More Peak Oil bad news…..

15 06 2017

There have been no end of new articles on the demise of the oil industry lately. I’ve been so busy building that it’s only now I can catch up with some blogging, so here’s your lot for the time being.

From the srsroccoreport.com website comes this unbelievable analysis…:

While the Mainstream media continues to put out hype that technology will bring on abundant energy supplies for the foreseeable future, the global oil and gas industry is actually cannibalizing itself just to stay alive.   Increased finance costs, falling capital expenditures and the downgrade of oil reserves are the factors, like flesh-eating bacteria, that are decimating the once great oil and gas industry.

This is all due to the falling EROI – Energy Returned On Investment in oil and gas industry.  Unfortunately, most of the public and energy analysts still don’t understand how the Falling EROI is gutting the entire system.  They don’t see it because the world has become so complex, they are unable to connect-the-dots.  However, if we look past all the over-specialized data and analysis, we can see how bad things are getting in the global oil and gas industry.

Let me start by republishing this chart from my article, Future World Economic Growth In Big Trouble As Oil Discoveries Fall To Historic Lows:

The global oil industry only found 2.4 billion barrels of conventional oil in 2016, less than 10% of what it consumed (25.1 billion barrels).  Conventional oil is the highly profitable, high EROI oil that should not be confused with low quality “unconventional” oil sources such as OIL SANDS or SHALE OIL.  There is a good reason why we have just recently tapped in to oil sands and shale oil…. it wasn’t profitable for the past 100 years to extract it.  Basically, it’s all we have left…. the bottom of the barrel, so to speak.

Now, to put the above chart into perspective, here are the annual global conventional oil discoveries since 1947:

You will notice the amount of new oil discoveries (2.4 billion barrels) for 2016 is just a mere smudge when we compare it to the precious years.  Furthermore, the world has been consuming about an average of 70 million barrels per day of conventional oil production since 2000 (the total liquid production is higher, but includes oil sands, deep water, shale oil, natural gas liquids, biofuels and etc).  Conventional oil production has averaged about 25 billion barrels per year.

As we can see in the chart above… we haven’t been replacing what we have been consuming for quite a long time.  Except for the large orange bar in 2000 of approximately 35 billion barrels, all the years after were lower than 25 billion barrels.  Thus, the global oil industry has been surviving on its past discoveries.

That being said, if we include ALL liquid oil reserves, the situation is even more alarming.

Global Oil Liquid Reserves Fall In 2015 & 2016

According to the newest data put out by the U.S. EIA, Energy Information Agency, total global oil liquid reserves fell for the past two years.  The majority of negative oil reserve revisions came from the Canadian oil sands sector:

Of the 68 public traded energy companies used in this graph, total liquid oil reserves fell from 116 billion barrels in 2014 to 100 billion barrels in 2016.  That’s a 14% decline in liquid oil reserves in just two years.  So, not only are conventional oil discoveries falling the lowest since 1947, companies are now forced to downgrade their total liquid oil reserves due to lower oil prices.

This can be seen more clearly in the EIA chart below:

The “net proved reserves change” is shown as the black line in the chart.  It takes the difference between the additions-revisions, (BLUE) and the production (BROWN).  These 68 public companies have been producing between 8-9 billion barrels of oil per year.

Because of the downward revisions in 2015 and 2016, net oil reserves have fallen approximately 16 billion barrels, or nearly two years worth of these 68 companies total liquid oil production.  If these oil companies don’t suffer anymore reserve downgrades, they have approximately 12 years worth of oil reserves remaining.

But… what happens if the oil price continues to decline as the global economy starts to really contract from the massive amount of debt over-hanging the system?  Thus, the oil industry could likely cut more reserves, which means… the 12 years worth of reserves will fall below 10, or even lower.  My intuition tells me that global liquid oil reserves will fall even lower due to the next two charts in the following section.

The Coming Energy Debt Wall & Surging Finance Cost In The Energy Industry

Over the next several years, the amount of debt that comes due in the U.S. oil industry literally skyrockets higher.  In my article, THE GREAT U.S. ENERGY DEBT WALL: It’s Going To Get Very Ugly…., I posted the following chart:

The amount of debt (as outstanding bonds) that comes due in the U.S. energy industry jumps from $27 billion in 2016 to $110 billion in 2018.  Furthermore, this continues higher to $260 billion in 2022.  The reason the amount of debt has increased so much in the U.S. oil and gas industry is due to the HIGH COST of producing Shale oil and gas.  While many companies are bragging that they can produce oil in the new Permian Region for $30-$40 a barrel, they forget to include the massive amount of debt they now have on their balance sheets.

This is quite hilarious because a lot of this debt was added when the price of oil was over $100 from 2011 to mid 2014.  So, these companies actually believe they can be sustainable at $30 or $40 a barrel?  This is pure nonsense.  Again… most energy analysts are just looking at how a company could producing a barrel of oil that year, without regard of all other external costs and debts.

Moreover, to give the ILLUSION that shale oil and gas production is a commercially viable enterprise, these energy companies have to pay its bond (debt) holders dearly.  How much?  I will show you all that in a minute, however, this is called their DEBT FINANCING.  Some of us may be familiar with this concept when we have maxed out our credit cards and are paying a minimum interest payment just to keep the bankers happy.  And happy they are as they are making a monthly income on money that we created out of thin air… LOL.

According to the EIA, these 68 public energy companies are now spending 75% of their operating cash flow to service their debt compared to 25% just a few years ago:

We must remember, debt financing does not mean PAYING DOWN DEBT, it just means the companies are now spending 75% of their operating cash flow (as of Q3 2016) just to pay the interest on the debt.  I would imagine as the oil price increased in the fourth quarter of 2016 and first quarter of 2017, this 75% debt servicing ratio has declined a bit.  However, people who believe the Fed will raise interest rates, do not realize that this would totally destroy the economic and financial system that NEEDS SUPER-LOW INTEREST RATES just to service the massive amount of debt they have on the balance sheets.

As an example of rising debt service, here is a table showing Continental Resources Interest expense:

Continental Resources is one of the larger energy players in the Bakken oil shale field in North Dakota.  Before tapping into that supposed “high-quality” Bakken shale oil, Continental Resources was only paying $13 million a year to finance its debt, which was only $165 million.  However, we can plainly see that producing this shale oil came at a big cost.  As of December 2016, Continental Resources paid $321 million that year to finance its debt…. which ballooned to $6.5 billion.  In relative terms, that is one hell of a huge credit card interest payment.

