haircut: German exit visa or just plain stupidity?
When I first heard of the bailout ‘solution’ for Cyprus late Friday morning, my first inclination was not to believe it. But then I remembered a conversation with a Madrid source earlier in the week (it was about the Wolfgang Schäuble v Mario Draghi dogfight) and went back to him late Friday afternoon just to check my memory of the conversation was correct. It was: he’d more or less said that it was a fight between two people on mad missions – respectively, to control European fiscal management according to German needs, and to ensure that nothing and nobody would get in the way of the euro’s survival.
On the Greek haircut question, Draghi illegally subordinated the private bondholders. Now it was Brussels-am-Berlin’s turn to subordinate the depositors in Cypriot banks. My own guess here is that Draghi knew precisely how dumb the Schäuble idea was for Cyprus (at one point in the debate, the German Finance Minister demanded depositors be wiped out to the tune of 40%) and decided to let him make an idiot of himself. So quickly were Draghi’s expectations of a bank run shared by the media, by early Saturday morning Olli Rehn was hastily promising a press conference that there wouldn’t be a repeat anywhere else in the eurozone of the tax on bank deposits that was imposed as part of Cyprus’s aid programme.
However, other interpretations are possible. Even in Berlin – even within the CDU, even in the Chancellery – nobody is entirely certain whose side Wolfgang Schäuble is really on. There are those who think he secretly supports the Bankfurt hardliners who want out of the euro. Others see him as a control freak with an unquenchable desire to run Europe’s fiscal system. A Frankfurt contact told me recently, “I’d guess that Schäuble’s plan is to slam the ECB and thus keep German losses in Cyprus to a minimum.” Based on what he wanted from the Cyprus bailout, that sounds like an increasingly accurate perception.
But does he really want to keep the euro, or did he set out to insist on doing something profoundly stupid over Cyprus in order to hasten the end of the euro….and get out with minimal damage to Berlin?
And here’s another angle: the bank run in Cyprus actually began a week ago, when Russian money began shipping out fast. Did Berlin tip Putin off as to what was about to happen?
This picture was sent to me from outside a Cypriot bank today. It displays more than panic: the large vehicle featured is clearly set up to ram the bank if it looks like farmers can’t get their money out. On Tuesday morning, the banks will open in Cyprus and there will queues to withdraw money round the block. Cyprus’s own finance minister dismissed the idea of a depositor haircut only a few days ago saying “Really and categorically – and this doesn’t only apply in the case of Cyprus but for the world over and the euro zone – there really couldn’t be a more stupid idea.”
Wolfie not only had the stupid idea, he also sold it to the others in the room. This is how crazy and/or Machiavellian things get when the endgame is just around the corner.
As to what will happen in the rest of ClubMed when their banks open, as Karl Whelan wrote in Forbes yesterday, ‘Now that people know that a depositor haircut is part of the European toolkit for dealing with banking problems, why would you sit around and wait for it to happen to you? This decision has the potential to trigger a full-scale bank run across the euro area, and such an outcome could place in question the continued existence of the euro as a common currency.’
But Whelan himself admits nothing might happen. However, he does acknowledge that the decision to tax all deposits below €100,000 shows that ordinary Cypriots are going to be hit very hard….and that this wasn’t just an attempt to shave the heads of Russian gangsters.
All I can say is that I was going to put a large six-figure sum into a eurobank next week to hedge against Sterling being openly massaged down the toilet in value. Now I’m going to put it into Dollars outside the eurozone. It seems to me that having torpoedoed the long-term bond market in Europe, the Eunatics have cast huge doubts over their willingness to guarantee deposits in the ezone banking system. Whether this is madness inflicted by angry Gods or catalysts thrown onto the fire by wily Germans is anyone’s guess. Either way, investors won’t be impressed.
Off the keyboard of Guy McPherson
Published on Nature Bats Last on February 24, 2013
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I’m pretty sure you know the drill. You pose the scenario and ask the hypothetical questions: There’s an asteroid headed for Earth. We know exactly when it will strike, and it will kill all humans. Do you want to know it will strike? Do you want to know when?
I know of no poll results, but I’ve asked the question a few times. Some people want to know everything. Others don’t want to know anything.
People who want to know when the asteroid will strike cannot fathom that people don’t want to know. People who don’t want to know the asteroid is headed our way cannot fathom why anybody would want to know. Obviously, I’m in the former camp, spreading the news like Nutella on a croissant as if people not only care about knowledge, but want to lap it up.
In fact, it’s inconceivable to me that people don’t want to know. I want to stare, unblinking, when the asteroid strikes. I want to peer into the abyss of my mortality, eyes wide open, knowing the exact moment I will depart this mortal coil. Not in the name of courage, but curiosity.
I have an idea. I could use the scenario and attendant hypothetical questions to introduce future presentations. (As an aside, the potential for speaking tours comes up quite frequently for me. Then, as prospective hosts fully understand the messages I’ll be transmitting, they fade away, often with no explanation and no response to my repeated messages. If you’re interested in jumping over the incredibly low bar necessary to host me, click this link for information.) Back to the point: If I used the hypothetical questions in my introduction, it would allow participants an opportunity to leave the premises before they hear the worst of it. They’d be out a few minutes of time, but they’d save some time and they’d depart relatively free of angst. Ignorance is bliss, especially with respect to challenging social issues, and who am I to rob people of their bliss?
Like the ninth person to arrive at a party for eight, I missed “fitting in” only by a smidgen. If I’m angry because I’m late to the party, you get to bear the brunt of my anger by reading about it here. My only defense is the line that’s become a bumper-sticker cliche: If you’re not outraged, you’re not paying attention.
For me, not knowing is unbearable. But knowing is a great burden, too. And while I’m expecting an asteroid oddly shaped like climate chaos, we’ll probably get hit by a meteor.
If I did not know about the horrors of empire, I would still be teaching at a university. I would still be drawing a large paycheck doing the work I love and interacting with idealistic young people. I would have the respect and admiration of civilized people, including the members of my immediate family.
If I did not know about the horrors of climate change, I would be content with my path in life. I would be living large, sleeping well, and enjoying the contentment of a life well lived. Rarely would I attract animus from across the sociopolitical spectrum. Angst would lie in abeyance, along with threats on my life.
What a boring existence that would be. For better and worse, I’m stuck with the current adventure: the adventure of a lifetime until the adventure ends, along with the life.
There are no second chances, no opportunities to undo what’s been done. At the level of individuals, we refer to poor choices as stupidity (when others are making the choices) or tragedy (when it’s us). At the level of our ill-fated species, we refer to the myriad poor choices as progress. As nearly as I can distinguish, when faced with the proverbial fork in the road, we’ve taken the wrong turn at each and every opportunity. There are no second chances for our species, no opportunities to undo what’s been done. And yet we keep plugging along, claiming we’re sapient progressives. A few among us claim to be conservatives, but we’re conserving only this omnicidal way of life. Until we can’t.
We’ve committed suicide at the level of our entire species, and too many other species to correctly tally. All that’s left is more excuses in an endless string of excuses from the architects and marketers of industrial civilization. I won’t hold my breath for their long-overdue apologies.
I’m not suggesting all the
bliss ignorance is inexplicable. The corporate governments of the world have been following the playbook of William Casey, U.S. Director of the Central Intelligence Agency, since long before he uttered these words in 1981: “We’ll know our disinformation program is complete when everything the American public believes is false.” It’s working great, as indicated by the one-third of Americans who would accept cavity searches in exchange for the privilege of flying commercial airlines, among many other such anecdotes.
An empire in decline requires obedience at home, and it helps if the populace remains purposefully ignorant. At a weekly White House meeting dubbed “Terror Tuesdays,” the drone-bomber-in-chief decides who will die without a whiff of due process, transparency, or oversight (and he has plenty of video-game operators forgoing their consciences to pull the trigger). In the video clip embedded in this article, Democratic National Committee chair Debbie Wasserman Schultz claims she has never heard of Obama’s infamous “kill list,” thus branding herself a
national-level politician liar or stunningly ignorant (if she’s lying, she has plenty of company in the Obama administration).
Obama has given himself power over all communication systems in the country, and he can wiretap, indefinitely detain, and kill any of us on a whim, thereby indicating how meaningless is the Bill of Rights. In addition, he’s constantly seeking more power (including pre-emptive prosecution, in case he believes you’re thinking about committing a crime). Obama’s brand of evil, which includes dictatorial assassinations and ongoing destruction of the Constitution and the Bill of Rights, is exceeded only by the audacity and willful ignorance of his supporters.
My monthly essay for Transition Voice is scheduled to appear tomorrow. Look for it here.
My latest cyber-conversation with Sherry Ackerman was posted at Transition Voice last week. It’s here.
From my Facebook page: Support the 99er documentary film, featuring Guy McPherson (“Walking Away From Empire”), Bill Moyer (Backbone Campaign), Keef Ward, Vincent Scotti Eirene, Jim Rehberg, Dana Light, Samsarah Morgan, Lazarus Long, Darrel Willis and other everyday people wholeheartedly involved in making another world possible. To pitch in, click here. Two trailers are embedded below.
Off the keyboard of RE
Published originally on Reverse Engineering on November 3, 2011
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Note from RE: This is the first of a 3 Part Series I wrote originally in 2011, before we even began discussions of openning up the Diner for Bizness. In this series I discuss what the possibilities are for survival in the hard times likely coming down the pipe here, and historically how some other people managed to survive their trials, and find a Place to Be for themselves.
I feel these articles are of particular significance now as the Diner Crew embarks on a New Voyage, looking for the Promised Land in one spot in North Carolina.. Many differences today from yesteryear, not the least of which are 7B Human Souls currently inhabiting the planet.
There are no guarantees with any plan, no sure bets. We all don’t have the same cards to play either. There are however some principles which are timeless, and others have walked this road before us. In this series, I hope a few Lessons ae demonstrated, and from that we can find the Pathway in out own time to a Better Tomorrow.
We have been discussing for a long time the various possible options we have here to try to find some way OUT of the mess coming down the pipe. Sadly, just about every paradigm we come up with has flaws and weakness embedded in it such force the thinking people here to in the end reject the idea as truly sustainable.
The Classic Method being pursued by many is the Doomstead, aka the Sustainable Subsistence Level small Permaculture Farm. Problems with this paradigm are many, first off many if not most people simply can’t AFFORD to set themselves up on a Doomstead. Or they are trapped inside a Big Shity here they currently ARE still employed, and to set up such a Doomstead would require they LEAVE that job. Who in their right mind is going to give up a decent paying job right now to move out, unless you are just rolling in cash to set up a Glory Doomstead? Long as you are making money and the money still functions, generally unless you are the kid of Robinson Crusoe Peter is, on balance it’s probably still a bit safer to stay with the functioning paradigm, until it really does crap out on you.
Owning Doomsteads also make you a Target, and there is no Guarantee anybody will respect your Property Rights once Da Goobermint collapses. Da Goobermint itself might “confiscate” your property in a Communist of Fascist solution to the problem. You might have to fend off endless Waves of Zombies defending said doomstead. So Doomsteads have their problems.
As mentioned in my Sail based Bugouts, this form of mobile living also has its problems. Your vulnerability on the boat, lack of security while in any harbor, lack of storage space on the boat are all major issues.
At the same time, we have discussed some very Minimalist ideas, including the Johnny Appleseed idea and Peters primitive Hermitage planning. These have their own limitations to deal with, and don’t handle well the problems people who are currently embedded inside Big Shities have to deal with.
