The shape of things to come…..?

30 11 2018

Consciousness of Sheep keeps coming up with magnificent articles, like this one…..  

I know I keep saying this too, but the Matrix can’t continue lurching about for too much longer….

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Despite a series of stock market scares, see-sawing oil prices and central banks jacking up interest rates, it seems likely that we are going to get through 2018 without experiencing the economic crash that many expected at the start of the year.  But while we may breathe a sigh of relief to have got to the festive season without a complete meltdown, the odds of another crash are still high.

Understanding what might go wrong is a particular problem according to Helen Thompson at the New Statesman.  Not least because 10 years on, we still cannot agree on what caused the last one:

“In July 2008 the then president of the European Central Bank (ECB), Jean-Claude Trichet, declared while announcing an increase in interest rates that the Eurozone’s fundamentals were sound. In fact, a recession had begun in the first quarter of that year.

“The causes of recessions are also sometimes wrongly diagnosed – even in retrospect. For instance, the impact of exceptionally high oil prices and the response of central banks to those prices are still routinely ignored as causes of the US and European recessions in the aftermath of the 2008 crash.”

Thompson’s article sets out a range of weaknesses across the global economy where a new economic meltdown could begin.  China, the (albeit anaemic) growth engine of the global economy for the last decade, has developed debt problems not dissimilar to those in the west in 2008:

“Economic growth in China has been slowing since the second half of 2017, and even the growth of the first half of that year was an interruption of a downward slope that began in 2013. Predictions of a Chinese financial crisis, owing to the country’s huge accumulation of debt since 2008, are made too readily. But China is now caught between a policy shift towards deleveraging to try to avoid such a debt-induced financial crisis, and another debt-financed push for higher growth amid an economic slowdown and a fierce trade war with the US. The Chinese government is struggling under these conflicting imperatives as the country’s dollar reserves fall.”

The Eurozone is also in trouble:

“Growth in the third quarter was the weakest since the second quarter of 2014. Germany’s economy contracted and Italy’s experienced no growth. If the Eurozone’s troubles were confined to Italy, there would be less cause for concern. But even Germany’s powerhouse economy is weakening: retail sales and exports have fallen for several successive months.”

Canada – like the UK – is a basket case just waiting the central bank to add that last interest rate hike to push it over the edge.  Things are more complicated across the border in the USA:

“The official US unemployment rate stands at 3.7 per cent, the lowest since 1969. But this masks a notably low participation rate (62.9 per cent), as significant numbers of people have withdrawn from the labour market. Ever-fewer jobs sustain middle-class lifestyles, especially in cities where housing costs have risen over the past decade.”

Of course, a “black swan” event beyond the areas that Thompson points to might also prove to be the trigger for the next meltdown.  A collapse in the Australian property market, renewed conflict in one of the successor states of the Soviet Union or an oil shock in the Middle East are not beyond the bounds of possibility in 2019.

What is clear, however, is that we are in uncharted territory when it comes to understanding and having any chance of fixing the next meltdown.  As Thompson points out:

“Central banks cannot fix what they set in motion after 2008. There appears to be no way forward that would let this economic cycle play out without risking much more disruption than the typical recession would bring. What is at stake is compounded by the problem of oil: shale production must be sustained by one or more of the following: high prices, extremely cheap credit or investors’ indifference to profitability.

“When a recession does come, central banks are unlikely to be able to respond without wading even further into uncharted monetary and political waters. And major economies will have significantly higher levels of debt than in 2008, interest rates will already be low and central banks will have enormous balance sheets. As a consequence, a policy response comparable to that of 2008 is likely to be more dangerous and insufficient to restore sustained growth. In times of fear, high debt ensures that, beyond a certain point, consumers simply cannot be incentivised to spend more. Even if they were to be tempted with ‘helicopter money’ from central banks – new money distributed freely to citizens – there is no guarantee at all that the money would do much for aggregate demand.”

Unusually for a mainstream academic Thompson – who is a professor of political economy at Cambridge University – grasps the impact of energy on the economy; particularly the hard choices that face politicians and central bankers as we transition from energy growth to energy decline:

“It has become impossible to confront the economic predicaments in the global economy without contemplating sacrifice, whether that be politicians and central bankers choosing where the heavy costs of the next policy response will fall, or recognising the role that energy sustainability has in maintaining material living standards and a liberal international politics…”

Tighter energy, coupled to the central bank policies that have kept business as usual limping along since the last meltdown, has given rise to a populist revolt that has thus far focused on the democratic pathways in liberal democracies, but has also favoured an emboldened nationalist right that has successfully targeted immigration as the cause of people’s woes.  Worse still, via social media, contrarian economists like Steve Keen, campaign groups like Positive Money and even central bank economists themselves, far more people understand that zero percent interest rates and quantitative easing were designed to favour the already wealthy at the expense of the majority of the population.  It would be lunacy for politicians and central bankers to attempt to do the same thing again this time around:

“The 2007-09 recessions exposed the political discontent that had grown in Western democracies over the previous decade. The next recession will begin with that discontent already bringing about substantial political disruption – from Brexit to Trump’s election to the Lega-Five Star coalition in Italy – which in itself has become a source of economic fear. The economic dangers that lurk are only likely to increase political fragmentation, especially when there is little understanding of the structural economic forces that serve to divide people.”