The folks that are receiving a nice 4.8% interest payment (again… just a simple average) for providing Continental Resources with funds to produce this oil at a very small profit or loss… would like to receive their initial investment back at some point.  However….. THERE LIES THE RUB.

With that ENERGY DEBT WALL to reach $260 billion by 2022, I highly doubt many of these energy companies will be able to repay that majority of that debt.  Thus, interest rates CANNOT RISE, and will likely continue to fall or the entire financial system would collapse.

Lastly…. the global oil and gas industry is now cannibalizing itself just to stay alive.  It has added a massive amount of debt to produce very low-quality Shale Oil-Gas and Oil Sands just to keep the world economies from collapsing.  The falling oil price, due to a consumer unable to afford higher energy costs, is gutting the liquid oil reserves of many of the publicly trading energy companies.

At some point… the massive amount of debt will take down this system, and with it, the global oil industry.  This will have an extremely negative impact on the values of most STOCKS, BONDS & REAL ESTATE.  If you have well balanced portfolio in these three asset classes, then you are in serious financial trouble in the future.

Then…….  on ABC TV’s lateline (I’m rarely up late enough to watch it, so this was an omen…) this interview came up. I have to say, I found the whole Qatar thing rather bizarre, but this commentator thinks that Saudi Arabia is already in trouble

http://www.abc.net.au/lateline/content/2016/s4682983.htm

And now Zero Hedge has this to say as well….

Oil Prices Suffer First ‘Death Cross’ Since 2014 Collapse

For the first time since September 2014, after which oil prices collapsed almost 75%, Brent and WTI Crude futures both just flashed a ‘death cross’ signal as the 50-day moving-average crossed below the 200-day moving-average.

The crossover is typically seen a loss of short-term momentum and last occurred in the second half of 2014, when prices collapsed due to oversupply amid surging U.S. shale oil production.

 

As Bloomberg notes, OPEC and its partners will be hoping their efforts to curb output will be enough to support prices and counteract any fears of growing downside risk.

 

However, this morning’s news of “real” OPEC production may raise more doubts about the cartel’s commitment (and going forward, the Qatar debacle won’t help).





What is this ‘Crisis’ of Modernity?

22 01 2017

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

This week, there has been an avalanche of articles on Limits to Growth, just not titled so……. it’s almost as though the term is getting stuck in people’s throats, and are unable to pronounce them….

acrooke

Alastair Crooke

This article by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, is an unpublished article I’ve lifted from the Automatic Earth…… as Raul Ilargi succinctly puts it…:

 

His arguments here are very close to much of what the Automatic Earth has been advocating for years [not to mention DTM’s…], both when it comes to our financial crisis and to our energy crisis. Our Primers section is full of articles on these issues written through the years. It’s a good thing other people pick up too on topics like EROEI, and understand you can’t run our modern, complex society on ‘net energy’ as low as what we get from any of our ‘new’ energy sources. It’s just not going to happen.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Alastair Crooke: We have an economic crisis – centred on the persistent elusiveness of real growth, rather than just monetised debt masquerading as ‘growth’ – and a political crisis, in which even ‘Davos man’, it seems, according to their own World Economic Forum polls, is anxious; losing his faith in ‘the system’ itself, and casting around for an explanation for what is occurring, or what exactly to do about it. Klaus Schwab, the founder of the WEF at Davos remarked  before this year’s session, “People have become very emotionalized, this silent fear of what the new world will bring, we have populists here and we want to listen …”.

Dmitry Orlov, a Russian who was taken by his parents to the US at an early age, but who has returned regularly to his birthplace, draws on the Russian experience for his book, The Five Stages of Collapse. Orlov suggests that we are not just entering a transient moment of multiple political discontents, but rather that we are already in the early stages of something rather more profound. From his perspective that fuses his American experience with that of post Cold War Russia, he argues, that the five stages would tend to play out in sequence based on the breaching of particular boundaries of consensual faith and trust that groups of human beings vest in the institutions and systems they depend on for daily life. These boundaries run from the least personal (e.g. trust in banks and governments) to the most personal (faith in your local community, neighbours, and kin). It would be hard to avoid the thought – so evident at Davos – that even the elites now accept that Orlov’s first boundary has been breached.

But what is it? What is the deeper economic root to this malaise? The general thrust of Davos was that it was prosperity spread too unfairly that is at the core of the problem. Of course, causality is seldom unitary, or so simple. And no one answer suffices. In earlier Commentaries, I have suggested that global growth is so maddeningly elusive for the elites because the debt-driven ‘growth’ model (if it deserves the name ‘growth’) simply is not working.  Not only is monetary expansion not working, it is actually aggravating the situation: Printing money simply has diluted down the stock of general purchasing power – through the creation of additional new, ‘empty’ money – with the latter being intermediated (i.e. whisked away) into the financial sector, to pump up asset values.

It is time to put away the Keynesian presumed ‘wealth effect’ of high asset prices. It belonged to an earlier era. In fact, high asset prices do trickle down. It is just that they trickle down into into higher cost of living expenditures (through return on capital dictates) for the majority of the population. A population which has seen no increase in their real incomes since 2005 – but which has witnessed higher rents, higher transport costs, higher education costs, higher medical costs; in short, higher prices for everything that has a capital overhead component. QE is eating into peoples’ discretionary income by inflating asset balloons, and is thus depressing growth – not raising it. And zero, and negative interest rates, may be keeping the huge avalanche overhang of debt on ‘life support’, but it is eviscerating savings income, and will do the same to pensions, unless concluded sharpish.

But beyond the spent force of monetary policy, we have noted that developed economies face separate, but equally formidable ‘headwinds’, of a (non-policy and secular) nature, impeding growth – from aging populations in China and the OECD, the winding down of China’s industrial revolution,  and from technical innovation turning job-destructive, rather than job creative as a whole. Connected with this is shrinking world trade.