How do you resolve ALL these problems in the most consistent way with the highest probabilities of creating a successful outcome? This is Game Theory, and this is how my mind works overall so it’s a challenge for me to try to resolve all the problems in a consistent manner.
My latest idea comes from experience I had in my youth doing Wilderness Camps. During those years, I spent some of my summers out in the Wilderness for the whole summer, but of course mostly did not H-G my own food, except for some brief tests. How this was accomplished was by “Caching” food, mostly at the Privately Owned Base Camp, but also at stop points on the routes we would take hiking and canoeing. We would drive to the Start Point of the Hike, but on the drive drop off supplies of food we couldn’t carry near places the wilderness trail crossed the public highways. The supplies were cached in two ways, mostly by hanging up Bags of them in Trees (easiest), but also occasionally by burying them in water resistant containers. We didn’t even have GPS in those days, but finding the stuff wasn’t that hard, you just triangulate on some major landmarks. So it was pretty easy really to spend 4 weeks out in the wilderness moving from place to place, picking up the Cached Food along the way.
How might you extend out such a “Summer Vacation” paradigm to last you say 3 years or perhaps even 5? Obviously your Food Caches are going to have to be a good deal larger than what we put up, but they are not really THAT large even so. You buy a 20 Gallon Plastic Garbage Can, inside that you can put enough dried legumes and rice and jerky and vitamins etc. all Vacuum sealed to last probably 6 months. Also you have another similar container with backup Tools, rope, fishing line etc. buried with it. Also of course, supplies of Wild Edible Plant Johnny Appleseeds that is appropriate for the neighborhod you do this in. So, for one year, you need 2 of these caches, for 3 years 6 of them. You could bury additional smaller ones over time as well.
Where do you do this? Well, it depends where you currently are living. Say you live on the East Coast at the moment. You might do it up in Maine or Vermont or Pennsylvania if you live in NY Shity. If you live in say DC or Norfolk, you might choose West Virginia or Tennessee. In Chicago, you might choose the Wisconsin Dells or the Ozarks. If you are in SF or LA on the West Coast, the Rocky Mountains are the obvious choice.
You want to have a “legal” Base Camp to operate out of in any of these areas, so here yes you DO “Buy Property”. What you buy though is just a few acres of unimproved on land nearby the vast acreages of National and State parks. Land you might build a “Hunting Cabin” someday, but you don’t build it yet unless you are really flush, and even then probably not. You probably can buy some of this land in the location appropriate to your bugout for $2K an acre or so, though I haven’t researched recent prices in such locations. The location should have a running stream on it or spring, or at least an easily diggable well, not something you need to drill hundreds of feet down to. Dig a simple well you can operate with a Hand Pump and Camouflage it on this property. On the property,
dig two of your Food Storage caches for a full year of basic survival foods. Now you have Food and Water on this land, hidden so others can’t find it, but nothing else. It’s not a Target. It’s just land that blends in with all the other unimproved on land in that neighborhood. It’s not going to be an
attraction point for Zombies.
Offsite of your own Personally “owned” land radially distributed out either on public land or even private land others own but have not built on, you distribute out your other main Food Caches at distances perhaps as much as 20 miles, but you probably don’t need to go that far, a mile or two in any direction would be fine. Main thing is that the cache is out of sight of anybody else while you dig it out and store the food. Once sorted and recorded in an encrypted journal, only you will know where to find this cache of food.
So, now you have a whole bunch of things to insure your survival for a good while. You have a source of Water on your own land not dependent on electricity to pump up. You have caches of food surrounding you only you know the location of, and only you know how many of them there are. You have Base Camp land under the current legal system you can’t be kicked off of. You buy it free and clear for CASH, you pay this year’s taxes in advance and you keep enough cash also to pay the next 3 years of taxes on it. Once Da Goobermint collapses, you won’t have to pay taxes on it and the money used to pay taxes on it probably is worthless anyhow, so don’t sweat it.
What issues previously dealt with have we solved here? Primary would be the Target Problem. You’re not setting up a “Doomstead” that is easily identified as such, even by TPTB using Eyes in the Sky. You’re not improving on the land significantly, putting up a building or buildings with Solar PV panels that could be stolen. From a Google Earth Geosat Image, it just looks like every other quadrant of Forest in the area. Yet on this speck of land, you have sequestered most of what you will need to survive through the Worst of Times.
Assume you have done what I am suggesting here. For approximately say $10K in cost for raw land in the right spot near enough to you, and another $10K in foodstuffs and tools and hardware for setting up your Well for water, you now have a place to go with enough to keep you going for a good 3 years here, PLENTY of time to seed the neighborhood with Edible Wild Plants also.
You are out in the Boonies pretty far, and there is nothing to indicate that many people live there or that they have much worth stealing. If others show up, you say you are just migrants and are camping out a while. You can pack up your tents and move along to convince others this was just a temporary stopover for you, nothing here to see, please move along. A few days later, you return.
PRIOR to the failure of Da Goobermint do you have legal issues? Nope. If the Gestapo show up asking why you have a RIGHT to camp on this land, you produce your TITLE to your 3 acres, and show you OWN it, and moreover your Property tax is all paid for. It is hunting land, so no Homeowner Property restrictions etc. to deal with. You live on these 3 acres, but in fact you have 1000s of acres surrounding you of the National Park you can tool around in once the Park Rangers or similar Gestaspo disappear. TONS of land to sow Wild Edible Plants Johnny Appleseed style!
When Da Goobermint DOES crap out completely, you’ll only have a very few others like you remaining in this neighborhood. The Park Rangers will disappear, and people who don’t have food caches will probably die of starvation in the first year. When the People start dying off, the Deer will start returning in droves, along with other wildlife. 3 years down the line when your caches start running out, your Johnny Appleseed groves will be bearing fruit, and there will be wild game to hunt. You just have to OUTLAST the general population by a couple of years here, most of them will go to the Great Beyond and YOU will be left with a decent portion of a National Park as YOUR hunting and fishing grounds!
During this period of Die Off while the few Zombies in your area are a Danger, you won’t seem much different from them, you are living in Tents like them, and if you are smart you eat meagrely and get skinny to look deprived. You aren’t WORTH considering for the other Zombies, and besides most of them will be feeding on the fat asses in the suburbs, they won’t be out in depopulated areas where the last convenience store closed 2 years ago.
So, to make it THROUGH the Zero Point, you just need to make it through an extended Camping Trip really. As Ross indicated in a prior post, what will really bring this culture down here is the failure of JIT transportation. When this fails, the vast majority of unprepared folks will die of Starvation inside the first year. Read that, the Deer on St. Matthew’s Island. There will be remarkably fewer people to compete with if you can survive this period. You do NOT want to have a Super Duper Doomstead that is a Target, and then you’ll either be descended on by Zombies or the National Guard looking to make your Doomstead into a fort. If you are just Camping Out on what seems to be unimproved land and doing a little self-protection you can make it through the Zero Point. Mostly you just try to AVOID contact with others, and you’ll probably be able to do that. You may have some battles to fight, but it’s unlikely you will be faced with large organized groups to fight off in a remote location that has nothing obvious to steal from.
What does it take to set up this paradigm of SURVIVAL for yourself and your Loved Ones? Not much really. $20K will suffice even on the East Coast, the most expensive area to try it. All you will need here is your Car and preps you can throw in the trunk, the Base Camp you buy for maybe another $10K for the raw land in the right spot and spend the time NOW burying about 3 years’ worth of dried legumes and rice and jerky and vitamins to carry you through the Zero Point. When TSHTF, you jump in your Car, abandon it several miles from your Base Camp and carry in your Shelter and clothing and some tools. You build some better shelters than your tents, or at least add to them. Nothing you can’t give up at the drop of a hat though. Long as you have shelter, food, water and clothing and you are far away from the center of the collapse, you will make it through the Zero Point. You’ll only need to go a couple of years here IMHO before most people are dropped through disease or starvation.
As I see it, EVERY one of the current members here could do some version of this survival paradigm. It’s not expensive, and as long as you have a Car and can GTFO of Dodge at the right time, you can do it even if you live now in a Big Shity. Prepare for the Long Campout. It could save your life.
Off the keyboard of Steve from Virginia
Published on Economic Undertow on February 19, 2012
You Know You’re In Trouble When ..
… the President lies on TV about energy:
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According to the president, the country has 100 years’ supply of natural gas … everyone knows this, even the president who is a square, the last to know everything. Right?
When a president mentions energy in any speech is a big red flag. The word energy from the president always has ‘problem’ lurking somewhere in the background: remember Jimmy Carter. The president suggests our problem is a matter of perception: this must be ‘the audacity of something-or-other’ that the ‘frantic urgency of nothing in particlar’ that have become part of the national conversation as a consequence of Mr. Obama’s presidency.
Frantic urgency to waste: keep in mind at all times that every single word and phrase of the president’s State of the Union Address is scrutinized and measured by flotillas of lawyers and professionals … and algorithms. The president does not write the speech, highly paid national security specialists … and algorithms … write the speech. Every word in the speech is there for a specific purpose. The president just didn’t blurt out by accident that the country has 100 years supply of natural gas: this misstatement was calibrated … by an algorithm.
The algorithm conveniently overlooked proven reserves or the rate of consumption, whether that rate would increase or decrease. For example, if we use no gas we have hundreds of thousands of years of supply. If the US had the same proven reserves as Saudi Arabia — or a bit better – we would have 13 years at the current rates of consumption.
Wiki — and the US EIA — gives the US about 9 trillion cubic meters of proven reserves.
At the current US rate of consumption, Russia, with six-times US reserves, would give us 80 years supply. Perhaps the president’s statement signals the upcoming invasion of Russia! The only way the US would get 100 years out of Russia’s massive reserves would be with stringent conservation! It would also mean no gas at all for Europe, the Baltic states, Belarus or Ukraine … or Russia itself.
Notice the map @ the right. Surprisingly out of focus on the high-definition TV, the map is overlapped with suggestive continent-sized giant, gassy bubbles. The map itself is made up of pink blobs giving the impression that America is bulging with natural gas … that a pin pricking the ground anywhere will cause the gas to flow. There are only a few areas in the country that are gas deposit free: the Eastern Seaboard, Minnesota, Nevada and the Pacific Northwest.
Notice the gas- and oil bearing formations. The map is misleading because there are only a few high-output hot spots within each mauvey-pink play. Other areas are not productive or deplete very rapidly. Once production is underway, the hoped-for vast resources generally turn out to be overstated. Gas or oil that cannot be retrieved may as well not exist.
The productivity of gas or oil wells follows a curve: for every hot spot a larger number of wells must be drilled that produce an average amount then rapidly deplete. There are also large numbers of dry holes. The technology that everyone raves about doesn’t make individual wells more productive but rather cuts the number of (costly) dry holes … technology such as ’3D seismic’ (reflection seismology).
The president never mentions cost: gaining gas from shale formations requires companies to drill far more wells than were required to extract from conventional hydrocarbon-bearing formations. He never mentions the customers ability to pay for the wells, nor does he mention the effects of drilling and hydrofracking everywhere in the country on the nation’s drinking water supply. He never mentions whether the water we have is enough … to extract the promised oil and gas.
It is the fact of the lie that is more important than the content or nature of the lie. It insists that within this government, nothing is true until it is officially denied.
You know you are in trouble when the president is not lying when he is lying.