Unfortunately, the political left are like so many rabbits caught in the headlights in relation to the crisis that is coming.  Rather than the right wing economic and social policies of Trump or the European nationalist parties, the left is most opposed to the populism that these movements harness.  The opposite of populism, of course, is elitism… and that puts the political left on the same platform that Marie Antoinette found herself on in October 1793.

There is no written law that says that the political left or even benign liberals have to win in the end – that storyline only works in Hollywood movies.  In the crisis that we are about to face – whether it be 2019 or 2020 – responding with more policies that favour the wealthy while driving the faces of the poor into the dirt can only end one way, as Thompson reminds us:

“History is full of grisly episodes, usually in eras of revolution, when the politics of sacrifice have come to the fore. Indeed, in many ways, the whole ideal of Western liberal democracies in the postwar world has been about the importance of avoiding such a politics, even as the policies governments pursued unavoidably created winners and losers.

“But the conditions for politics have now become much harder, and the collective and individual question of our times has become how we can confront the inescapable political conflict generated by deep economic dysfunctionality without losing the democratic and liberal foundations of political order as we know it?”

The answer to this question might be the same as the answer to the two other existential crises facing us – How can we prevent runaway climate change without undermining our civilisation? And how can we prevent resource depletion and energy decline undermining it?  The answer is very likely to be that we can’t.





YOU HAVE BEEN WARNED: The Situation In The Markets Is Much Worse Than You Realize

11 09 2017

Reblogged from the SRS website……. between this item and Raul’s which I posted yesterday, I’d say the US economy has to hit the wall very soon now. Hang onto your seats folks….

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It’s about time that I share with you all a little secret.  The situation in the markets is much worse than you realize.  While that may sound like someone who has been crying “wolf” for the past several years, in all honesty, the public has no idea just how dire our present situation has become.

The amount of debt, leverage, deceit, corruption, and fraud in the economic markets, financial system, and in the energy industry are off the charts.  Unfortunately, the present condition is even much worse when we consider “INSIDER INFORMATION.”

What do I mean by insider information… I will explain that in a minute.  However, I receive a lot of comments on my site and emails stating that the U.S. Dollar is A-okay and our domestic oil industry will continue pumping out cheap oil for quite some time.  They say… “No need to worry.  Business, as usual, will continue for the next 2-3 decades.”

I really wish that were true.  Believe me, when I say this, I am not rooting for a collapse or breakdown of our economic and financial markets.  However, the information, data, and facts that I have come across suggest that the U.S. and global economy will hit a brick wall within the next few years.

How I Acquire My Information, Data & Facts

To put out the original information in my articles and reports, I spend a great deal of time researching the internet on official websites, alternative media outlets, and various blogs.  Some of the blogs that I read, I find more interesting information in the comment section than in the article.  For example, the Peakoilbarrel.com site is visited by a lot of engineers and geologists in the oil and gas industry.  Their comments provide important “on-hands insight” in the energy sector not found on the Mainstream Media.

I also have a lot of contacts in the various industries that either forward information via email or share during phone conversations.  Some of the information that I receive from these contacts, I include in my articles and reports.  However, there is a good bit of information that I can’t share, because it was done with the understanding that I would not reveal the source or intelligence.

Of course, some readers may find that a bit cryptic, but it’s the truth.  Individuals have contacted me from all over the world and in different levels of industry and business.  Some people are the working staff who understand th reality taking place in the plant or field, while others are higher ranking officers.  Even though I have been receiving this sort of contact for the past 4-5 years, the number has increased significantly over the past year and a half.

That being said, these individuals contacted me after coming across my site because they wanted to share valuable information and their insight of what was going on in their respective industries.  The common theme from most of these contacts was…. GOSH STEVE, IT’S MUCH WORSE THAN YOU REALIZE.  Yes, that is what I heard over and over again.

If my readers and followers believe I am overly pessimistic or cynical, your hair will stand up on your neck if you knew just how bad the situation was BEHIND THE SCENES.