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

And, as that bounty tapered down around the year 2000, the system wobbled again, “and the viziers of the Fed ramped up their magical operations, led by the Grand Vizier (or “Maestro”) Alan Greenspan.”  Some other key things happened though, at this point: firstly the cost of crude, which had been remarkably stable, in real terms, over many years, suddenly started its inexorable real-terms ascent.  And from 2001, in the wake of the dot.com ‘bust’, government and other debt began to soar in a sharp trajectory upwards (now reaching $20 trillion). Also, around this time the US abandoned the gold standard, and the petro-dollar was born.

 


Source: Get It. Got It. Good, by Grant Williams

Well, the Hill’s Group, who are seasoned US oil industry engineers, led by B.W. Hill, tell us – following their last two years, or so, of research – that for purely thermodynamic reasons net energy delivered to the globalised industrial world (GIW) per barrel, by the oil industry (the IOCs) is rapidly trending to zero. Note that we are talking energy-cost of exploration, extraction and transport for the energy-return at final destination. We are not speaking of dollar costs, and we are speaking in aggregate. So why should this be important at all; and what has this to do with spiraling debt creation by the western Central Banks from around 2001?

The importance? Though we sometimes forget it, for we now are so habituated to it, is that energy is the economy.  All of modernity, from industrial output and transportation, to how we live, derives from energy – and oil remains a key element to it.  What we (the globalized industrial world) experienced in that golden era until the 70s, was economic growth fueled by an unprecedented 321% increase in net energy/head.  The peak of 18GJ/head in around 1973 was actually of the order of some 40GJ/head for those who actually has access to oil at the time, which is to say, the industrialised fraction of the global population. The Hill’s Group research  can be summarized visually as below (recall that these are costs expressed in energy, rather than dollars):

 


Source: http://cassandralegacy.blogspot.it/2016/07/some-reflections-on-twilight-of-oil-age.html

[This study was also covered here on Damnthematrix starting here…]

But as Steve St Angelo in the SRSrocco Reports states, the important thing to understand from these energy return on energy cost ratios or EROI, is that a minimum ratio value for a modern society is 20:1 (i.e. the net energy surplus available for GDP growth should be twenty times its cost of extraction). For citizens of an advanced society to enjoy a prosperous living, the EROI of energy needs to be much higher, closer to the 30:1 ratio. Well, if we look at the chart below, the U.S. oil and gas industry EROI fell below 30:1 some 46 years ago (after 1970):

 


Source: https://srsroccoreport.com/the-coming-breakdown-of-u-s-global-markets-explained-what-most-analysts-missed/

“You will notice two important trends in the chart above. When the U.S. EROI ratio was higher than 30:1, prior to 1970, U.S. public debt did not increase all that much.  However, this changed after 1970, as the EROI continued to decline, public debt increased in an exponential fashion”. (St Angelo).

In short, the question begged by the Hill’s Group research is whether the reason for the explosion of government debt since 1970 is that central bankers (unconsciously), were trying to compensate for the lack of GDP stimulus deriving from the earlier net energy surplus.  In effect, they switched from flagging energy-driven growth, to the new debt-driven growth model.

From a peak net surplus of around 40 GJ  (in 1973), by 2012, the IOCs were beginning to consume more energy per barrel, in their own processes (from oil exploration to transport fuel deliveries at the petrol stations), than that which the barrel would deliver net to the globalized industrial world, in aggregate.  We are now down below 4GJ per head, and dropping fast. (The Hill’s Group)

Is this analysis by the Hill’s Group too reductionist in attributing so much of the era of earlier western material prosperity to the big discoveries of ‘cheap’ oil, and the subsequent elusiveness of growth to the decline in net energy per barrel available for GDP growth?  Are we in deep trouble now that the IOCs use more energy in their own processes, than they are able to deliver net to industrialised world? Maybe so. It is a controversial view, but we can see – in plain dollar terms – some tangible evidence fo rthe Hill’s Groups’ assertions:

 


Source: https://srsroccoreport.com/wp-content/uploads/2016/08/Top-3-U.S.-Oil-Companies-Free-Cash-Flow-Minus-Dividends.png

(The top three U.S. oil companies, ExxonMobil, Chevron and ConocoPhillips: Cash from operations less Capex and dividends)

Briefly, what does this all mean? Well, the business model for the big three US IOCs does not look that great: Energy costs of course, are financial costs, too.  In 2016, according to Yahoo Finance, the U.S. Energy Sector paid 86% of their operating income just to service the interest on the debt (i.e. to pay for those extraction costs). We have not run out of oil. This is not what the Hill’s Group is saying. Quite the reverse. What they are saying is the surplus energy (at a ratio of now less than 10:1) that derives from the oil that we have been using (after the energy-costs expended in retrieving it) – is now at a point that it can barely support our energy-driven ‘modernity’.  Implicit in this analysis, is that our era of plenty was a one time, once off, event.

They are also saying that this implies that as modernity enters on a more severe energy ‘diet’, less surplus calories for their dollars – barely enough to keep the growth engine idling – then global demand for oil will decline, and the price will fall (quite the opposite of mainstream analysis which sees demand for oil growing. It is a vicious circle. If Hills are correct, a key balance has tipped. We may soon be spending more energy on getting the energy that is required to keep the cogs and wheels of modernity turning, than that same energy delivers in terms of calorie-equivalence.  There is not much that either Mr Trump or the Europeans can do about this – other than seize the entire Persian Gulf.  Transiting to renewables now, is perhaps too little, too late.

And America and Europe, no longer have the balance sheet ‘room’, for much further fiscal or monetary stimulus; and, in any event, the efficacy of such measures as drivers of ‘real economy’ growth, is open to question. It may mitigate the problem, but not solve it. No, the headwinds of net energy per barrel trending to zero, plus the other ‘secular’ dynamics mentioned above (demography, China slowing and technology turning job-destructive), form a formidable impediment – and therefore a huge political time bomb.

Back to Davos, and the question of ‘what to do’. Jamie Dimon, the CEO of  JPMorgan Chase, warned  that Europe needs to address disagreements spurring the rise of nationalist leaders. Dimon said he hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn’t happened, and if nationalist politicians including France’s Marine Le Pen rise to power in elections across the region, “the euro zone may not survive”. “The bottom line is the region must become more competitive, Dimon said, which in simple economic terms means accept even lower wages. It also means major political overhauls: “I say this out of respect for the European people, but they’re going to have to change,” he said. “They may be forced by politics, they may be forced by new leadership.”