The US actually is bubbling with natural gas, the president is right! The problem is the gas is dispersed and flows are intermittent and irretrievable. Methane gas leaks out of landfills, from marshes, from undersea clathrates, from melting permafrost, leaking around fracked wells and coal mines, it emerges from animal waste, from peat bogs … none of these are useful ‘reserves’ for the natural gas industry or its customers. Instead, the gas circles the globe in the atmosphere, contributing to climate change. Millions of cubic feet of gas are simply flared:
(TRC Solutions) Flaring natural gas from Bakken oil well. Funds are always available to lavish on waste, proper husbandry of capital and gaining the maximum return is unaffordable. Here is the perverse waste-based US energy policy made manifest: citizens and firms are given every incentive to burn through non-renewable natural resources as fast as possible. Flaring suggests that the world will come to an end if the associated oil is kept in the ground for a few more months until gas transmission infrastructure can be installed.
It also suggests there isn’t enough oil or gas to worry about, not enough to pay the bills.
You know you’re in trouble when corruption and influence peddling becomes so commonplace as to be invisible, the background noise behind ordinary business-as-usual.
Comes now another billionaire … to take his rightful place in the leadership cadre, as potential boss of the Department of Energy, (Washington Post):
Billionaire has unique role in official Washington: climate change radical
When Thomas Steyer — a San Francisco billionaire and major Democratic donor — discusses climate change, he feels as if one of two things is true: What he’s saying is blindingly obvious, or insane.
“I feel like the guy in the movie who goes into the diner and says, ‘There are zombies in the woods and they’re eating our children,’ ” Steyer said during a recent breakfast at the Georgetown Four Seasons, his first appointment in a day that included meetings with a senator, a White House confidant and other D.C. luminaries.
It’s a somewhat shocking statement for someone who’s in the running to succeed the cerebral Steven Chu as energy secretary. Granted, he’s a long shot — the leading contender is MIT professor Ernest Moniz, who served as the department’s undersecretary during the Clinton administration …
Unsurprising that leading nominee Moniz is a Clinton retread and nuclear industry whore. Recycled insiders from previous regimes has been a characteristic of the Obama administration … bet the rent on Moniz (Reuters).
Moniz, who was undersecretary at the Energy Department during the Clinton administration, is a familiar figure on Capitol Hill, where he has often talked to lawmakers about how abundant supplies of U.S. natural gas will gradually replace coal as a source of electricity. Moniz is director of MIT’s Energy Initiative, a research group that gets funding from industry heavyweights including BP, Chevron, and Saudi Aramco for academic work on projects aimed at reducing climate-changing greenhouse gases. (Reporting by Roberta Rampton and Jeff Mason; Editing by Paul Simao)
While Moniz is a tycoon enabler, Steyer is an actual tycoon. He offers more upside to Obama than the technocrat Moniz. With Steyer’s connections, Obama could wind up being somebody after he’s finished with his probationary period as president … Steyer might even capitalize an Obama hedge fund!
Steyer is taking on a more prominent public role. On Sunday, he spoke to a crowd that organizers estimated at 35,000, gathered on the Mall to call for a stronger national climate policy.“I’m not the first person you’d expect to be here today. I’m not a college professor and I don’t run an environmental organization,” he said. “For the last 30 years I’ve been a professional investor and I’ve been looking at billion-dollar investments for decades and I’m here to tell you one thing: The Keystone pipeline is not a good investment.” The move stems from an uncomfortable conclusion Steyer has reached: The incremental political victories he and others have been celebrating fall well short of what’s needed to avert catastrophic global warming. “If we can win every single battle and lose the war, then we’re doing something wrong,” he said, moments after consuming two mochas on the table before him.The simultaneous mocha-drinking is understandable: Steyer had arrived just hours before on the red-eye, which he chooses over a private jet to reduce his carbon footprint. He may have built one of the nation’s most successful hedge funds — Farallon Capital Management, named after the waters off San Francisco Bay teeming with great white sharks — but he’s not flashy.
It’s good to know billionaires are ordinary folks just like you and me … while at the same time inhabitants of the rarefied precincts of sacred money. As a consequence, star-struck Eilperin avoids shining any light into the dark corners of Steyer’s fund, (Wikipedia):
Tom Steyer founded Farallon in January 1986 with $15 million in seed capital. Previously, Steyer worked for San Francisco-based private equity firm Hellman & Friedman, as a risk arbitrage trader, under Robert Rubin, at Goldman Sachs and in Morgan Stanley’s corporate mergers and acquisitions department.
Rubin … Goldman-Sachs … take it back: Steyer is certainly equally qualified- if not more so than ‘Brand X’ candidate Moniz. In Washington, DC, where money talks, Steyer carries his own lobbyist around in his wallet.
Steyer knows coal because Farallon once owned the 2d largest coal-fired power plant in Indonesia! The following is from a report criticizing Steyer’s handling of university endowment funds (Amanda Ciafone, Working Group on Globalization and Culture, Yale University):
(Un)Fa(i)rallon in the Endowment:
Tracking Yale’s Global Capitalism In 2002, when Farallon purchased a 51% stake of Indonesia’s Bank Central Asia for $520 million dollars the fund could not avoid the high visibility of mainstream media attention. Bank Central Asia was the “crown jewel” of Indonesia’s banking sector with approximately $10 billion in assets and eight million customer accounts. In 1998, when the Asian financial crisis brought on by foreign investment and currency speculation brought Indonesia’s banks “to the brink of ruin,” the Indonesian government nationalized the bank, bailing it out and taking on its debtors by replacing unpaid loans with government bonds.In line with demands from the IMF, the sale of Bank Central Asia was seen as crucial to the overall success of the government’s privatization program: “international lenders and the IMF placed great emphasis on BCA’s divestment as a yardstick of economic reform, threatening to withhold financial aid if it was not completed.” Private investors could now buy an Asian bank on the cheap. Although it offered 25 rupiah a share less and has never run a bank, Farallon was chosen over other bidders. In fact, Farallon had won a huge asset for Yale and its other investors; for the $520 million it paid, it bought a bank predicted to earn $650 million in government interest payments a year for the next few years. In actuality, the Indonesian government was paying Farallon interest on its own bonds originally issued to save the bank that Farallon now owns.
Ciafone questions how non-Indonesian Farallon could buy the bank with both the lower bid and zero-experience in running a financial institution? It emerged that Farallon was well connected in Indonesia and could leverage its friends in high places (IMF) better than the other financiers.
Some of Farallon’s (Yale’s) money was invested in Paiton I, Indonesia’s first private power venture and “one of the most expensive power deals of the decade.” As the first private power project in the country the huge Paiton I coal burning power plant set the tone for subsequent private power ventures which “cut overpriced, politically influenced deals that undermined the Indonesian economy.” Although little is known about Farallon’s connection to the Paiton project, the financial press revealed that Farallon held a “controlling position in the $180 million [bond] issue” of Indonesia’s Paiton I plant. But much is known about the nature of the Paiton I project; three Wall Street Journal investigative articles detail the crony capitalism, price gauging, and environmental risks surrounding the plant in Indonesia.
It’s hard to say who would be worse as DOE Boss: captive insider Moniz or finance criminal Steyer. Both are creatures of the money-establishment: the end result is more of the current status-quo: lies and continuing incentives to waste, more theft from the citizens by tycoons. Regardless who whomever becomes DOE Boss, don’t expect any real change as to do so might adversely effect tycoons’ two-fisted lifestyles.
Meanwhile, you know you are in trouble when the Federal Reserve is lending $85 billion dollars to the Federal Government and the mortgage business every month.
It is both worrisome and suggestive that the central bank is such a large lender to the government. Are there no other lenders? This is a tremendous red flag: this sort of direct monetization suggests the government is a credit risk.
Is is also worrisome and suggestive when the Fed is lending billions every day to the mortgage industry. If the industry was solvent it would not need a continuing $40 billion-per-month bailout! At the same time, it is worrisome that the Fed is guaranteeing bank deposits. When the Fed accepts securities as collateral during open market operations such as ongoing Quantitative Easing (QE) it credits the banks with ‘excess’ reserves. These reserves are never deployed (into circulation) unless the banks’ balance sheets are collapsing … as when there are runs on the banks.
Does the Fed know something about the banks we should worry about?
You know you are in trouble when the inflation/deflation argument is still with us.
Deflation tends to be described as a change in prices for goods, a fall in the general price level or a contraction of credit and available money. Rather, deflation is where the cost of repayment of any debt is greater in real terms than the worth of the debt.
Current deflation is meaningless out of context of debt and energy. The world is running out of energy and has taken on $640 trillion$ in debt in order to run out of energy.
There is debt deflation when the cost of repaying a debt increases as the debt is repaid, because the act of repayment extinguishes currency. The scarcity premium of currency increases faster than the rate at which the debt(s) can be retired. In fact, debt repayments by 3d parties has the effect of rendering all debts unaffordably costly to repay. Read Irving Fisher’s paper on ‘Debt Deflation’ (1933).
Energy deflation occurs when energy becomes scarce and more expensive in real terms, there is a scarcity premium added to fuel that the customers cannot afford … fuel becomes too valuable to waste by driving tens of millions of useless cars in circles from gas station(s) to gas station(s).
Fuel is hoarded or unaffordable, so is money used to buy fuel. If currency is more useful to gain fuel than credit, there is no credit. The cycle is broken only when there is no fuel or no demand for it.
Economists are blind to the distinction between ledger loans (amounts noted on spreadsheets as due and payable) and circulating money.
Central banks offer ledger loans as do private sector lenders. The latter offer unsecured loans to customers. Ledger loans are credits made to borrowers’ accounts, funds thereto are simply ‘invented’. As the name implies, circulating money is loans that have changed hands to 3d (or more) parties in the marketplace where their worth is determined.
Banks’ offering unsecured loans is called ‘inflation’, demanding circulating money as repayment for unsecured loans is called ‘deflation’. Since most repayment is made by taking out greater loans, inflation tends to be a background condition. Unsecured loans represent economic ‘growth’ as their tally makes up the components of GDP.
Private sector lenders demand repayment in circulating money which is always in limited/finite supply. Borrowers cannot offer ledger repayments! They must earn, borrow or steal the funds demanded for repayment from others who then do not have the funds. Repayment reduces the amount of money in circulation which reduces GDP. When repayment demands exceed the amount of new loans there is a recession.
Clearly, offering more ledger credit — which costs very little — and gaining circulating money in return — which costs everything — is good business for lenders. Everyone is robbed whether they borrow or not because of the increased scarcity and cost of needed circulating money!
Central banks cannot make unsecured loans (loans in excess of collateral) therefor there is no such thing as central bank ‘money printing’. Because reserve banks have no capital structure — they are reserve banks after all — they cannot extend unsecured credit. Any central bank that offers unsecured loans is instantly and permanently insolvent!
This is not an Economic Undertow supposition but a condition like gravity. If ordinary commercial or depository banks are rendered insolvent by excess leverage and bad loans, a central bank which leverages itself while taking on the bad loans of its clients is ruined just the same as the other banks, for the same reason!
Under such circumstances, there is no effective lender of last resort, the only real collateral for all loans is currency on deposit. There are bank runs to redeem as much as possible … (as are underway in Europe and commencing in Japan).
The outcome of the discussion is delay in implementing reforms. Meanwhile, there is ongoing energy- and resource waste.
You know you are in trouble when your world burns 88.8 million barrels of petroleum per day … and is fantastically in debt by trillions of dollars!