Unfortunately, we in the Alternative Media have been lobotomized to a certain degree due to the constant propaganda from the Mainstream Media and market intervention by the Fed and Central Banks.  A perfect example of the massive market rigging is found in Zerohedge’s recent article;Central Banks Have Purchased $2 Trillion In Assets In 2017 :

….. so far in 2017 there has been $1.96 trillion of central bank purchases of financial assets in 2017 alone, as central bank balance sheets have grown by $11.26 trillion since Lehman to $15.6 trillion.

What is interesting about the nearly $2 trillion in Central Bank purchases so far in 2017, is that the average for each year was only $1.5 trillion.  We can plainly see that the Central Banks had to ramp up asset purchases as the Ponzi Scheme seems to be getting out of hand.

So, how bad is the current economic and financial situation in the world today?  If we take a look at the chart in the next section, it may give you a clue.

THE DEATH OF BEAR STEARNS: A Warning For Things To Come

It seems like a lot of people already forgot about the gut-wrenching 2008-2009 economic and financial crash.  During the U.S. Banking collapse, two of the country’s largest investment banks, Lehman Brothers, and Bear Stearns went belly up.  Lehman Brothers was founded in 1850 and Bear Stearns in 1923.  In just one year, both of those top Wall Street Investment Banks ceased to exist.

Now, during the 2001-2007 U.S. housing boom heyday, it seemed like virtually no one had a clue just how rotten a company Bear Stearns had become.  Looking at the chart below, we can see the incredible RISE & FALL of Bear Stearns:

As Bear Stearns added more and more crappy MBS – Mortgage Backed Securities to its portfolio, the company share price rose towards the heavens.  At the beginning of 2007 and the peak of the U.S. housing boom, Bear Stearns stock price hit a record $171.  Unfortunately, at some point, all highly leveraged garbage assets or Ponzi Schemes come to an end.  While the PARTY LIFE at Bear Stearns lasted for quite a while, DEATH came suddenly.

In just a little more than a year, Bear Stearns stock fell to a mere $2… a staggering 98% decline.  Of course, the financial networks and analysts were providing guidance and forecasts that Bear Stearns was a fine and healthy company.  For example, when Bear was dealing with some negative issues in March 2008,  CBNC’s Mad Money, Jim Cramer made the following statement in response to a caller on his show (Source):

Tuesday, March 11, 2008, On Mad Money

Dear Jim: “Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?” – Peter

Jim Cramer: “No! No! No! Bear Stearns is fine. Do not take your money out. Bear sterns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear. That’s just being silly. Don’t be silly.”

Thanks to Jim, many investors took his advice.  So, what happened to Bear Stearns after Jim Cramer gave the company a clean bill of health?

On Tuesday, March 11, the price of Bear Stearns was trading at $60, but five days later it was down 85%.  The source (linked above) where I found the quote in which Jim Cramer provided his financial advice, said that there was a chance Jim was replying to the person in regards to the money he had deposited in the bank and not as an investment.  However, Jim was not clear in stating whether he was talking about bank deposits or the company health and stock price.

Regardless, Bear Stearns stock price was worth ZERO many years before it collapsed in 2008.  If financial analysts had seriously looked into the fundamentals in the Mortgage Backed Security market and the bank’s financial balance sheet several years before 2008, they would have realized Bear Stearns was rotten to the core.  But, this is the way of Wall Street and Central Banks.  Everything is fine, until the day it isn’t.

And that day is close at hand.

THE RECORD LOW VOLATILITY INDEX:  Signals Big Market Trouble Ahead

Even though I have presented a few charts on the VIX – Volatility Index in past articles, I thought this one would provide a better picture of the coming disaster in the U.S. stock markets:

The VIX – Volatility Index (RED) is shown to be at its lowest level ever when compared to the S&P 500 Index (GREY) which is at its all-time high.  If we take a look at the VIX Index in 2007, it fell to another extreme low right at the same time Bear Stearns stock price reached a new record high of $171.  Isn’t that a neat coincidence?

As a reminder, the VIX Index measures the amount of fear in the markets.  When the VIX Index is at a low, the market believes everything is A-OKAY.  However, when the VIX surges higher, then it means that fear and panic have over-taken investment sentiment, as blood runs in the streets.

As the Fed and Central Banks continue playing the game of Monopoly with Trillions of Dollars of money printing and asset purchases, the party won’t last for long as DEATH comes to all highly leveraged garbage assets and Ponzi Schemes.

To get an idea just how much worse the situation has become than we realize, let’s take a look at the energy fundamental that is gutting everything in its path.