A race to the bottom in pay levels?  Italy should undercut Romanian salaries?  Maybe Chinese pay scales, too? This is politically naïve, and the globalist Establishment has only itself to blame for their conviction that there are no real options – save to divert more of the diminished prosperity towards the middle classes (Christine Lagarde), and to impose further austerity (Dimon). As we have tried to show, the era of prosperity for all, began to waver in the 70s in America, and started its more serious stall from 2001 onwards. The Establishment approach to this faltering of growth has been to kick the can down the road: ‘extend and pretend’ – monetised debt, zero, or negative, interest rates and the unceasing refrain that ‘recovery’ is around the corner.

It is precisely their ‘kicking the can’ of inflated asset values, reaching into every corner of life, hiking the cost of living, that has contributed to making Europe the leveraged, ‘high cost’, uncompetitive environment, that it now is.  There is no practical way for Italians, for example, to compete with ‘low cost’ East Europe, or  Asia, through a devaluation of the internal Italian price level without provoking major political push-back.  This is the price of ‘extend and pretend’.

It has been claimed at Davos that the much derided ‘populists’ provide no real solutions. But, crucially, they do offer, firstly, the hope for ‘regime change’ – and, who knows, enough Europeans may be willing to take a punt on leaving the Euro, and accepting the consequences, whatever they may be. Would they be worse off? No one really knows. But at least the ‘populists’ can claim, secondly, that such a dramatic act would serve to escape from the suffocation of the status quo. ‘Davos man’ and woman disdain this particular appeal of ‘the populists’ at their peril.





This is the big one……

11 02 2016

This article from The Great Recession Blog just arrived in my news feed, straight from Nicole Foss no less…… written by David Haggith, it’s an amazing read, and you better hang onto your seat, we’re in for a pretty wild ride.

 

 

DavidHaggith-269x300

David Haggith

Only a couple of weeks ago, I said we were entering the jaws of the Epocalypse. Now we are sliding rapidly down the great beast’s throat toward its cavernous belly. The biggest economic collapse the world has ever seen is consuming everything — all commodities, all industries, all national economies, all monetary systems, and eventually all peace and stability. This is the mother of all recessions.

That’s a big statement to swallow, especially when many don’t see the beast because we’re already inside of it. You need to look down from 100,000 feet up in order to observe the scale of this monster that is rising up out of the sea and to see how rapidly it is enveloping the globe and how the world’s collapse into its throat is accelerating. The belly of this leviathan is a swirling black hole, composed of all the word’s debts, that is large enough to swallow every economy on earth.

Mexican retail billionaire Hugo Salinas Price has looked long into the stomach of this mammoth, and this is what he has seen:

 

[Global] debt [as a percentage of GDP] peaked in August of 2014. I’ve been watching this for 20 years, and I have never seen anything like it. It was always growing, and now something has changed. A big change of this sort is an enormous event. I think it portends a new trend, and that trend will be to get out of debt. Deleverage and pay down debt. That is, of course, a contraction. Contraction means depression. The world is going into a depression. It’s going to get very nasty. (USAWatchdog)

 

So, let’s step back and look at the big picture in order to see how immense this thing is: (One thing that you’ll notice is common in the statements of many sources below is comparisons to 2008, when we first entered the Great Recession. You hear that comparison every day now, which says many people feel that, after piling on trillions of dollars and trillions of euros and trillions of ___ in debt to save ourselves, we are right back where we started … but exhausted from the effort.)

 


Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy


 

Toxic debt flush heard round the world

 

As Hugo Salinas Price warns, toxic debt may have hit a ceiling where it has stopped going up because individuals, industries, and now nations have reached real debt limits they cannot support. According to the New York Times, toxic loans around the world are weighing heavily on global growth:

 

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising.

 

The Times lists China as leading the world for personal and industrial bad debt at $5 trillion, which in terms of its economy is half of China’s GDP. As a result of hitting this ceiling, Chinese banks reeled in lending in the last month of 2015.

And this is just bad debt. It does not include debts that are being properly paid or China’s national debts. These are the loans already failing. Likewise with the global debt problem The Times is writing about. Bad loans in Europe, for example, total about $1 trillion. Again, that’s just the loans that are already falling into the abyss.

Many national debts are more than the entire annual GDP of the nation, including the enormous US national debt, which will reach $20,000,000,000,000 by the time the next president takes office. (You can’t even see wide enough to focus on that many zeroes at the same time. The “2” gets lost in your peripheral vision.) And many places like Greece and Brazil and Puerto Rico are defaulting on their debts.

The United State’s debt alone is only payable so long as interest rates stay near zero; but rates are now rising, and the number of financiers has greatly retreated. The only thing to save the US from its toppling debt problem in the short term may be that people all over the world run to the shelter of US bonds when everything else is caving into the black hole.

 


Between Debt and the Devil: Money, Credit, and Fixing Global Finance. One of Financial Times Best Economics Books of 2015. “A devastating critique of the banking system. Most credit is not needed for economic growth — but it drives real estate booms and busts and leads to financial crisis and depression.”


 

Bulls become bears

 

The first sign that this global change is now consuming the US is in how many of the market’s permabulls are becoming neobears and which sizable institutions are making the switch quickly. Citi has been bullish over the years, but now they have stepped out of the back half of the bull suit and put on a toothy bear suit, expecting oil to drop to the mid-twenties and geopolitical change that “is maybe unprecedented for the last decades”:

 

The global economy seems trapped in a “death spiral” that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi … strategists have warned…. “The stakes are high, perhaps higher than they have ever been in the post-World War II era.”(Yahoo)

 

Here’s a 100,000-foot-high look at the US stock market that is now swirling down the throat of the beast: Last year, the number of stock dividend reductions surpassed 2008. In fact, 2015’s number of cuts — now that the year is barely past — was 35% higher than the number of cuts going into the Great Recession. That gives you some sense of the scale of corporate pain that is just starting to be felt. Companies cut dividends when they have less profit to share with their owners. Bloomberg referred to it as “equity investors … suffered death by 394 cuts.”