That petroleum is gone forever. Another 88.8 million barrels will flush down the toilet tomorrow and another 88.8 million the day after … day after day after day!
and the day after that. What do we get in return for 88.8 million barrels per day? People laugh at the Medievals but they left behind some nice towns and useful buildings. What do we have to show … for the million barrels … burned up for nothing every single day for decades?
We have some used cars, some potholed ‘infrastructure’, millions of ugly buildings … we’re bankrupt.
In order to burn the 88.8 million barrels we’ve had to borrow billions of dollars from bankers and finance every day, as well, The total amount we owe to the financiers is $640 TRILLION dollars (Bank for International Settlements, PDF warning)!
Don’t listen to the soothing bromides of the analysts. Each swap noted on BIS ledgers cost someone real money, they hedge something real, the total system credit including that derived by way of foreign exchange.
We burn instead of holding onto our oil until someone can figure out something better to do with it. We rush to burn as much as possible as fast as possible. We want to burn it faster so that we can change some ‘indicators’ and allow tycoons, ‘entrepreneurs’ and ‘innovators’ to borrow some more.
We are like a family that has inherited a palace: we have burned all the furniture in order to keep warm now the furniture is gone we must burn the house. Well-dressed salesmen knock on the door offering efficient saws and furnaces to cut the house apart and burn it.
Madness … whatever is happening to us we deserve it.
Off the keyboard of Lucid Dreams
Published originally on Epiphany Now on February 18, 2013
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The time has come for the collective consciousness of our planet to take responsibility for our predicament. Pointing the finger and exclaiming who’s fault this mess is has lost it’s point. Yet what exactly does it mean to take responsibility for our global mess? How does one take responsibility for the colossal clusterfuck we find ourselves in? Is it possible to change business as usual? Anything is possible if you have money, because everything on our globe has a price and at any rate the IRS requires it of us. Unfortunately money has an affinity towards not going anywhere once it’s created. The money changers create it and then give it away to themselves while the rest of us blindly service the hologram that tells our brains that our highest purpose is consumption and acquisition of useless throw away uselessness. The money that we do manage to get our hands on is already spoken for by the same ass holes who created it in the first place. When we aren’t working at acquiring money to keep the hologram active, we’re anesthetized by all manner of mesmerization by way of fukitol franken pharma chemicals and the idiot panel. Anything to distract us from how stupid and pointless our existence inside the hologram has become.
Off the keyboard of RE
Published originally on The Burning Platform on December 12, 2010
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Among many other things, I am a Fisherman. Even on the frozen lake outside my cabin now as the cold blankets the Last Great Frontier, I will Fish. 20 Below Zero, I will put on my Red Fox Fur Mittens, and I will still fish. I cut a small hole in the Ice, and I drop in my line to see what comes up. Its cold here in Alaska now in December, and often I come up empty, but still I will fish. I do this because I am a Fisherman.
Here on the pages of TBP (and now on the Doomstead Diner), I am a Fisher of Men. It can be cold here on these pages also, and here also I often come up empty. I seek no money, I have no PayPal account for donations. I don’t even get a kickback from your clicks on Amazon as JimQ does. I have only one reason for what I write, for why I fish on these pages, and that is to Save as Many as I Can. With that purpose in mind, tonight I will write for you a Parable of the Fisherman.
I will begin this essay tonight with a song from Billy Joel about the Fishermen of Long Island, the “Downeaster Alexa”:
Well I’m on the Downeaster Alexa
And I’m cruising through Block Island Sound
I have charted a course to the Vineyard
But tonight I am Nantucket bound
We took on diesel back in Montauk yesterday
And left this morning from the bell in Gardiner’s Bay
Like all the locals here I’ve had to sell my home
Too proud to leave I worked my fingers to the bone
So I could own my Downeaster Alexa
And I go where the ocean is deep
There are giants out there in the canyons
And a good captain can’t fall asleep
I’ve got bills to pay and children who need clothes
I know there’s fish out there but where God only knows
They say these waters aren’t what they used to be
But I’ve got people back on land who count on me
So if you see my Downeaster Alexa
And if you work with the rod and the reel
Tell my wife I am trolling Atlantis
And I still have my hands on the wheel
Now I drive my Downeaster Alexa
More and more miles from shore every year
Since they tell me I can’t sell no stripers
And there’s no luck in swordfishing here
I was a bayman like my father was before
Can’t make a living as a bayman anymore
There ain’t much future for a man who works the sea
But there ain’t no island left for islanders like me
Over in “The Real Terrorists” thread based on a Gonzalo Lira article, Stuck and I began discussing the moral and ethical issues involved in becoming a Soldier, which can label you either a Terrorist or Patriot, depending on the perspective of who writes the History Books, or who issues the current Propaganda. I pulled in a Pop Culture reference, the tag line from the AI WOPR program in the film “Wargames”, where the only “solution” the WOPR Computer found to the problem of Tic Tac Toe was not to play the game at all. Smokey of course flamed the reference, because understanding pop culture metaphors and their significance is beyond the intellectual capacity of the mentally challenged. Regardless of what such dimwitted, ethically bankrupt and morally repulsive Napalm Artists will write here though, not playing the game is a possible choice in many ways as we proceed through this spin down. In this post, I will present a few LEGAL means by which an individual can attempt to remove himself as much as possible from the “grid”, and not be forced into becoming a Tool for Evil.
As Stuck indicated in his posting, the choice of not playing the game isn’t always available. For the Iraqui or Afghani who has Ruskie or FSofA Soldiers occupying his towns and raping his wives and daughters, he’s got no choice, he has to fight, or surrender and become a Slave to the Conquistadores.
For the Sons and Daughters of J6P when Conscription starts, their choices will also be limited, as it will probably be a whole lot harder in this go round to escape to Canada than it was in the Vietnam Era, not to mention the Hosers will probably be conscripting up Soldiers as well. However, at least for the moment while the Military remains a Mercenary Force here, our young adults still do have the Choice available not to play the game. The guys who are sitting behind consoles at Norfolk or aboard Carriers flying drones didn’t HAVE to sign up, although with fewer Jobs available all the time besides selling your soul to become an Illuminati Killing Machine they are in a sense forced into this choice. Not quite so directly as someone living in the War Zone is though.
Much more than in previous Fourth Turning cycles, because of the Internet many more people are becoming aware now that this fight isn’t so much between Nation States as it is a fight between the Haves and the Have Nots. This knowledge is likely to become more widespread as the economic spin down proceeds, and it will be very interesting to see how the newly conscripted soldiers will handle what will increasingly become maintaining a Police State inside their own home countries, rather than fighting foreign wars. As with the Collapse of the Roman Empire, my guess would be that the Army will eventually break up into factions, and there will be many Assassinations of Illuminati by Rogue Generals in the various Armies seeking Power for themselves. Locally, said incipient Warlords will confiscate the property of most typical biz owners and landholders, creating small Feudal type states.
Now, in this scenario, at the beginning those who Rebel against the Illuminati and Boil them in Oil are the Good Guys. However, they can quickly Morph into being the Bad Guys once they become the Oppressors in their own local neighborhoods, so in many cases the process will repeat itself in a Fractal fashion as along the way former Good Guys are corrupted by Evil and become Bad Guys.
Remaining Alive as a Good Guy through this whole deal is a matter of luck for the most part, although good Planning and Preparation can help you in Not Playing the Game for a while, until the Big Show comes directly to a Theatre Near You. You can also help yourself by making Connections inside your local community and beginning the process of transitioning to a locally sustainable economy.
What are the most important Choices a Young Adult can make today to remain on the Good side of the line, and not end up becoming a Killing Machine for the Illuminati, and becoming Damned to Everlasting Torment Burning in the Fires of Hell? The first thing would be to move as far away as you can from the center of industrial society. The second would be to operate in all Cash, cashing your paychecks as soon as you get them if you are still employed. This will make your life harder to track in a database .Third would be getting rid of any Internet Accounts in your name, and a Cell Phone in your name. Use a prepaid Cell Phone for communications, and buy the minutes with Cash. Be ready to dispose of the Phone when TSHTF.
Buy a laptop at Walmart with Cash. Only sign on to the internet from Publicly Available WiFi locations, for so long as they still exist. To do Transactions on the Internet, use prepaid Visa Cards you buy with Cash, for as long as those are available (discovered since this is impossible to do on many websites, most significantly PayPal). Set up 2 or 3 separate Google Accounts using different prepaid Cell Phone numbers and do it from different computers you do not own, preferably in widely dispersed locations as you move outward from the center of civilization.
None of this is Illegal, its just making yourself as Anonymous as possible in the Digital Age. There are of course still other ways you can be tracked, such as with your Car and its Registration. If you have an Older Relative, preferably not with the same last name or better yet just a friend of an older relative (more removal), ask that person to register a used car you buy with Cash from an individual seller, not a Car Lot. Give this Older person Cash to pay the insurance. Somebody in a Nursing Home is a very good choice for this. Again this is not illegal, the Old Person is just “loaning” you his car, since he is not able to use it while stuck in the Nursing Home on a Respirator.
Do not Buy Property, and if possible do not even sign a Rental lease anywhere, find someplace you can rent month to month, or look in the classifieds for people seeking roommates, and again pay your share of the rent to them in CASH. Avoid putting your name or signature on ANYTHING. No loans, no leases, no bank accounts, NADA. Anything that requires a Signature, avoid like the PLAGUE. There shouldn’t be too much need for you to use Snail Mail, but if you do need to set up a Post Office Box and be ready to abandon it when TSHTF. Still, I would advise against setting one up because it will pin down your location.
Your Driver’s License is your greatest Vulnerability, and Driving is your greatest Risk in trying to stay Anonymous and off the radar. Go in TODAY and re-up your license for as long as you can, some States its 6 years before you have to go in and show up at the DMV to renew. However, once TSHTF, if you are Dodging the Draft, the minute you get pulled over for having a broken tail light is the minute you end up getting a Buzz Cut for Boot Camp when the Gestapo asks to see your Driver’s License. So practice being SCRUPULOUSLY legal when you drive, and limit your driving as much as possible. Do as much of your Commuting as you can by Bicycle or Public Transportation. Reserve your Car only for Emergency Bug Outs.
Obviously, if you are Employed anywhere you collect a Regular Paycheck attached to your Social Security Number, you are immediately Vulnerable. So the sooner you get off the grid of regular jobs with regular paychecks the better, though this is of course pretty difficult. However, there are many things you can do for CASH if you are young and strong, once you migrate out to the boonies you can do yard work, do painting or other house maintenance tasks or make like an Illegal Alien and follow the Ag Seasons, doing work harvesting or planting in various locales. If you are a good Mechanic, drop cards all around the neighborhood letting people know you will fix their cars CHEAP. My nephew who was UE for a few months kept his head above water this way. He raced on Dirt Tracks in better times, so his Garage is practically as good as a commercial one. He can yank out an engine and disassemble and reassemble it in a day. He had to do that after almost every race anyhow with his race car. If you are really bright with some money to wager, you might even stay ahead by front running the Fed for a while longer here. LOL. Of course, doing that through an anonymous account is quite difficult I am sure.