WHY THE BIG MARKET COLLAPSE IS COMING:  It’s The Energy, Stupid

Even though I belong to the Alternative Media Community, I am amazed at the lack of understanding by most of the precious metals analysts when it comes to energy.  While I respect what many of these gold and silver analysts have to say, they exclude the most important factor in their forecasts.  This critical factor is the Falling EROI – Energy Returned On Investment.

As I mentioned earlier in the article, I speak to many people on the phone from various industries.  Yesterday, I was fortunate enough to chat with Bedford Hill of the Hill’s Group for over 90 minutes.  What an interesting conversation.  Ole Bedford knows we are toast.  Unfortunately, only 0.01% of the population may understand the details of the Hill’s Group work.

Here is an explanation of the Hill’s Group:

The Hill’s Group is an association of consulting engineers and professional project managers. Our goal is to support our clients by providing them with the most relevant, and up to-date skill sets needed to manage their organizations. Depletion: A determination for the world’s petroleum reserve provides organizational long range planners, and policy makers with the essential information they will need in today’s rapidly changing environment.

I asked Bedford if he agreed with me that the hyperinflationary collapse of Venezuela was due to the falling oil price rather than its corrupt Communist Government.  He concurred.  Bedford stated that the total BTU energy cost to extract Venezuela’s heavy oil was higher than the BTU’s the market could afford.  Bedford went on to say that when the oil price was at $80, Venezuela could still make enough profit to continue running its inefficient, corrupt government.  However, now that the price of oil is trading below $50, it’s gutting the entire Venezuelan economy.

During our phone call, Bedford discussed his ETP Oil model, shown in his chart below.  If there is one chart that totally screws up the typical Austrian School of Economics student or follower, it’s this baby:

Bedford along with a group of engineers spent thousands and thousands of hours inputting the data that produced the “ETP Cost Curve” (BLACK LINE).  The ETP Cost Curve is the average cost to produce oil by the industry.  The RED dots represent the actual average annual West Texas Oil price.  As you can see, the oil price corresponded with the ETP Cost Curve.  This correlation suggests that the market price of oil is determined by its cost of production, rather than supply and demand market forces.

The ETP Cost Curve goes up until it reached an inflection point in 2012… then IT PEAKED.  The black line coming down on the right-hand side of the chart represents “Maximum Consumer Price.”  This line is the maximum price that the end consumer can afford.  Again, it has nothing to do with supply and demand rather, it has everything to do with the cost of production and the remaining net energy in the barrel of oil.

I decided to add the RED dots for years 2014-2016.  These additional annual oil price figures remain in or near the Maximum Consumer Price line.  According to Bedford, the oil price will continue lower by 2020.  However, the actual annual oil price in 2015 and 2016 was much lower than estimated figures Bedford, and his group had calculated.  Thus, we could see some volatility in the price over the next few years.

Regardless, the oil price trend will be lower.  And as the oil price continues to fall, it will gut the U.S. and global oil industry.  There is nothing the Fed and Central Banks can do to stop it.  Yes, it’s true that the U.S. government could step in and bail out the U.S. shale oil industry, but this would not be a long-term solution.

Why?  Let me explain with the following chart:

I have published this graph at least five times in my articles, but it is essential to understand.  This chart represents the amount of below investment grade debt due by the U.S. energy industry each year.  Not only does this debt rise to $200 billion by 2020, but it also represents that the quality of oil produced by the mighty U.S. shale oil industry WAS UNECONOMICAL even at $100 a barrel.

Furthermore, this massive amount of debt came from the stored economic energy via the various investors who provided the U.S. shale energy industry with the funds to continue producing oil at a loss.   We must remember, INVESTMENT is stored economic energy.  Thus, pension plans, mutual funds, insurance funds, etc., had taken investments gained over the years and gave it to the lousy U.S. shale oil industry for a short-term high yield.

Okay, this is very important to understand.  Don’t look at those bars in the chart above as money or debt, rather look at them as energy.  If you can do that, you will understand the terrible predicament we are facing.  Years ago, these large investors saved up capital that came from burning energy.  They took this stored economic energy (capital) and gave it to the U.S. shale oil industry.  Without that capital, the U.S. shale oil industry would have gone belly up years ago.

So, what does that mean?  It means… IT TOOK MORE ENERGY TO PRODUCE THE SHALE OIL than was DELIVERED TO THE MARKET.  Regrettably, the overwhelming majority of shale oil debt will never be repaid.  As the oil price continues to head lower, the supposed shale oil break-even price will be crushed.  Without profits, debts pile up even higher.

Do you all see what is going on here?  And let me say this.  What I have explained in this article, DOES NOT INCLUDE INSIDER INFORMATION, which suggests “The situation is even much worse than you realize… LOL.”

For all my followers who believe business, as usual, will continue for another 2-3 decades, YOU HAVE BEEN WARNED.  The energy situation is in far worse shape than you can imagine.