Another high-view snapshot of corporate collapse can be see everywhere in US retail: Walmart, Macy’s, J.C. Penny’s, K-Mart, The Gap and many smaller retailers have all announced a large number of store closures and layoffs to come.

US Corporate earnings across all industries are on track for their third quarter in a row of year-on-year declines. That is an ominous signal because back-to-back periods of decline for just two quarters are always followed by a decline of, at least, 20% (a bear market) in the S&P 500.

 

This weakness in overall corporate earnings growth could bode badly for the broader stock market, as it represents the actual impact of geopolitical concerns, the slowdown in China, the weakness in oil prices and productivity, said Karyn Cavanaugh, senior market strategiest at Voya Investment Management. “Earnings discount all the noise…. It’s the best unbiased view of what’s going on in the global economy.” (MarketWatch)

 

As earnings fall, the much watched price-earnings ratio gets more top-heavy, putting pressure on stocks to fall. Thus, on Friday:

 

The willingness of U.S. stock investors to abide price-earnings ratios stretching into three and four digits all but ended Friday as the Nasdaq Composite Index fell to its lowest since October 2014. The … tumble in American equities turned into a full-blown selloff in stocks with the highest valuation. The Nasdaq Internet Index sank 5.2 percent, as Facebook Inc. lost 5.8 percent. (NewsMax)

 

The most significant part of this picture is that tech stocks have finally started making the big drop with the few that have been holding the stock market’s average up being the ones now taking the biggest plunge. Facebook, Amazon, Apple, and Microsoft are all falling fast. LinkedIn is getting “destroyed.” The time at the top is over, which leaves the market with zero levitation. Therefore, it’s no surprise that we saw another major sell-off on Monday.

Said USA Today, Bye, Bye Internet Bubble 2.0,” calling this “the worst start of a year for technology stocks since the Great Recession.

 

Collapse of the petrodollar opening sink holes everywhere

 

It’s no secret that Russia has outlawed trading oil in dollars among its satellite nations and that China and Russia trade in yuan now, not dollars, but Iran is the latest to stick it to the US, announcing that it will no longer trade oil in US dollars either but will sell its oil only for euros. So, we have the gargantyuan and the petroeuro, taking major bites out of the petrodollar now. China and Russia have also been divesting from US treasuries for some time and investing in gold, something I started point out here a few years ago.

All of this means that the US dollar is rapidly ceasing to be the trade currency of the world, and that prized status is the only thing that has made the US national debt manageable over the years, as the high demand for trade dollars guarantees low interest on the most colossal debt in the world because national treasuries and businesses sop up US bonds as a safe way to store trade dollars. The Federal Reserve has become the buyer of last resort for US debt; but it has maxed out.

The move away from the petrodollar is momentous. Losing its status as the reserve currency of the world will take a massive bite out of US superpower status, and that, of course, is exactly what Russia, China and Iran are counting on. With so many countries now trading oil exclusively in non-dollar currencies, one has to wonder how much longer overstretched Saudi Arabia can hold out as an oil supplier that trades oil only in dollars. Most likely they will feel a lot of economic pressure to start trading in other currencies, especially now that US support of Saudi Arabia appears to have weakened.

Iran’s announcement may be why the dollar dropped drastically in value last week. The high value of the dollar makes oil very expensive to other nations, who have to convert their low-valued currency to dollars to buy oil. This is surely another reason the price of oil has been falling, though almost no one talks about it … almost as if the economic geniuses of the world can’t figure this simple relationship out. As nations compete to lower the value of their currency with zero interest policies and quantitative easing, they are burying the petrodollar.

In nations with currencies priced very low compared to the dollar, oil is like an American export — too expensive for people in that nation to afford, causing demand to fall off and, thus, further increasing the problem of oversupply and lowering the price of oil. This creates another big reason for many nations to want to stop trading oil in dollars.

I’ve been reporting on this site for a few years now on this global campaign to kill the petrodollar, and that campaign is finally nearing maturity. For the US, it will mark a horrible transformation in the world, as it will hugely erode US superpower status because it will become much more difficult to finance a massive military machine.

 

The banks that are too-big-to-fail are falling FAST!

 

Deutsch Bank‘s derivative bonds (the kind that caused the Great Recession) are pealing away. The top-tier bonds of Germany’s largest bank have lost about 20% since the start of the year. Investors are fleeing as tumbling profits cause them to doubt the issuer’s ability to support the coupon payments on the bonds. InvestmentWatch reports that “Deutsche Bank is shaking to its foundations” and asks “is a new banking crisis around the corner?” DB stock has fallen off its high last July by 50%.

By how much is Deutsch Bank too big to fall? DB’s exposure to derivatives is over 55-trillion euros. That’s five times more than the GDP of the entire Eurozone or three times the amount of debt the United States has accumulated since it was founded. Its CEO says publicly he’d rather be somewhere else. Looking up at a leaning tower like that, I imagine so.

As DB bleeds red ink from its throat, its cries to the European Central Bank are burbled in blood. DB has warned the central bank that zero-interest-rate policies and quantitative easing are now killing bank stocks, but that didn’t stop giddy ECB president, Murio Draghi, from announcing a lot more easing to come … as much as it takes. As much as it takes to what? Kill all of Europe’s banks now that stimulus is working in reverse with negative interest making new money in reserves expensive to hang on to?

Is the ECB waging war on it major banks, or is it just too dumb to realize that QE is far beyond the high point on the bell curve of diminishing returns to where it is now killing stock values while doing nothing to boost the economy? (Hence, the move to negative interest rates to go to the ultimate extreme of easing because you have to push the accelerator through the floor when returns are diminishing that fast). As ZeroHedge has said, we are now entering a “monetary twilight zone”where …

 

Europe’s largest bank is openly defying central bank policy and demanding an end to easy money. Alas, since tighter monetary policy assures just as much if not more pain, one can’t help but wonder just how the central banks get themselves out of this particular trap they set up for themselves.

 

Credit Suisse reported a loss of 6.4 billion Swiss francs for the fourth quarter of 2015, suffering from its exposure to leveraged loans and bad acquisitions.