Ultimately of course, the best option is to get off the grid of money altogether and be able to find food yourself to barter with. I cannot recommend more anything for a young adult than becoming a Fisherman with your own boat, and moving to a location where there is still good fisherie. I have one friend who lives this way, he has a 30’ Downeaster he uses to fish all summer, he sells most of his catch for CASH. Winters, he plows snow, also for CASH. Sadly, we haven’t had a lot of snow so far this winter, so he is hurting some, but he has plenty of food in the larder, so his family is not starving here, and no SNAP card either. I started this post with Billy Joel’s sad paean to the Fisherman of Montauk and Long Island Sound, but to my mind it is the Fishermen who will make it though the Zero Point here. To do this though, you must place yourself in a neighborhood where there is still a good fisherie. The GOM is NOT a good choice here, unless you figure Corexit is a good Vitamin Supplement. I would advise though outfitting your Downeaster for a Sail Rig of course.
Like Bruce Springsteen in “My Home Town”, in the song the “Downeaster Alexa”, Billy Joel explores the loss of a livelihood as industrialization and financialization stole a way of life from the working man in this country. The Fishing Grounds of Montauk and the properties in the Hamptons these folks lived on became priced out of their affordability as the Pigmen of Wall Street made this property their Playground. For the Steel Mills of Pittsburgh and the Factories of Atlantic City, The Boss was RIGHT. Those jobs ain’t never coming back to these shores. For the Fishermen in Long Island Sound though? It may take some time, but one day they WILL return, far into the future no doubt. .
I was eight years old and running with a dime in my hand
Into the bus stop to pick up a paper for my old man
Id sit on his lap in that big old buick and steer as we drove through town
Hed tousle my hair and say son take a good look around
This is your hometown, this is your hometown
This is your hometown, this is your hometown
In `65 tension was running high at my high school
There was a lot of fights between the black and white
There was nothing you could do
Two cars at a light on a saturday night in the back seat there was a gun
Words were passed in a shotgun blast
Troubled times had come to my hometown
My hometown, my hometown, my hometown
Now main streets whitewashed windows and vacant stores
Seems like there aint nobody wants to come down here no more
They’re closing down the textile mill across the railroad tracks
Foreman says these jobs are going boys and they aint coming back to
Your hometown, your hometown, your hometown, your hometown
Last night me and kate we laid in bed talking about getting out
Packing up our bags maybe heading south
Im thirty-five we got a boy of our own now
Last night I sat him up behind the wheel and said son take a good
This is your hometown
Decreasing opportunities for “paying” jobs will force many people off the monetary grid. In the end, this is how this monetary system will be destroyed, regardless of what Helicopter Ben does here. You will have to find ways to earn your living that are local and do not demand money as an intermediary. To truly KILL the Banksters, you have to “Go Galt”, and stop using their money. You will be forced into it eventually, but if you start NOW learning how to do it, you might be able to NOT PLAY THE GAME. For a while anyhow, until the Big Show Comes to a Theatre Near You. Then you will have to make your choices, and staying on the Good side of the line will always be difficult. It may cost you your life to stay on that side of the line, but its worth it for your Everlasting Soul to do so, even if you do not believe in the Afterlife. After all, if this is the ONLY life you will ever get and you only have ONE chance going out of it to be on the side of Good or Evil, do you want to leave the earth and your corporeal existence as an enabler of EVIL? I sure don’t. When the Big Show Comes to a Theatre Near You, when your own existence and that of your loved ones is Threatened, there is no more Hiding. Then you pull out ALL the stops, and you TAKE NO PRISONERS. Pick a means to fight and make your Final Stand against Evil. Whatever means you pick, make sure you take out as many of the Enemy as possible before you go to Glory in the Kingdom of Heaven. That is just the way I see it though, I can’t speak for everyone of course, and Jesus Christ probably would not agree with that philosophy. But then, Jesus lived 2000 years ago, not now, and he was thoroughly immersed in the paradigm of the Ag Society as it had developed in his time. We are in the post Ag Society now, on our way BACK and REVERSE ENGINEERING our way to a much different lifestyle than we have known over the last couple of centuries. If the good guys WIN this battle, for all our children who make it through the Zero Point it will be a Better Tomorrow.
Off the keyboard of Steve fromVirginia
Published on Economic Undertow on February 10, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
The North Dakota Department of Mineral Resources made a presentation to native peoples’ tribal leaders in the state last fall regarding oil and gas production in the Bakken area, (PDF alert). It’s a comprehensive report and worth the time to examine it. This jumped out:
Figure 1: the cost of Brent crude vs. the ability of crude customers to pay for it made graphic, from TFC Charts. What the chart can’t say is that the industrial world is impoverished by the high cost of crude in a vicious cycle. What it also doesn’t show is that real fuel prices will increase relative to other costs, even when nominal prices decline. Funds must be diverted toward obtaining fuel away from the purchase of non-fuel goods and services. When the drillers gain credit the customers are deprived of it … the alternative is less fuel.
Little has changed over the past two weeks except that Brent prices are a little higher due to war fears in the Middle East, moral hazard by central banks and nonsense bullish frenzy that has overtaken asset speculators. Right now, customers are borrowing at the expense of drillers. If the prices climb high enough, listen for ugly noises from the euro-zone or Japan as the higher prices bite hard … and businesses (banks) start to fail. That will be the end of the bullishness.
Keep in mind if the economy starts deleveraging (again), there is little the establishment and central banks can do but stand aside and wring their hands. Everything has been committed already: interest rates are at near zero, governments are at the borrowing limit, there is little in the way of collateral remaining for central banks to take on as security for new loans.
Speculators don’t realize conditions are fundamentally different this time … nations, regions, individuals and firms have experienced temporary shortages of fuel, credit and other resources in the past due to wars, droughts and other disruptions: the world in its entirety has never run out of energy before, which is what is underway right now.
|Crude Oil (WTI)||USD/bbl.||95.72||-0.11||-0.11%||Mar 13||17:15:00|
|Crude Oil (Brent)||USD/bbl.||118.90||+1.66||+1.42%||Mar 13||18:00:00|
|RBOB Gasoline||USd/gal.||305.88||+5.89||+1.96%||Mar 13||17:15:00|
Is $118 the new $147? Here is another look from Stuart Staniford:
Figure 2: Brent and WTI performing together on the same stage (click on for big). The lower West Texas Intermediate price is good for refiners who can sell products outside the Midwest at the world price. This is a burden for drillers as Bakken formation supports the most expensive, fastest depleting wells on Earth. Landlocked wells put the squeeze on drillers: if the Bakken oil field was near the Gulf coast, drillers could sell their crude at the Brent price, putting the squeeze on refiners instead.
– Drillers have to keep pace with depletion in the Bakken and similar tight fields so large numbers of wells have to be drilled continuously.
– Drillers also have to keep pace with depletion in conventional formations which is occurring at a rate + 4% per year.
– Drillers in the US face an inhospitable environment: oil-field labor shortages, skeptical regulators, anti-fracking activists and the price squeeze.
Rune Likvern (Oil Drum) called keeping up with Bakken depletion rates ‘Running With the Red Queen’ Drillers need to punch holes in the ground at ever-increasing rates just to maintain current rates of output. Any slacking in efforts and flows of product decline sharply, says Likvern:
In reality, it was the growth in the oil price to an apparent structurally higher level that secured commercial support for crude oil production from shales. In that respect it was the oil price that was the true game changer and unleashed the “shale/tight oil revolution”. There is a saying that goes like; “Do not listen to what they say (technology). Look at what they are doing! (spending borrowed money)”. This may as well go for the Bakken formation. The oil service giant Baker Hughes recently expressed concerns about slowing activity levels in shale plays if oil prices moved below $80/Bbl. Further the oil companies Marathon and Occidental recently cut back on their activities in the Bakken formation. Oil and gas companies still care about the colors of the numbers at the bottom line for their projects.
Figure 3: Running with the Ace of Spades: by the time the transportation mess is straightened out the Bakken fields will be depleted.
Coastal refiners must pay world prices for crude while selling high cost products. As a result of the squeeze, coastal refiners are going out of business. Here is a clip from Stillwater Associates:
US East Coast Refinery for Sale: Who’s Buying? Earlier in September, Sunoco had announced plans to sell its Marcus Hook and Philadelphia, PA refineries, noting that the refineries had been profitable for only two of the last 10 quarters, and stating that both refineries would be idled in July 2012 if buyers have not been found. However, in an early November conference call with analyst, Lynn Elsenhans, Sunoco’s CEO and Chairman, stated that “…if at any point we believe it’s in the best interest of the shareholders to either stop operating (Marcus Hook and Philadelphia) or change their utilization rate, up or down, even if that’s before July, 2012, we would take the appropriate action.” Sunoco Refining and Supply reported a $17 million pretax loss for 3Q 2011, the ninth quarter out of the last 11 for which Sunoco Refining and Supply lost money.When ConocoPhillips announced that it was seeking a buyer for the Trainer refinery, Willie Chiang, then ConocoPhillips’ Senior Vice President of Refining, Marketing, Transportation and Commercial, noted that their decision to sell, like Sunoco’s, was based on unfavorable economics caused by a competitive and difficult market environment characterized by “…product imports, weakness in motor fuel demand, and costly regulatory requirements.”So, who will buy these refineries?
Valero has been mentioned by some as a possible buyer, but Valero exited the refining business on the US East Coast when it sold its Paulsboro, NJ and Delaware City, DE refineries in 2010. Valero has said it plans to move gasoline from its recently acquired Pembroke, UK refinery, which can process heavier sour crude, to the US East Coast.
Keep in mind, the transport bottleneck is the reason for so much gas flaring in tight oil formations. Gas does not command a price high enough to support a crash program to build out distribution infrastructure. Meanwhile, enough gas to heat a big city like Minneapolis is wasted.
Keith Schaefer @ Oil and Gas Investment Bulletin says:
A vertical well into a conventional oil field costs something like $1 million. The Bakken’s horizontal, multi-stage frack wells cost an average of $9 million, according to the North Dakota Department of Mineral Resources. That’s a huge upfront cost. Each well produces approximately 615,000 barrels of oil, meaning the breakeven price for each Bakken well ends up in the $70-$90/barrel range, once taxes, royalties, and expenses are included. If oil prices slump below that level, a lot of people say Bakken wells aren’t worth the cost.
A lot of people like grade school arithmetic teachers. Because businesses cannot lose money perpetually, low prices keep crude in the ground … conservation by other means.
As the wells in the Bakken grow closer together, initial production rates are sliding. According to some sets of data, average first year well output climbed steadily from 2005 to a peak in mid-2010, then declined almost 25% over the following 12 months. With more wells tapping into the same resources, there is simply less oil pressure available to each well. And when initial well output starts to fall, an accelerating number of new wells must be brought online to sustain overall production volumes.Such is the heart of the pessimist argument: that sliding initial flow rates will tag-team with the Bakken’s high decline rates to mean that, no matter how many new wells are drilled, production will stagnate.
One thing to keep in mind is when oil-bearing rock is fractured, it is turned into gravel, the stones held apart by propants: sand or ceramic grains. Once rock is fractured, it cannot be fractured a second time. Fracking is ‘one and done’.
Of course, the real problems are on the consumption side, not the production. Consumption is waste, it does not and cannot pay for itself. What does the heavy lifting is debt and lots of it. We’ve had debt around for so long we’ve gotten used to it. What we are starting to realize is the monumental cost alongside the impossible debt dynamic. The debts are too large to repay only refinance with new debts. Meanwhile, costs including repayment obligations compound exponentially. We ‘fix’ debt problems by taking on new debts, falling deeper into a hole with each round of debt.