More gnashing of teeth

7 02 2017

The Über-Lie

By Richard Heinberg, Post Carbon Institute

heinbergNevertheless, even as political events spiral toward (perhaps intended) chaos, I wish once again, as I’ve done countless times before, to point to a lie even bigger than the ones being served up by the new administration…It is the lie that human society can continue growing its population and consumption levels indefinitely on our finite planet, and never suffer consequences.

This is an excellent article from Richard Heinberg, the writer who sent me on my current life voyage all those years ago. Hot on the heels of my attempt yesterday of explaining where global politics are heading, Richard (whom I met years ago and even had a meal with…) does a better job than I could ever possibly muster.  Enjoy……

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Our new American president is famous for spinning whoppers. Falsehoods, fabrications, distortions, deceptions—they’re all in a day’s work. The result is an increasingly adversarial relationship between the administration and the press, which may in fact be the point of the exercise: as conservative commentators Scott McKay suggests in The American Spectator, “The hacks covering Trump are as lazy as they are partisan, so feeding them . . . manufactured controversies over [the size of] inaugural crowds is a guaranteed way of keeping them occupied while things of real substance are done.”

But are some matters of real substance (such as last week’s ban on entry by residents of seven Muslim-dominated nations) themselves being used to hide even deeper and more significant shifts in power and governance? Steve “I want to bring everything crashing down” Bannon, who has proclaimed himself an enemy of Washington’s political class, is a member of a small cabal (also including Trump, Stephen Miller, Reince Priebus, and Jared Kushner) that appears to be consolidating nearly complete federal governmental power, drafting executive orders, and formulating political strategy—all without paper trail or oversight of any kind. The more outrage and confusion they create, the more effective is their smokescreen for the dismantling of governmental norms and institutions.

There’s no point downplaying the seriousness of what is up. Some commentators are describing it as a coup d’etat in progress; there is definitely the potential for blood in the streets at some point.

Nevertheless, even as political events spiral toward (perhaps intended) chaos, I wish once again, as I’ve done countless times before, to point to a lie even bigger than the ones being served up by the new administration—one that predates the new presidency, but whose deconstruction is essential for understanding the dawning Trumpocene era. I’m referring to a lie that is leading us toward not just political violence but, potentially, much worse. It is an untruth that’s both durable and bipartisan; one that the business community, nearly all professional economists, and politicians around the globe reiterate ceaselessly. It is the lie that human society can continue growing its population and consumption levels indefinitely on our finite planet, and never suffer consequences.

Yes, this lie has been debunked periodically, starting decades ago. A discussion about planetary limits erupted into prominence in the 1970s and faded, yet has never really gone away. But now those limits are becoming less and less theoretical, more and more real. I would argue that the emergence of the Trump administration is a symptom of that shift from forecast to actuality.

Consider population. There were one billion of us on Planet Earth in 1800. Now there are 7.5 billion, all needing jobs, housing, food, and clothing. From time immemorial there were natural population checks—disease and famine. Bad things. But during the last century or so we defeated those population checks. Famines became rare and lots of diseases can now be cured. Modern agriculture grows food in astounding quantities. That’s all good (for people anyway—for ecosystems, not so much). But the result is that human population has grown with unprecedented speed.

Some say this is not a problem, because the rate of population growth is slowing: that rate was two percent per year in the 1960s; now it’s one percent. Yet because one percent of 7.5 billion is more than two percent of 3 billion (which was the world population in 1960), the actual number of people we’re now adding annually is the highest ever: over eighty million—the equivalent of Tokyo, New York, Mexico City, and London added together. Much of that population growth is occurring in countries that are already having a hard time taking care of their people. The result? Failed states, political unrest, and rivers of refugees.

Per capita consumption of just about everything also grew during past decades, and political and economic systems came to depend upon economic growth to provide returns on investments, expanding tax revenues, and positive poll numbers for politicians. Nearly all of that consumption growth depended on fossil fuels to provide energy for raw materials extraction, manufacturing, and transport. But fossil fuels are finite and by now we’ve used the best of them. We are not making the transition to alternative energy sources fast enough to avert crisis (if it is even possible for alternative energy sources to maintain current levels of production and transport). At the same time, we have depleted other essential resources, including topsoil, forests, minerals, and fish. As we extract and use resources, we create pollution—including greenhouse gasses, which cause climate change.

Depletion and pollution eventually act as a brake on further economic growth even in the wealthiest nations. Then, as the engine of the economy slows, workers find their incomes leveling off and declining—a phenomenon also related to the globalization of production, which elites have pursued in order to maximize profits.