 

DoubleLine Capital’s Jeffrey Gundlach said it’s “frightening” to see major financial stocks trading at prices below their financial crisis levels…. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009?” (NewMax)

 

Credit Suisse has announced it will cut 4,000 jobs after posting its first quarterly loss since 2008. The Stoxx Europe 600 Banks Index has also posted its longest string of weekly losses since 2008, having posted six straight weeks of decline. The European Central Bank’s calculus says banks in Europe should be benefiting from QE, but it’s clearly lost all of its mojo or is now  actually more detrimental than good like a megadose of potent medicine. Negative interest rates are particularly taking a toll because banks have to pay interest on their reserves, instead of making interest.

Banks have rapidly become so troubled that NewsMax ran the following headline “Bank Selloffs Replacing Oil Rout as Stock Market Pressure Point.”  In other words, bank stocks are not just falling; they are falling at a rate that is causing fear contagion to other stocks. It’s not easy these days to beat out oil as a cause of further sell-offs in the stock market.

How quickly we moved from a world of commodity collapse to what now appears to be morphing into a banking collapse like we saw in 2008. Financial stocks overall have lost $350 billion just since 2016 began. Volatility in bank shares has spiked to levels not seen since … well, once again, 2008.

Consider how big the derivatives market is — that new investment vehicle that turned into such a pernicious demon in 2007 and 2008 because they are so complicated almost no one understands what they are buying and because they mix a little toxic debt throughout, like reducing the cancer in one part of the body by spreading its cells evenly everywhere. Instead of learning from the first crash into the Great Recession, we have run full speed into expanding this market. Estimates of the value of derivatives in the market range half a quadrillion dollars to one-and-a-half quadrillion dollars (depending on what you count and whether you go by how much was invested into them or their face value). Either way, that’s a behemoth number of derivatives floating around the world, many of them carrying their own little attachment of metastasizing toxins! (That’s, at least, a thousand trillions! More than ten times the entire GDP of the world.)

Still think 2016 isn’t the Year of the Epocalypse? Well, if you do, the rest of the ride will convince you soon enough. If I were the Fed, I’d be really, really worried that my star-spangled recovery plan was starting to look more like Mothra in flames.

 

The oil spillover

 

But don’t think oil is loosing its shine as a market killer. Another bearish prediction by Citi, now that it has change suits, is to expect “Oilmegeddon.” (Hmm, sounds like something that would be found in an epocalypse to me.)

 

“It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks,” the analysts add. “Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon….We should all fear Oilmageddon,” Citi concludes. “Global recession, as we define it, would leave nowhere to hide in equities. Cash wins.” (NewsMax)

 

In the first months of the crash in oil prices, most analysts felt that the only companies that would be seriously hurt would be marginal fracking companies — the speculative little guys jumping into the oil shale. Now that fourth-quarter results are coming in from the world’s largest refineries, we find that isn’t true:

 

British Petroleum kicked off the European oil and gas reporting season with an ugly set of fourth-quarter results. The company reported a sharp drop in earnings for the fourth quarter. It’s own measure of underlying profit dropped 91%.… All of this is a recipe for two things — more cost cutting and more job cuts… What’s worrying for investors is that the first quarter, so far, doesn’t look much better. (MarketWatch)

 

That’s massive. BP has already announced the elimination of 7,000 jobs. Chevron and Shell also saw profit declines. Royal Dutch Shell has announced it will be making 10,000 job cuts.

If that’s how bad things got during the fourth quarter of 2015, imagine how bad they will get this quarter now that oil prices have gone down a lot more. Hence, the talk of “Oilmageddon.”

As if the industry wasn’t already burning up, President Obama is trying to impose a $10 carbon tax on each barrel of oil. At today’s oil prices, that is a 30% tax. At tomorrow’s prices, it may be a 50% tax! One has to wonder how far out of touch economically, a president can get in order to propose a hefty tax like that at a time like this.

Naturally, oil magnate T. Boone Pickens calls it “the dumbest idea ever.” While I have a general hatred for gigantic oil companies, especially since gasoline prices in my area have not dropped much, I have to agree that a $10/barrel carbon tax could cinch the noose around the neck of an already strangle industry.

Maybe that’s the plan. While the tax would hit the end user more, no tax helps an industry thrive.

 

The Epocalypse swallows everything whole

 

The reason the Epocalypse is going to be a far worse bloodbath than the first plunge into the Great Recession is that all of the central banks of the world have, by their own admission now, “exhausted their ammunition” to fight back against another recession. Back at the start of the Fed’s Goliath recovery plan, I posited that we would be falling back into the abyss right at the time when all central banks had exhausted their strength and when all nations had maxed their debt.

Here we are.

Many central banks are already doing negative interest; yet, their economies are still sinking. It appears that more negative interest could actually sink them faster by eroding their banks with internal ulcers. It will certainly require going cashless in order for those banks to start handing the negative interest down to their customers. They have to absorb the cost of negative interest if they cannot loan out their funds fast enough. That’s why some banks are now pleading with their government’s for a cashless solution … so they can prevent their customers from switching to the cash-under-the-mattress exit plan.

The world faces a tsunami of epochal defaults. William White, former economist for the International Bank of Settlements, says,

 

Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief…. It was always dangerous to rely on central banks to sort out a solvency problem … It is a recipe for disorder, and now we are hitting the limit… It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. (The Telegraph)

 

We have finally reached that time in our decades of astronomical debt-based economic expansion where it is time to pay the piper. We traveled blithely along many decades on currency cushions filled with hot air. In an article titled, “Debt, defaults, and devaluations: why this market crash is like nothing we’ve seen before,” The Telegraph says,

 

A pernicious cycle of collapsing commodities, corporate defaults, and currency wars loom over the global economy. Can anything stop it from unravelling…? Commodity prices have crashed by two thirds since their peaks in 2014…. China, the emerging world, and financial markets – are all brewing to create a perfect storm in a global economy that has barely come to terms with the Great Recession…. “We are in a very unusual situation where market sentiment is of a different nature to anything we’ve seen before.”

 

Yes, this is the big one. The times we now face are the reason I started writing this blog four+ years ago. The Federal Reserve’s Goliath recovery plan was cloned all over the world for seven years, and for seven years all nations have done nothing to rethink their debt-based economic structures that are now cracking and groaning and falling into … the Epocalypse.