The outlines of our condition are becoming more defined, the clock is ticking … Numerian says (Economic Populist) HT Usman:
Even if another credit blow-out occurred, we all know how that would end – very badly, as in 2008 credit crisis all over again. Unfortunately, without another credit splurge the results are the same. When the credit stops flowing, income is hit hard, because most of the growth in income in the economy is produced by debt, and it is not organic growth that would result from a normal recovery generated through capital investment, wage and benefit increases, revenue advances, and expanded global trade. This is precisely what the Fed understands, and why it is expanding its balance sheet ceaselessly, and enabling the Congress and Administration to build up debt at the tune of a trillion dollars a year. All this credit is the lifeblood of the economy, allowing the government to make Social Security and Medicare/Medicaid payments, feed 48 million people through food stamps, fight wars in multiple hot spots around the world, pay interest on the debt to keep bondholders happy, and shift unemployment money to the states. The problem for the Fed is that the unraveling is already beginning. The stock market may be testing its highs, and 50 out of 50 economists may be anticipating a solid economic recovery, but without new sources of credit that is going to be impossible to achieve. Credit has already dried up in the real economy, which is why you hear so many retailers say “nobody has any money” …
“Nobody has any money …” should be familiar: What the chart can’t say is that the industrial world is impoverished by the high cost of crude in a vicious cycle.
When credit stops flowing, income is hit hard because ALL of the growth in income in the economy is produced by debt … without it there is no industry!
What we are experiencing are two interrelated phenomena: an energy shortage due to our wonderful economic ‘success’ over a period of 400 years and the consequences of exponential growth of loans needed to ‘buy’ this success..
Debt is taken on to capitalize industries and their customers. More debt is taken on later to fill the pockets of the industrialists and roll over the first rounds of debt. Finally, debt is taken on the service the previous rounds and nothing more, the economy is saturated with debt.
The first round of debt gains the industrialist tools to produce goods and provides customers with purchasing power. The second round gives the industrialist his fortune and repays the venture capitalist: during this round fewer tools are gained and less in the way of goods are produced. The third round pays the moneylenders’ interest and nothing more, customers and industries are bankrupted by their debts.which are unproductive. Eventually, the moneylenders also fail.
‘Moneylenders’ here must also include the central banks.
Our economy is in the third stage and has been here for awhile, perhaps since 1980 and the ‘Reagan Revolution’.
Added to this is the ongoing shortage of liquid fuels which results in higher prices which must be met with debt. The cost of new fuel rises past what customers can borrow using fuel waste … as collateral. Waste of the fuel does not provide an organic return so all returns must be borrowed adding to the demand for debt… during a period when productivity of debt is diminished.
More about central bank-n-market head-fakery and wishful thinking, (Naked Capitalism):
Is the Euro Crisis Over? By Robert Guttmann, Professor of Economics at Hofstra University and a visiting Professor at University of Paris, Nord. Cross posted from Triple Crisis.A strange calm has settled over Europe. Following Mr. Draghi’s July 2012 promise “to do whatever it takes” to save the euro, which the head of the European Central Bank followed shortly thereafter with a new program of potentially unlimited bond buying known as “outright monetary transactions,” the market panic evaporated. Since then super-high bond yields have come down to more reasonable levels, allowing fiscally and financially stressed debtor countries in the euro-zone to (re)finance their public-sector borrowing needs a lot more easily than before. Even Greece has been able to borrow in the single-digits for the first time in three years.This calming of once-panicky debt markets has led to optimistic assessments that the worst of the crisis has passed. Draghi himself declared at the beginning of the new year that the euro-zone economy would start recovering during the second half of 2013. He talked of a “positive contagion” taking root whereby the mutually reinforcing combination of falling bond yields, rising stock markets and historically low volatility would set the positive market environment for a resumption of economic growth across the euro zone. Christine Lagarde, as the head of the IMF part of the “troika” (i.e. ECB, IMF, and European Commission) managing the euro-zone crisis, declared at the World Economic Forum in Davos a few weeks ago that collapse had been avoided, making 2013 a “make-or-break year.”
Here is conventional economic analysis that never gets around to mentioning energy.
– A strange calm has settled over Europe … following Mr. Draghi’s July 2012 promise “to do whatever it takes” to save the euro,
Draghi didn’t actually do anything, he talked about it.
– the market panic evaporated.
That’s an assumption. The more likely is credit strangulation eased a bit.
– This calming of once-panicky debt markets has led to optimistic assessments that the worst of the crisis has passed.
Not by a long shot, the crisis is the cost of energy and the inability of the Europeans to earn anything by wasting it.
– we can see that Ireland, Spain, Portugal or even Greece have been able to lower their current-account deficits substantially,
Automobile sales in these countries along with France have collapsed, petroleum use has significantly declined. Consequently, there is less fuel being imported by these countries. Keep in mind, their fuel use will decline to zero if they do not effect conservation measures. What is underway is not a rehearsal, it is the effects of entropy being felt along with diminishing supply of fuel overall. Fuel is being rationed, conservation by other means.
– renewed turmoil in the sovereign-bond markets will be just a matter of time. Most troubling in this context is the doom-loop dynamic of persistent fiscal austerity across the continent.
Withholding credit is a way to compel the export of European fuel consumption to credit issuers such as the US. Any fuel not burned in Italy or Spain is available to be burned in Los Angeles. America’s energy ‘surplus’ is by way of theft from Europe and elsewhere, not fracking. The problem with the professor is he is not cynical enough!
– This dialectic centers above all on the euro’s trade-adjusted exchange rate.
Not in the sense that the professor implies: the more deflation-priced euro gives those who hold it the means to buy fuel at a bit of a discount … and an incentive to keep the euro. Any replacement currency would be depreciated violently, there would be small likelihood of any petroleum exporter accepting any replacement currency other than d-marks.
– will undermine the competitiveness of the euro-zone’s economies,
The assumption is that countries like Greece or Portugal are industrial countries with factories filled with overpaid proletarian workers like China. Instead, they are senior centers filled with retirees. Peoples’ pensions are being looted, this is called ‘competitiveness’, stealing on a grand scale is what is showing up on the ‘stats’.
– But the euro-zone cannot afford this stop-go pattern of policy-making in the face of a systemic crisis. It will have to undertake far-reaching reform on several fronts beyond what Europe’s leading politicians have been willing to entertain.
Europe is being de-carred by pauperizing the populations. The necessary reform is for governments to take charge of this dynamic and decar the continent on purpose while sparing the citizens. Europe can stand to jettison its useless cars and the fuel waste these things represent. It is the waste that has undermined the European — and world — economies, not trivial real interest rate movements or currency exchange rates. These last are abstractions, petroleum waste is permanent: when the fuel is gone baby, it’s gone, forever.
Off the keyboard of John Ward
Published originally on The Slog January 2013
Discuss these articles at the Epicurean Delights Smorgasbord inside the Diner
Italian banks have been hiding massive derivatives losses…so now MPS bank needs a €3.9bn bailout. The Talvivaara Mining company of Finland is secretly mining uranium, and covering up dangerous accidents. Both the Germans and the Swiss think the Americans are lending out or selling more than they actually hold in gold, thus raising the spectre of ‘fiat gold’: hence their growing desire to get the gold back before things get totally out of hand. Almost nobody believes the figures for Spanish bank liquidity – and the authorities have relaxed their liquidity requirements in order to get real about this.
All these stories have one simple commonality: deception. Alongside the trend identified by The Slog in recent weeks (the élites are becoming less bothered about fessing up to fibs) is another more encouraging one: the MSM has been rather more on the ball about spotting the mendacity in the first place.
What the main ‘old’ media still aren’t doing, however, is addressing specific reasons why the deceptions are necessary in the first place. In fact, this isn’t even slightly hard to do. The three main élite activities taking place at the minute are:
1. A scramble for energy and new-industry sector resources;
2. The appropriation by sovereign banks of gold as a bulwark against insolvency; and
3. the injection of more unelected technocrats into key positions in order to help carry that out.
Realities which might cause a derailing panic have thus been hidden. But reporting the instances and symptoms of this process is becoming increasingly irrelevant: it’s very good for hits – if you’re chasing hits – but as always, that gets in the way of intelligent analysis of how the rest of us should respond in the face it. And anyway, those ‘in charge’ haha are no longer that fussed about the media finding out about such stuff: the die is cast now, there’s little we can do to stop it….and they know that.
I think any investor or survivalist must therefore apply two critieria to any investment – whatever it might be: first, do I really understand all the fundamentals of this sector? And second, is anyone dicking about with those fundamentals for commercial or sovereign/central bank gain?
For me, silver is looking a better and better opportunity. So using the advice offered above, remember that the metal is prone to at times terrifying volatility…that’s the downside. The upside is that Mario Draghi, Mervyn King and Ben Bernanke do not (as far as I know) have plans for it. Nevertheless, other directionalising folks much nastier than any of us may well have such plans.
As always, caveat emptor applies: ignore what the buggers say, but oggle what they do like a hawk.
Finally, as a trailer to what will be coming soon at The Slog, I leave you with this thought. Every top fiscal Wally around the Western world is busy predicting confidently that Zirp will be maintained until such time as things improve. It is my considered opinion that the main emotion in play during such assertions is hubris. Hugh Briss is a loud sort of cove, but prone to delusions of grandeur: he is the Icarus of our world, convinced he can fly close to the sun, and control its effect. He cannot.
George Osborne yesterday showed once more that he’s ahead of the game by suggesting that Britain faces “a difficult time”, the gdp results were “disappointing”, and thus the Pound is falling…so Brits abroad in the eurozone will “feel the pinch”. The Daily Mail noted all this, and then wrote that the FTSE had ‘smashed through the 6,300 barrier’. No dots were joined up or brain-cells overworked in the reporting of these facts. The phrases ‘currency wars’, ‘selling the Pound to help exports’ and ‘indescribably bonkers’ were absent.
Still, the American ‘recovery’ continues to be the only one in history wherein the Federal Government owes more money every month, over half the public sector pension fund has been thrown at the debt, and the absorption of failed banks by healthier ones is a process taking place 4-5 times a month on average. 53 banks failed in the US last year, and for those of a vengeful disposition, The FDIC has all the gory details.
Doing this sort of thing, of course, simply means that bad banks infect goodish banks with their toxicity….which quietly moves from one balance sheet to another, becoming yet another lump of pulsating radioactive gunk ready to lay the system low.
But heh – volatility is just so now baby. CBOE Holdings, buoyed by the phenomenal success of options and futures contracts based on its Volatility Index (VIX) is ratcheting up its efforts to broaden their appeal.
“The volatility business is only eight years old, but we see terrific growth,” Ed Tilly, CBOE’s president and chief operating officer, told a gathering of reporters in New York recently. “We see hedge funds, prop trading firms, (commodity trading advisors), insurance companies and other institutional users migrating to the product. It’s very important for us.”
‘The volatility business’. Doncha love it? Here we are, it’s the 21st century, and fully grown up adults are gainfully employed building a new sector specialising in calculating the Fanshit Factor. Buy fanshit futures. Compare your own fanshit fear to the fanshit feelings of other calmer souls. Spot the fanshit index falling as more fanshit sprays your new YSL suit an interesting shade of fanshit. Be a fanshit fan: You Know it Makes Sense. Human beings are never funnier than when examining the interior of their own backsides in search of fanshit.
But desperation breeds criminality too – imagine that. Suddeutsche Zeitung reports that Germany’s bank regulator Bafin has now started an investigation against four German banks in connection with alleged manipulation of the Euribor. So far, the German authorities have only cooperated with the Libor investigations, but this is a new investigation.