Declining wages have resulted in the upwelling of anti-immigrant and anti-globalization sentiments among a large swath of the American populace, and those sentiments have in turn served up Donald Trump. Here we are. It’s perfectly understandable that people are angry and want change. Why not vote for a vain huckster who promises to “Make America Great Again”? However, unless we deal with deeper biophysical problems (population, consumption, depletion, and pollution), as well as the policies that elites have used to forestall the effects of economic contraction for themselves (globalization, financialization, automation, a massive increase in debt, and a resulting spike in economic inequality), America certainly won’t be “great again”; instead, we’ll just proceed through the five stages of collapse helpfully identified by Dmitry Orlov.

Rather than coming to grips with our society’s fundamental biophysical contradictions, we have clung to the convenient lies that markets will always provide, and that there are plenty of resources for as many humans as we can ever possibly want to crowd onto this little planet. And if people are struggling, that must be the fault of [insert preferred boogeyman or group here]. No doubt many people will continue adhering to these lies even as the evidence around us increasingly shows that modern industrial society has already entered a trajectory of decline.

While Trump is a symptom of both the end of economic growth and of the denial of that new reality, events didn’t have to flow in his direction. Liberals could have taken up the issues of declining wages and globalization (as Bernie Sanders did) and even immigration reform. For example, Colin Hines, former head of Greenpeace’s International Economics Unit and author of Localization: A Global Manifesto, has just released a new book, Progressive Protectionism, in which he argues that “We must make the progressive case for controlling our borders, and restricting not just migration but the free movement of goods, services and capital where it threatens environment, wellbeing and social cohesion.”

But instead of well-thought out policies tackling the extremely complex issues of global trade, immigration, and living wages, we have hastily written executive orders that upend the lives of innocents. Two teams (liberal and conservative) are lined up on the national playing field, with positions on all significant issues divvied up between them. As the heat of tempers rises, our options are narrowed to choosing which team to cheer for; there is no time to question our own team’s issues. That’s just one of the downsides of increasing political polarization—which Trump is exacerbating dramatically.

Just as Team Trump covers its actions with a smokescreen of controversial falsehoods, our society hides its biggest lie of all—the lie of guaranteed, unending economic growth—behind a camouflage of political controversies. Even in relatively calm times, the über-lie was watertight: almost no one questioned it. Like all lies, it served to divert attention from an unwanted truth—the truth of our collective vulnerability to depletion, pollution, and the law of diminishing returns. Now that truth is more hidden than ever.

Our new government shows nothing but contempt for environmentalists and it plans to exit Paris climate agreement. Denial reigns! Chaos threatens! So why bother bringing up the obscured reality of limits to growth now, when immediate crises demand instant action? It’s objectively too late to restrain population and consumption growth so as to avert what ecologists of the 1970s called a “hard landing.” Now we’ve fully embarked on the age of consequences, and there are fires to put out. Yes, the times have moved on, but the truth is still the truth, and I would argue that it’s only by understanding the biophysical wellsprings of change that can we successfully adapt, and recognize whatever opportunities come our way as the pace of contraction accelerates to the point that decline can no longer successfully be hidden by the elite’s strategies.

Perhaps Donald Trump succeeded because his promises spoke to what civilizations in decline tend to want to hear. It could be argued that the pluralistic, secular, cosmopolitan, tolerant, constitutional democratic nation state is a political arrangement appropriate for a growing economy buoyed by pervasive optimism. (On a scale much smaller than contemporary America, ancient Greece and Rome during their early expansionary periods provided examples of this kind of political-social arrangement). As societies contract, people turn fearful, angry, and pessimistic—and fear, anger, and pessimism fairly dripped from Trump’s inaugural address. In periods of decline, strongmen tend to arise promising to restore past glories and to defeat domestic and foreign enemies. Repressive kleptocracies are the rule rather than the exception.

If that’s what we see developing around us and we want something different, we will have to propose economic, political, and social forms that are appropriate to the biophysical realities increasingly confronting us—and that embody or promote cultural values that we wish to promote or preserve. Look for good historic examples. Imagine new strategies. What program will speak to people’s actual needs and concerns at this moment in history? Promising a return to an economy and way of life that characterized a past moment is pointless, and it may propel demagogues to power. But there is always a range of possible responses to the reality of the present. What’s needed is a new hard-nosed sort of optimism (based on an honest acknowledgment of previously denied truths) as an alternative to the lies of divisive bullies who take advantage of the elites’ failures in order to promote their own patently greedy interests. What that actually means in concrete terms I hope to propose in more detail in future essays.





This is bigger…….

17 01 2016

That was big………  but this is bigger.