Debt Inequality and Crisis

25 05 2015

When the economic history of our epoch is written, three key phenomena will feature: a period of tranquility giving way suddenly to crisis, rising inequality, and rising private debt. Using my model of Minsky’s Financial Instability Hypothesis, I show that these three phenomena are all related. There is a direct link between rising debt, rising inequality, and the crisis itself. The key to reducing inequality and ending economic stagnation is to reduce private debt through “Quantitative Easing for the Public” or a “Modern Debt Jubilee”. This is the keynote speech Steve Keen gave to the #IEEP conference in Pula, Croatia on May 23rd 2015

Now I still find economics mind numbing…  but Steve Keen’s 3D modelling and his live modelling during this talk is fascinating, even if the algorithms he uses are not for the faint hearted.





A Roadmap For The Land Access

22 04 2015

Another gem….  this one’s from William Horvath’s blog, and really resonates with me because I am constantly asked how our younger generations can ever duplicate our efforts on their own piece of heaven.  We baby boomers have really cleaned up, and it’s entirely at the expense of our kids….. so what are they to do?  I have reached the conclusion that only we with the wealth (such as it might be…) will have to assist in ensuring our kids do have a future, natural catastrophes aside of course, some things are out of our control, maybe even out of control altogether….  Anyhow, read on and see what William thinks.





George Monbiot on Money

19 02 2015

George-Monbiot-LUnlike the vast majority of journalists, George Monbiot does his own research rather than repeat parrot fashion what others in his trade throw at the sheeples as ‘news’.  It’s a pity he hasn’t included resource depletion in the pot as a problem for growth and therefore debt servicing, but there are enough new concepts in this to make it a most worthwhile read.  Lifted from the Guardian.

 

A maverick currency scheme from the 1930s could save the Greek economy

Compare the terms demanded of the Greek government to those offered to the banks. Eurozone ministers now insist upon unconditional surrender: a national abasement that makes a mockery of democracy. But when the banks were bailed out, governments magicked up the necessary money almost unconditionally. They shyly requested a few token reforms, then looked away when the bankers disregarded them.

The German government, now crushing the life out of southern Europe, merely tickled its own banks. As the New York Times reported, though the corrupt German banking system “required a bailout bigger than the one American banks received”, “there is little appetite for change in Germany because the banking system is so deeply intertwined with its politics, serving as a rich source of patronage and financing for local projects”.

When the Greeks complain that they have been reduced to colonial subjects, they are right, but the colonial masters are not the northern members of the eurozone. They are the private banks. The governments that seem determined to destroy a sovereign state for its impudence are merely the intermediaries of power.

None of this is to deny the corruption and fiscal promiscuity of previous Greek administrations. But while the banks have got away with far worse, the bullies of the eurozone insist on extracting every last drop of blood from people who had no role in their governments’ deceptions.

Greece is stuffed: or so almost everyone asserts. Perhaps. Or perhaps there are possibilities we have scarcely begun to examine. I should warn you that no one in their right mind would take financial advice from me.  (Or, for that matter, from most financial advisers) I seek only to suggest that there may be some possibilities of hope among the ruins.

One of these radical ideas was proposed a few months ago by Martin Wolf in the Financial Times. He suggests stripping private banks of their remarkable power to create money out of thin air. Simply by issuing credit, they spawn between 95% and 97% of the money supply. If the state were to assert a monopoly on money creation, governments could increase their supply without increasing debt. Seigniorage (the difference between the cost of producing money and its value) would accrue to the state, adding billions of pounds to national coffers. The banks would be reduced to the servants, not the masters, of the economy.

An entirely different approach is proposed by Ann Pettifor, in Just Money. She argues that governments have failed to understand what money is. It should not be seen as a commodity, she says, but as a social relationship based on trust. Unusually for a radical critic of finance, she sees the creation of money by private banks as “a great civilisational advance”, freeing nations from the usurers who once monopolised and restricted wealth.

The supply of money is, in effect, unlimited: as long as there is sufficient productive activity to absorb it there is no obvious restraint on the amount of money that can be issued. So when governments and central bankers tell you that the money has run out, Pettifor argues, they are either deceiving us or deceiving themselves. What holds back economic activity is an unnecessary and artificial restriction of the medium of exchange.

Banking’s great civilisational advance has been all but destroyed through deregulation, whose result is a new system of usury, speculation and exploitation. Private banks borrow cheap and lend dear, forcing us to work ever longer hours and to inflict ever more damage on the natural world to service our debts. Pettifor suggests that governments should reassert control over interest rates at every level of lending.

But perhaps the biggest transformation could happen at the local level. Greece already has set up some local currencies that have kept money circulating in several towns and cities as it cannot be siphoned away. (There are similar systems in Britain, such as the Bristol Pound). But strangely they do not make use of the thrilling, transformative system that almost saved Europe from fascism; the currency developed by the economist Silvio Gesell called stamp scrip. It is explained in Bernard Lietaer’s magnificent book The Future of Money.

In its original form, stamp scrip was a piece of paper on which a number of boxes were printed. The note would lose its validity unless a stamp costing 1% of its value was stuck in one of the boxes every month. In other words, the currency lost value over time, so there was no incentive to hoard it. Stamp scrip projects took off across Germany and Austria after national currencies collapsed in the early 1930s. In 1932, for example, the Austrian town of Wörgl was almost broke, unable to finance public works or to support its destitute population, until the mayor heard of Gesell’s proposal.

This little pot of money kept circulating, enabling Wörgl to repave the streets, rebuild the water system

He put up the town’s tiny remaining fund as collateral against the same value of stamp scrip, and used it to pay for a building project. The workers then passed on the currency as quickly as they could. Like the magic pudding, this little pot of money kept circulating, enabling Wörgl to repave the streets, rebuild the water system, construct houses, a bridge and even a ski jump. In the 13 months of the experiment, the 5,500 scrip schillings in circulation were spent 416 times, creating between 12 and 14 times as much employment as the standard currency would have done. Unemployment vanished, and the stamp fees paid for a soup kitchen feeding 220 families.

The governments of Germany and Austria, profoundly threatened by the success of these projects, shut them down and employment collapsed once more. When the US economist Irving Fisher examined these experiments he concluded that “the correct application of stamp scrip would solve the depression crisis in the US in three weeks!”. Roosevelt’s government, aware that such currencies could invoke a massive loss of federal power, promptly banned it.