Do we need a trial to establish guilt here? Probably not: they’re all guilty. Still, some sort of judicial process would be nice. I mean in the sense of politeness to the 65% of us suffering a pythonic grip while the authorities work out how to save themselves. QE does nothing that it claims on the tin. Zirp pauperises anyone on a fixed income with ‘proper’ investments. Libor manipulation screws the borrower. Welfare cuts play well in the markets while leaving all worthy recipients of it even more desperate than the authorities.
They’re called the authorities, by the way, because although they’re rarely authoritative – and never able to command authority through respect – they do have unlimited authority to do WTF they like to anyone and anything at any time they fancy. This is what makes investing such a joy at the moment. But if nothing else, the competition authorities are still on Michael O’Leary’s case, so it’s not all bad.
Ryanair has put out quarterly results showing turnover, profit and passengers continue to rise. The last of these is an especially good sign for any company in the business of getting people into the air, and predictably the results are accompanied by a bullish statement from chief executive Michael O’Leary. As O’Leary could be bullish about the imminence of an asteroid hit, that doesn’t mean much beyond his infinite determination to take over Aer Lingus.
Mad Michael claims that his plan to sell Aer Lingus routes to two separate airlines meets all concerns raised by the competition authorities. They just don’t address my concerns about the possibility of him being a wing short of an aeroplane, but then I’m picky. I once drove a six hundred mile round-trip to pick up four teenage children who unexpectedly found themselves in the Loire thanks to the immaculate scheduling and navigation skills of Ryanair. It is for this and many other reasons that I still think the price of O’Leary buying the national airline of his homeland should be the authorities insisting on rebranding it Cunnilingus.
But just when you thought Absolute Zero Sanity had been achieved, there’s always the Greek austerity problem to prove you wrong. Charis Theocharis, the new Hellenic revenues general secretary, made an astonishing claim in public last week. During his appearance at
the congress of the Association of Property Owners, a number of people
started to shout and protest about the many different taxes imposed on
“I have no money to pay property taxes,” shouted someone from the audience.
An obviously stunned general secretary shouted back, “Me neither”.
Truth, Lies and Tickertape in America and Europe
It’s a desperate politician that ever uses the term ‘one hundred per cent’, but yesterday Greek Finance Minister Yannis Stournaras said he was that certain 2013 will be Greece’s last year of recession. Whether it’s a forever thing or just until 2014 we can’t be sure, but speaking to the BBC’s Mark Lowen, Yannis said the Greeks had reason to be optimistic.
Missing from his statement was why they should feel optimistic, but just to back himself still further into a newly-painted corner, Stournaras added, “Towards the last quarter of 2013, we are going to have recovery. The probability of Greece leaving the euro – Grexit – is now very small.”
I would imagine this is what passes for being ‘on message’ in the Eurozone at the moment, and if nothing else it offers an example to French ministers about how they’re expected to behave. In a desperate attempt to disarm a self-inflicted torpedo yesterday, colleagues in the Socialist administration said Labour Minister Michel Sapin was only highlighting faults of the previous government of Nicolas Sarkozy when he said France was ‘totally bankrupt’.
‘Totally’ is another of those ‘one hundred per cent’ statements. Not that you can be slightly bankrupt, but either way retreating from such an observation represents a toughie. His boss Pierre Moscovici said: “What he meant was that the fiscal situation was worrying”, but nobody in history ever rang up the administrators to say the situation was totally worrying. As if to prove the point, a poll yesterday by Le Figaro had 80% of readers agreeing that France was bankrupt. You ain’t outta the woods yet, Pierre baby.
But if things seem anything from rosey to awful on the mainland, things are catastrophic on Cyprus. You know there’s a big issue at stake when they drag in the clerics, and last week the island’s orthodox leader Archbishop Chrysostomos II requested financial assistance for the rapidly sinking island nobody wants to sink. However, Chrysostomos turned towards Russia, asking his counterpart in Moscow to try to persuade President Rasputin to grant another emergency loan….on top of the 2.5 billion euros Cyprus got from Russia just 13 short months ago.
According to Fitch, in fact, the total Cyprus now needs is 17 billion euros, which represents seventeen eighteenths of the gdp there. I’d call that ‘worrying’ even on a good day and 25 mgs of Valium; but then, I’m getting hazy on what ‘bankrupt’ means. I’m also unclear as to when Archbishops began to have numbers like monarchs: does this suggest delusions of grandeur, we ask. Or is he the follow up to the last movie, Archbishop Chrysostomos I, in which the Bish looked West but saw only a Belgian skull writing kamikaze poetry?
We may never know, but it’s good to see that the Phantom Finn Olli Rehn has joined the certainty club. “It’s essential that everybody realises that a disorderly default of Cyprus could lead to an exit of Cyprus from the Eurozone,” he said, adding pointedly and yet pointlessly, “It would be extremely stupid to take any risk of that nature.”
That’s another fine mess you got us into, Olli: but as the irrepressible Mark J Grant pointed out yesterday, a big slice of the formula for Europe is that ‘no country will leave the Euro under any circumstances so not only is money thrown about, but deficit goals are relaxed, relaxed and ignored as demonstrated quite clearly in Spain, Greece, Portugal, Italy and Cyprus. The actual financials in these European countries have gone from bad to worse but it is irrelevant, as there has been a change in the mindset of the Europeans which is being reflected in the minds of investors – which is that “it just does not matter”’. He is of course right on the money, reflected by the fact that Catalonia has just requested another 9 billion euros in aid from Mariano Rajoy’s Madrid Government.
Grant’s brilliant piece was marred only by the growing inability of folks under forty to get the compose/comprise verb right. Something is either composed of, or it comprises. You can’t comprise of something any more than you can compose of music. English is full of comprises, but it does no harm to know the rules.
Knowing the rules has never held the Italians back, and the smell surrounding Monte dei Paschi di Siena Bank (MPS) is getting more pervasively gaggo by the hour. Siena prosecutors have been looking at the MPS accounts, and found suspicious bank transfers for €17bn in 11 months from May 2008 to April 2009 to various other institutions. That’s a figure I’d rank beyond suspicious and heading towards smoking gun held in bright-red cordite-stained hand. I mean, €17bn is a lot. The money went to ABN Amro, Santander and Abbey National, and has an air of f**king enormous bribe about it.
Talking of bribes, Federal Reserve Chairman Bernanka’s latest round of bond buying will reach $1.14 trillion before he ends the programme in the first quarter of 2014, according to estimates in a Bloomberg survey of economists.
Despite the US being in complete, obvious and unstoppable recovery, Benny the Banke will press on with purchases of $40 billion a month of mortgage bonds, and $45 billion a month of Treasuries – although more than a few Fed officials warn his unprecedented balance-sheet expansion will “impair efforts to tighten policy when necessary” as one mole put it.
I am very happy to be quoted as offering the view that this is a one hundred per cent certainty. But as they say in Brussels, “it just doesn’t matter”. Thank God for that: we are saved.
Off the keyboard of Jim Quinn
Published on The Burning Platform on January 18, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
I’ve put off writing an article about what is likely to happen in 2013 so I could peruse the thousands of other articles by reputable bloggers, paid pundits, Wall Street shills and captured charlatans to gather their wisdom. It’s essential that I make predictions for 2013 so I can write another article in December rationalizing why 90% of my predictions failed to materialize. Reading all of these 2013 prediction articles made things much clearer for me. I now know for sure:
- The stock market will reach an all-time high.
- The stock market will fall 42%.
- The economy will strengthen as the year progresses.
- The economy will descend into a depression.
- The USD will strengthen.
- The USD will collapse.
- Gas prices will set new highs.
- Gas prices will fall below 2012 levels.
- Gold will rise to $10,000 per ounce.
- Gold will drop below $1,000 per ounce.
- We will experience hyperinflation.
- We will experience horrific deflation.
- Obama will compromise with the Republicans and put the country on a path to prosperity.
- Obama will create a debt ceiling crisis and assume dictatorial powers as a result.
- Snooki will be a better mother than Kim Kardashian.
- Honey Boo Boo will beat I Didn’t Know I Was Pregnant in the Neilson ratings.
The majority of 2013 prediction articles are written to support the agenda of the writer. Many are trying to sell newsletter subscriptions or investment services. Their predictions will match the theme of their newsletter. Others are Wall Street paid shills who will predict what they are paid to predict by their owners. Then there are the political hacks who tow the party line with their predictions. But no one can top the predictive powers of the CBO. They just put out their ten year updated forecast reflecting the fabulous fiscal cliff deal that saved the country. According to the CBO, the “compromise” to reduce our deficits will add a mere $4 trillion to the national debt over the next ten years. I’m sure this will prove to be accurate. Just take a look at their 2002 projection, after passage of the Bush tax cuts:
The CBO predicted the FY2012 surplus would be $641 billion, the national debt would total $3.5 trillion, the debt held by the public would total $1.273 trillion, and GDP would total $17.2 trillion. They missed by that much.
The actual FY12 results were:
- The true deficit was $1.37 trillion (amount national debt increased – not the phony deficit number reported by the mainstream media).
- The national debt was $16.1 trillion.
- The debt held by the public was $11.3 trillion.
- GDP was $15.8 trillion.
Based on these results, I won’t be asking the CBO for help with my Super Bowl bet. Making ten year predictions is beyond worthless, but public policy in Washington DC is based on these useless CBO projections. The entire fiscal cliff kabuki theater fictitious crisis reveals the politicians and mainstream media pundits to be liars, fools and frauds. The tax the rich to cut the deficit storyline was sold to the public and won the day. Of course, the highly accurate CBO immediately revealed that the Orwellian named American Taxpayer Relief Act of 2012 adds $4 trillion to the national debt over the next ten years. Based on the accuracy of their previous predictions, it’s a guarantee the national debt goes up by $8 trillion, as the rich take advantage of the thousands of loopholes in the IRS code they paid for to avoid paying the taxes expected by the CBO.
Hypocrisy abounds on both sides of the aisle in Washington DC and on the media company propaganda channels. As the national debt soared from $10.6 trillion on the day Obama took office to $16.4 trillion today, I heard shrieking liberal talking heads on MSNBC, CNN, and the rest of the liberal media blame the debt on the Bush tax cuts and the Bush wars. If the Bush tax cuts were so horrific, why did Obama and his minions just make 98% of these tax cuts permanent? Liberals held protest marches across the country against Bush’s wars and burned him in effigy. Obama’s defense budgets have been larger than Bush’s and he doubled down on our miserable failure in Afghanistan. You don’t hear a peep from the liberals about the warmongering Barack Obama who has kill lists and unleashes predator drones, killing women and children across the globe. Liberals pretend to be concerned about the welfare of the citizens, but continue to support a President that uses executive orders to imprison citizens indefinitely without charges, has expanded surveillance on citizens, has kept Guantanamo open, signs the continuation of the Patriot Act, and proposes overturning the Second Amendment by executive order. Liberals shriek about the evils of an unregulated Wall Street, while remaining silent as Obama hasn’t prosecuted a single banker for the greatest financial fraud in world history. You don’t hear a peep about Jon Corzine, who stole $1.2 billion from the accounts of farmers and ranchers. Liberals talk about regulation and then stand idly by while Wall Street lobbyists wrote the Dodd Frank law and insurance and drug company lobbyists wrote the Obamacare law. Liberal hypocrisy knows no bounds and is only matched by Neo-Con hypocrisy.