Whilst I admit to not hearing it for some time, the MSM has been spreading its usual nonsense in the form of “the fundamentals” [of the economy] are spot on, there’s nothing to worry about. Which I’ve been calling for years as crap, and now there’s a chart that explains everything regarding why I feel this way.

chart says it all

(Richard Koo: The ‘struggle between markets and central banks has only just begun’, Business Insider)

Why is the economy barely growing after seven years of zero rates and easy money? Why are wages and incomes sagging when stock and bond prices have gone through the roof? Why are stocks experiencing such extreme volatility when the Fed increased rates by a mere quarter of a percent?

It’s the policy, stupid. And here’s the chart that explains exactly what the policy is.

What this chart clearly shows is that the monumental increase in money printing had almost zero effect on lending, nor did it trigger the credit expansion the Fed were hoping for…… In other words, the Fed’s insane pump-priming of the economy experiment (aka– QE) both failed to stimulate growth and put the economy back on the so called ‘path to recovery’ we’ve been told was on, but everyone else has been saying for years never happened. For all intents and purposes, the policy was a complete flop.

Mind you, had it worked, I think we would have seen massive inflation. Basically, the fundamentals went AWOL way back in 2008. And no one wants to admit to it.lifestyle_banksy-500x332

The latest news from the US is that Walmart are closing 269 stores, which will probably leave some small towns with nowhere to buy anything,  and thousands of people out of work. If you need signs that economic collapse is now well underway, look no further than that little curler…..

The upside is that we might even see CO2 emissions starting to fall.





China, Oil and Markets: It’s All One Story

8 01 2016

$2.5 trillion was lost in global equities in three days this year even before the Thursday China trading stop and ongoing oil price decline. Must be easily over $3 trillion by now. And counting: European markets look awful, and so do futures.

Or so says Raul Illargi. I just had to copy paste this item before going out in the fields, this stuff scares the pants off me…… you can read the whole thing and more over at the Automatic Earth.

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If there’s one thing to take away from this year’s developments in markets and economies so far, it’s that they are all linked, they’re all part of the same thing. If you can’t see that, you’re not going to understand what’s happening.

Looking at falling oil prices as a separate thread is not much use, and neither is doing the same with Chinese stocks, or the yuan, or the millions of Americans who are one paycheck away from poverty, for that matter. It’s all one story.

And the take-away from that, in turn, is that focusing too much on ‘narrow’ conditions in your particular part of the globe has only limited value. We’re very much all in this together. In the UK today, it matters very little what George Osborne says or does, or Mark Carney, because they don’t shape the future of the economy.

The same goes for all finance ministers and central bank governors across the planet, Yellen, Draghi, Koruda, the lot: the influence they exert on their own economies, which was always limited from the start, is running into the boundaries imposed by global developments.

Even if central bankers could ever have ‘lifted’ anything at all (a big question mark), their power to do so is rapidly diminishing. The constraints global developments place on their powers will now be exposed -even more. And of course they’ll try to deny and ignore that, as naked emperors are wont to do.

And with the exposure of the limits to their abilities to make markets and economies do what they want, come the limitations of the mainstream financial press to make their long-promoted recovery narratives appear valid. Before we know it, we might have functioning markets back.

Oil -both Brent and WTI- have breached the $32 handle, and are very openly flirting with the $20s. China’s stock market trading was halted for a second time this year, just 14 minutes after the opening. This came about after the PBoC announced another ‘official’ devaluation of the yuan by 0.5% (stealth devaluation has been a daily occurrence for a while).

$2.5 trillion was lost in global equities in three days this year even before the Thursday China trading stop and ongoing oil price decline. Must be easily over $3 trillion by now. And counting: European markets look awful, and so do futures.

For the first time in years, markets begin to seem to reflect actual economic activity. That is to say, industrial production, factory orders, exports, imports and services sectors are falling both in China and the US. Many of these have been falling for a prolonged period of time.

In fact, Reuters quotes a Sydney trader as saying: The Chinese economy actually contracted in December. Given what I’ve written in the past year and change about China, that can hardly be a surprise anymore.

What we are looking at is debt deflation, in which virtual ‘wealth’ is being wiped out at a fast pace, and it’s taken some real wealth with it for good measure. It’s not going to be one straight line down, for instance because there are a lot of parties out there who need to cover bets they carry from last year, but it’s getting very hard to see what can stop the plunge this time. Volatility will be a popular term again.

The Fed could lose its last remaining shred of credibility through QE4,5,6 and a 180º turn on the rate hike, but it would lose that last shred for sure. Draghi’s ECB could start buying ever more paper, but they would have a hard time finding sufficient amounts of anything to buy that’s worth anywhere near the written value.