Could these ideas be useful to Greece? Could they be of relevance in other parts of Europe? Even perhaps in Scotland, where the currency issue was unimaginatively fudged before the referendum? I don’t know. But if Greece leaves the eurozone, it could open up a world of possibility to which other nations have closed their minds.

Twitter: @georgemonbiot. A fully referenced version of this article can be found at Monbiot.com





The Great Challenges of Sustainability

5 10 2014

I haven’t written much here for a while, a combination of being flat out preparing for the two ‘Sustainable House Days’ last month, (and possibly two parties interested in buying Mon Abri), plus dealing with Jezzie (our goat) giving birth to twins, ducklings joining the menagerie, harvesting the Winter crop and making space in the garden for the Summer one, and and and and being exhausted.  Just as I was starting to think my chronic fatigue was easing off, it seems to have come back with a vengeance lately.  And the temperature is rising as Spring was swallowed up by Summer in about two days; Tassie really beckons at this time of the year when I just know the heat will keep me inside for most of the day.  Thank goodness for a cool house…

So I’m posting someone else’s work today, again.  An excellent article on degrowth by Samuel Alexander at The Conversation I heartily recommend you all read, has raised fast and furious commenting now totalling more than 360 posts…….  One of those posts, near the bottom of the list, is by someone I have never heard of before called Brandon Young; nor do I have any means of contacting him to ask his permission to reproduce his writing.  But such is the quality of the small essay, and so resonating it is with me, that I have decided to repost it here as an essay worth saving for prosperity.  Enjoy.

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The steady state economy is an important objective of one of the two fundamental forces locked in the battle to save or destroy the world: the forces of Sustainability versus the corrupt financial-corporate system.

The financial-corporate system is corrupted by two deliberate design flaws: money buys political power, and money is created as debt by private owners. These design flaws give the financial-corporate system the power to grow organically, feeding on the creation of debt and consuming political will at exponential rates. Its structure is the greatest hierarchy of unaccountable power the world has ever seen.

If the forces of Sustainability do not defeat the corrupt financial-corporate system, the world will be systematically consumed until it becomes unstable and collapses into chaos. This is neither a theoretical nor an avoidable outcome; it is the empirical reality of how systems behave when they deplete the resources on which they depend at a higher rate than those resources naturally accumulate.

Importantly, the systematic march towards collapse under business as usual is not the greatest threat facing the world, because the corrupt financial-corporate system actually has an agenda to reshape the world in a way which will dramatically accelerate the destruction of the resources on which our system depends.

The corrupt financial-corporate system is seeking to take absolute power across two thirds of global economic activity, and has already ticked off most of the preparatory tasks, aided by enthralled governments around the world, including Australia’s current regime. The international agreements are about to be finalised, and our government has declared that Australia will sign up to the installation of the financial-corporate system into power beyond our sovereign control.

Under the new framework, corporations will be free to ignore sovereign constraints on their activities, and will have the power to change public systems to serve their own interests. Everything that can be privatised and then corporatised will be restructured to maximise the expansion of the sources of debt. This is expected to generate a whole new wave of economic expansion, without the costs associated with protecting the social value of goods and services. This represents the systematic destruction of social capital in the production of the imaginary capital of debt based money.

Environmental capital will also be systematically converted into imaginary capital under the new framework. With sovereign laws either removed or disregarded, which is the inevitable and systematic result of the investor-state dispute mechanisms in the new international agreements, a whole new wave of corporate plunder of natural resources will accelerate both the growth of the corrupt financial-corporate system and the rate of collapse of the ecosystem.

So, the forces of Sustainability face an extremely powerful opponent and must overcome some very great challenges to have any chance at all of defeating the corrupt financial-corporate system. Some of these great challenges are obstacles that have been established by the corrupt financial-corporate system over long time periods as part of its grand strategy.

The first great challenge is the addiction to debt. Our economies are now structured around debt, and if we were to retain or regain sovereign power, we would be able to transition to new economic structures that eliminate the need for debt, but first we would need a plan to both settle existing debts and to allow those currently profiting from the creation of debt to draw just as much profit from some other function in the new economy, or to compensate them in some way that they are willing to gradually concede the power to create debt based money.

The second great challenge is the poor state of democracy. The indoctrination of the citizenry of consumer societies, which systematically drives populations to favour irrational short term self interest over rational long term collective interest, makes the task of amassing political will from the population extremely difficult when it comes to issues that don’t seem to have immediate impact on people’s daily lives. This difficulty is exacerbated by the fact that money can be converted into political influence via commercial media, and this allows sovereign governments to escape accountability for public policy that actually works against the collective interests of the people.

The third great challenge facing the forces of Sustainability is that the steady state economy can only be achieved with a goal-directed systems approach, and while fairly simple conceptually for those with a feel for how complex systems work, the value and practicality of the goal-directed systems approach is extremely difficult to convey to a broader section of any population. Briefly, the goal-directed systems approach involves identifying the relationships between the inputs and the outputs of each activity within the economy, and adjusting the prices of the inputs in order to make the outcomes track towards a set of system goals. The goals may be compiled via a political process that will have both objective and subjective components, but the adjustments made to system inputs are driven by the objective measurement of actual outcomes. The goal-directed systems approach is the only way to develop meaningful prices for the set of social and environmental resources that the steady state economy is designed to conserve. The free market can still determine the economic price of resources and services, and it is the perfect tool for the task, but now the social and environmental value can be systematically added to the economic value so that these resources are depleted or preserved in accordance with the desired tracks.

The fourth great challenge facing the forces of Sustainability is that time is running out. The signing of the great and secret agreements into international law is imminent, and the ratification by the fifty member countries will be fast-tracked in accordance with certain clauses, even through the US Congress. This checkmate move by the corrupt financial corporate system is coming very soon, perhaps in the case of the Trans Pacific Partnership to be announced at the G20 in Brisbane, and in the case of the Trade In Services Agreement, only to be revealed in 2020, five years after becoming the instrument that installs the corrupt financial-corporate system as the absolute power over two thirds of the planet.

However great these challenges are, those with the capability to confront them surely have a responsibility to contribute to publicly collaborative efforts like this conversation.

Brandon Young.

 

justwalkaway