The Neo-Con controlled Republican Party is a pathetic joke. They have the guts to declare themselves the party of fiscal responsibility, after Bush’s eight year reign of error. He and his fiscally responsible party were handed a budget in surplus and managed to add $4.9 trillion to the national debt by waging undeclared wars, encouraging Wall Street to create the biggest fraudulent financial bubble in history, creating a new $16 trillion unfunded entitlement (Medicare Part D), cutting taxes without paying for them, and creating a massive new government agency (DHS) to take away our liberties and freedom. Federal government spending grew from $1.9 trillion to $3.0 trillion under Bush and the Republicans. Does that sound fiscally responsible?
Does anyone believe the Republican Party is serious about cutting anything? Tough guy Republicans like Big Chris Christie preach fiscal responsibility when going to war with teachers’ unions, but he squeals like a stuck pig when a $60 billion pork filled, unpaid for, Sandy Relief bill is held up in Congress. The courageous fiscally responsible Congress critters passed the entire pork filled, unfunded, bloated, vote buying joke. It included $28 billion to mitigate future disasters, $3 billion to repair or replace Federal assets, and $6 billion for transportation projects completely unrelated to Sandy damage. The hypocrisy of politicians who proclaim the $50 billion of 2013 fiscal cliff tax revenue as deficit cutting, and then immediately piss it away by paying people to rebuild their houses yards from the Atlantic Ocean while funding billions of non-disaster related projects is disgusting to behold. There is nothing like compromise to add another $60 billion to the national debt.
Our entire economic and political system is a farce. The American people are being played by the powerful interests that provide them with an illusion of choice. Both parties serve the interests of their masters and the fiscal cliff show and debt ceiling show are a form of reality TV to keep the masses alarmed, fearful, and believing there is actually a difference between the policies of the ruling class. The charade has played out in its full glory in the last few weeks with Obama convincing the masses he had stuck it to the rich, while in reality the working middle class got it good and hard when they got their January paychecks. This chart details the tax changes that went into effect on January 1.
The funniest part this fiscal fiasco farce is watching the reaction of the sheep who believed Obama and the mainstream media storyline. Obama was able to raise the published top rate on people making over $400,000. The newly defined “rich” laughed heartily as they know only fools pay anywhere near the top rate. The rich just call their tax advisor and instruct them to use one of the thousands of tax loopholes in the 75,000 page IRS tax code to “legally” avoid the new Obama rates. Meanwhile, both parties and their mainstream media mouthpieces downplayed the 2% payroll tax increase on every working American. This tax increase has been a complete surprise to the reality TV zombies and Facebook aficionados. Even college educated professionals in my office had no idea their next monthly paycheck was going to be $150 to $200 lighter. This will wipe out most, or all, of the annual raise they received. The tax will fall heavily on the 75% of households that make less than the $113,700 Social Security cutoff. For a struggling family of four earning the median income of $50,000, the $1,000 less in their paychecks will mean less food, putting off trips to the doctor, driving on bald tires, or not taking the family on a vacation to the Jersey shore. The $2,274 increase in taxes (.57%) for the Wall Street banker making $400,000 probably won’t put too much of a crimp in his Hamptons lifestyle.
The joke is on the American people as the rich will ante up maybe $50 billion of taxes in 2013, while the working middle class will be skewered for $125 billion. How’s that “Tax the Rich” slogan working out for you?
Only in the Orwellian capital of Washington DC would a bill that was supposed to provide tax relief to the middle class and spending cuts to reduce the deficit, actually increase the tax burden of a median household by $1,000 and perpetuate the pork spending payoffs to campaign contributors and friends of the slimy politicians that slither through the halls of Congress. The list of pork and bribes should be nauseating to hard working Americans across the country:
$30 billion extension of the 99 weeks of unemployment benefits, even though we are supposedly in the 3rd year of economic recovery. Continuing to pay people to not work for two years will surely boost employment.
$14.3 billion for a two-year extension of the corporate research credit benefiting large technology companies like IBM and Hewlett Packard.
$12.2 billion one-year extension of the production tax credit for wind power.
$11.2 billion two- year extension of the active financing exception, which lets GE, Caterpillar Inc. (CAT) and Citigroup Inc. (C), among others, defer taxes on financing income they earn outside the U.S.
$1.9 billion extension of the Work Opportunity Tax Credit for hiring workers from disadvantaged groups, benefitting mega-restaurant chains like McDonalds.
$1.8 billion extension of the New Markets Tax Credit for investments in low- income areas, benefitting JP Morgan and other Wall Street shyster banks.
$650 million tax credit for manufacturing energy-efficient appliances, benefitting mega-corps like Whirlpool.
$430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects. NBC thanks you.
$331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50% of the cost to maintain tracks that they own or lease.
$248 million in special expensing rules for films and television programs.
$222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.
$78 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”
$59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.
$4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.
So when you see the cut in your take home pay, just comfort yourself knowing that JP Morgan, Citigroup, GE and hundreds of mega-corporations were able to retain their tax breaks. As they have done for decades, Congress and the President agreed to address spending cuts at a future date. Of course, a government spending cut isn’t actually a cut. It’s a lower increase than their previous projection. Nothing is ever cut in Washington DC. The austerity storyline is a lie. Not a dime has been cut from the Federal budget. Intellectually dishonest ideologues try to peddle the wind down of the Obama $800 billion porkulus program as a cut in Federal spending. They sold this Keynesian “shovel ready” crap to a gullible public as stimulus to jumpstart the economy. Federal spending was $3.0 trillion before the Obama stimulus. After the two year stimulus was pissed away without helping the economy one iota, the baseline should have been back in the $3.2 trillion range. Instead, FY13 Federal spending will be $3.8 trillion. This hasn’t kept liberal ideologues like Krugman and his minions in the mainstream media from blaming crazy Tea Party Republicans for inflicting horrendous austerity measures on the poor and disadvantaged.
The chart above reveals a few truths:
- The country has been blessed with two of the worst presidents in U.S. history over the last twelve years.
- When Federal spending as a percentage of GDP is beyond two standard deviations over the normal range during the last sixty years, your problem is not lack of tax revenue.
- Obama and the current Congress are spending at a level of 24% of GDP versus the 18% of GDP when Clinton left office. This amounts to a nose bleed altitude $950 billion higher than the level Clinton was spending in his final year in office.
The Op-eds in liberal rags across the land decry the lack of civility in Washington DC and plead for politicians on both sides of the aisle to come together and compromise for the good of the country. This line of bullshit would be laughable if it wasn’t so wretched in its falsity. Compromise is what has left this country with a $16.4 trillion national debt, $200 trillion of unfunded liabilities, and $1 trillion deficits as far as the eye can see. Democrats have compromised and let the Republicans create a warfare state. Republicans have compromised and let Democrats create a welfare state. The two headed monster living in the swamps of Washington DC just voted to increase taxes on all Americans. They voted to hand criminal Wall Street banks $700 billion. They voted to pass the Patriot Act. They voted to pass the NDAA. They’ve allowed the President to wage undeclared wars in Iraq, Afghanistan, Libya, and now Iran. They voted for a $663 billion Defense bill that includes tens of billions the Secretary of Defense doesn’t even want. They will vote to raise the debt ceiling in the next two months. The last thing this country needs is more compromise. We can’t afford any more compromise. The chart above proves what can happen when gridlock ensues, spending restrictions are enforced, and confrontation displaces compromise. After the 1994 Republican takeover of Congress, gridlock ensued for the next six years. PAYGO restrictions in the Omnibus Budget Reconciliation Act of 1990 didn’t allow unfettered spending increases. The result was Federal spending falling from 22% of GDP to 18% of GDP and a budget surplus. The Pay-Go restrictions expired in 2002 and Democrats and Republicans have compromised to the tune of a $10.2 trillion increase in the national debt in ten years. The hypocrisy of pandering deceitful politicians is boundless and shows utter contempt for the intelligence of the American populace.
“Raising the debt ceiling does not authorize more spending. It simply allows the country to pay for spending that Congress has already committed to. If congressional Republicans refuse to pay America’s bills on time, Social Security checks, and veterans benefits will be delayed. We might not be able to pay our troops, or honor our contracts with small business owners. Food inspectors, air traffic controllers, specialist who track down loose nuclear materials wouldn’t get their paychecks. Investors around the world will ask if the United States of America is in fact a safe bet. Markets could go haywire, interest rates would spike for anybody who borrows money – Every homeowner with a mortgage, every student with a college loan, every small business owner who wants to grow and hire. We are not a deadbeat nation.
It would be a self-inflicted wound on the economy. It would slow down our growth, might tip us into recession. And ironically it would probably increase our deficit. So to even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible. It’s absurd. Republicans in Congress have two choices here. They can act responsibly, and pay America’s bills, or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy.” – President Barack Obama – January 14, 2013
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. The Senate continues to reject a return to the common sense Pay-go rules that used to apply. Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts.
The Senate had to abide by the common sense budgeting principle of balancing expenses and revenues. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours. Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” – Senator Barack Obama – March 16, 2006
I could have shown quotes from George W. Bush during the 2000 Presidential campaign talking about a non-interventionist foreign policy and no need for the U.S. to get involved in nation building and then proceeding to pre-emptively attack sovereign countries while wasting trillions and impoverishing unborn generations trying to create “democracy” in the Middle East at the point of a gun as a cover to protect “our” oil. The point is that we are being given the illusion of choice. Everyone knows the debt ceiling will be raised after another episode of Washington DC Kabuki Theater, presented by the corporate mainstream media in breathtaking detail, because the politicians are beholden to their owners and those owners want more of our money. That is why spending will never be willingly cut by the spineless puppet congressmen, as their strings are pulled by the corporate puppet masters and they dance to the tune of the banking oligarchs that own this country.
After witnessing the fighting of undeclared never ending wars, passage of freedom destroying legislation like the Patriot Act & NDAA, approval of pork barrel spending to the tune of hundreds of billions, rule by Executive Order, using ZIRP to extract hundreds of billions from senior citizen savers and give it to criminal Wall Street banks, forcing the American people at gunpoint to replenish the Wall Street banks with $700 billion after they had committed the greatest financial fraud in history, and a continuing trampling of the U.S. Constitution, the American people continue to remain willfully ignorant of the truth. The American Dream is dead. We’ve allowed a rich, privileged, elite few to achieve hegemony over our economic and political system with their control of the media and manipulation of our financial markets. They will collapse the country because they will never be satisfied with the amount of wealth and power they’ve accumulated. Their voracious greed will be their downfall. The sooner we can channel the anger of George Carlin, the sooner we can put an end to this corporate fascist reign of terror.
“Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear. They’ve got you by the balls.
They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. You know something, they don’t want people that are smart enough to sit around their kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago.
It’s a big club and you ain’t in it! You and I are not in the Big Club. By the way, it’s the same big club they use to beat you in the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table is tilted folks, the game is rigged. And nobody seems to notice, nobody seems to care. That’s what the owners count on, the fact that Americans are and will probably remain willfully ignorant of the big red, white, and blue dick that’s being jammed up their assholes every day. Because the owners of this country know the truth, it’s called the American Dream, because you have to be asleep to believe it.” – George Carlin
I never did get around to making my 2013 predictions. I’ll give it a stab in my next article: Apparitions in the Fog.
Off the keyboard of Jason Heppenstall
Published on 22 Billion Energy Slaves on January 21, 2013
|Anders Fogh Rasmussen’s self-commissioned portrait. What message is he trying to send out I wonder?|