A Century of Challenge

12 02 2012

We had the great privilege the other night of seeing Nicole Foss from Canada present her Century of Challenge lecture….  and what a polished performance!  Over 1 1/2 hours of stumble free oration, without a single second of emotional  drama, all factual, all presented in a way anyone could understand.  Even for someone as knowledgeable as I am, there wasn’t one second of boredom!  At the end, she got a deserving standing ovation….

Nicole Foss at the Big Pineapple, Nambour

My heartfelt thanks to the Transition Nambour folks who organised this, great job guys…. and the attendance was amazing, I estimate at least 300 people turned up, her biggest audience ever according to Nicole…!

The future belongs to the adaptable

To say we are in deep shit is an understatement.  I cannot understand how the morons in charge of running the world cannot at this late stage come out and say it; it is really beyond me… as Nicole said, they can kick the can down the road some more but they are running out of road.  Greece will default, no ifs no buts, it’s only a matter of time, it could easily happen this week.  It is mathematically impossible for Greece (or any other European country to repay its debts – it’s as clear as 1 + 1 = 2..)  Portugal will be next, and Ireland, Spain and Italy will follow suit.  The Euro, and the Eurozone, are finished.  And as the dominoes fall over one by one, the greatest depression will begin.  And make no mistake, Australia is not immune, globalisation has made sure of that.

Are you ready?  The future will have two kinds of people in it: the adaptable, and the rest.  Those who watch Days of our Lives, and those who listen to the likes of Nicole (and Chris Martenson, and James Howard Kunstler, and and and many other prophets all over the internet).

If you are in debt, it’s time to get out.  Nicole predicts that property values could easily fall to what they were in the 1970’s, that is to just 10% of their current bubble value.

Architecture of a housing bubble

Canada and Australia have much in common….  largely untouched by the GFC, with an economy that relies on abundant resources the rest of the world wants.  As long as they have money to pay for it.  China’s housing bubble is even worse than ours.  They have entire cities, all brand new, that are uninhabited…..  poor Chinese have no hope of ever buying apartments there, China’s capitalists are way past the stage they can recover their investments, or repay their debts.  When this bubble bursts, just watch the demand for our resources fall off a cliff.  But they keep saying “this time it’s different”.  It’s different alright… this time the depression will be global.

Here, our banks are raising their interest rates, even though the Federal Reserve is lowering the cash rate.  This is a very bad sign in my opinion.  Australian banks have to raise an important proportion of their funding from overseas and the deep crisis in Europe means that the cost of borrowing money in those international markets has risen to levels not seen since the GFC. The RBA cannot influence the price of money internationally.

Just think about what this means… anyone worried about not being able to meet their commitments may decide to sell.  As  more and more houses hit the market, there are fewer and fewer buyers, worried that if they borrow, their interest rates may rise and sink them too.  So prices fall.  As prices fall, more people stake out sale signs on the footpath, worried that their investment is going pear shaped.  So prices fall some more…

Eventually, many people end up owing more than their properties are worth, called being “underwater” in the US.  It has happened before, in the 1930’s great depression.  My mother in law’s parents lost everything like this at the time.  Don’t think it can’t happen again.

As Nicole pointed out, all this depressing stuff occurred at a time resources were plentiful, and cheap.  There were no excuses for growth to not occur, except that it is money that oils the cogs of the economy, and without money, everything grinds to a halt….

Now imagine what happens when, after much deleveraging, this idiotic system tries to put the pedal to the metal again only to discover the energy to do it with is no longer there.  As one last item to depress you, here is a little something I found on the internet the other day.  It is a spreadsheet from a government website http://www.ret.gov.au/resources/fuels/aps/Pages/default.aspx

See those red numbers at the bottom…..  that’s our depletion rate.  TWENTY SIX POINT SIX PERCENT PER ANNUM!  Still don’t believe we’ll run out of oil before 2020…?

Table 1A. Petroleum Production, Australia

Crude Oil Condensate Total Crude Oil and Condensate
megalitres megalitres 000 bbls / day
2008-09 20,106 7,680 27,785 479
2009-10 17,497 8,896 26,393 455
2010-11 13,231 8,426 21,657 373

November 2010 1,196 704 1,900 398
December 2010 1,101 725 1,826 371
January 2011 851 721 1,572 319
February 2011 840 590 1,431 321
March 2011 1,027 640 1,667 338
April 2011 995 675 1,670 350
May 2011 1,036 661 1,696 344
June 2011 843 661 1,504 315
July 2011 793 661 1,454 295
August 2011 989 709 1,698 345
September 2011 1,071 581 1,652 346
October 2011 1,122 632 1,754 356
November 2011 1,127 668 1,795 376
December 2011 1,182 658 1,839 373
Percentage change on year-to-date

Fiscal -17.8 -12.7 -15.9


-10.2 -20.9