The PBoC can’t really do QE after the $25 trillion post-2008 credit pump, and the yuan devaluation today achieved the opposite of what it was intended for. The BoJ is being severely hampered by the rising yen. We’ll see crazy stuff from the global Oracles, for sure, but in reality they never had anything but expensive band-aids to offer, and they have nothing better now.

Ultimately, if China is a Ponzi (and $25 trillion in credit spent on overcapacity strongly suggests so), then the entire world economy is one. I would very much argue so, and have for years. And we all know what inevitably happens with Ponzi’s.

Economists like to think in cycles, in which things will simply bounce back at some point, but a lot of this stuff will not come back, not for a very long time. I’ve said it before: Kondratieff is also a cycle.

We’re watching the initial stages (though a lot has already vanished behind all sorts of curtains) of a massive ‘wealth’ destruction, a very loud POOF!, ‘wealth’ which can so easily be destroyed because most of it was never real, just inflated soap. It’s time to move to cash if you haven’t already, and if you have enough, perhaps a bit of gold, silver or bitcoin, but do remember those are not risk-free.

It’s tempting to see this as a China problem, but first of all there is no China problem that will not of necessity also gravely affect the west , and second of all when you read, just to name an example, that America’s new jobs pay 23% less than the jobs they replaced, it’s just plain silly to believe that the economy is doing well, let alone recovering.

Which is why a majority of Americans are living paycheck to paycheck, and don’t have enough savings even for a $500 car repair bill. All Ponzi’s burst, they can’t be tapered, and this one we have now is going down in epic fashion because there are no major economies left that are not overburdened by debt.

It’s also tempting, certainly for economists, to see money that’s lost in one ‘investment’ to automatically shift to another, but that’s not what’s happening. Much of it simply evaporates. That’s why investment funds where already in a huge high-yield bind last year, and why you should really worry about your pension fund.

Do prepare for rising taxes and services cuts: governments suffer along with everyone, and because they’re slow and lagging, probably even more so. And governments think they deserve to have their hands in your pockets. Prepare for mass lay-offs too. The consumption model is being broken and dismantled as we speak.

 





It’s all happening…..

25 08 2015

Things have been quiet on the DTM front since moving out of Mon Abri.  Having inherited my mother’s smart phone, I have actually mastered (well, kind of…) the art of mobile internet, but I draw the line at writing blog posts on those small screens.  We are still waiting for an internet connection at my MiL’s place, and hopefully it will arrive before I leave for Tasmania on the 5th of September, and I am typing this at the Noosa Library where the net is actually very fast.

deadbullIt looks like we sold just in time and getting out of debt when we did was a bonus.  But now I worry our money might devalue before I have a chance to spend it all. It certainly looks like the Chinese bull has been slain, and the red ink is flowing – or is that red LED’s in this new modern world of algorithmic trading by digital means? Our treasurer is lying through his teeth – as usual – telling the world and anyone stupid enough to listen, that ‘the fundamentals’ are just fine, when in fact they are thoroughly broken.  Even the young lady making market announcements on ABC TV’s morning news admitted it was her job to say this was a mere correction and not a crash…..  I kid you not!

I even heard some ‘expert’ pronounce that China’s official growth  figures of 7% were way overblown, and were more likely to be between 0 and 4%.  Zero?  Yep, that’s what she said….

Chinese state and private debt currently total about 300% of GDP. If you think that the GDP number they publish is too high, the debt percentage goes even higher. China has a lot of debt any way you look at it, and much of it is dollar-denominated, hence the recent devaluation of their currency which seems to have triggered this current crash.

The best article I have read about this whole affair came from The Automatic Earth:

Central banks will come up with more, much more, ‘stimulus’, but what China teaches us today is that we’re woefully close to the moment when central banks will lose the faith and trust of everyone. After injecting tens of billions of dollars in markets, which thereby ceased to function, the global economy is in a bigger mess than it was prior to QE. The whole thing is one big bubble now, and we know what invariably happens to those.

More QE is not an answer. And there is no other answer left either. Those tens of trillions will need to vanish from the global economy before any market can be returned to a functioning one, and by that time of course asset prices will be fraction of what they are now. It may not happen today, but that doesn’t matter: what’s important to know is that it WILL happen.

And if you keep being out there trying to outsmart a non-functioning market, you’ll get burned as badly as the millions of Chinese grandmas who already lost 20%+ so far just this month. And that’s just on their share holdings; Chinese property ‘markets’ will be at least as badly burned.

 nails it here in my opinion…..

China’s leaders, and its people, have walked eyes wide open into an ugly albeit nigh perfect trap. They’ve all started to believe that borrowing more could make them richer. Outstanding credit across the entire society has reached idiotic proportions. We can get somewhat of a glance at what levels debt have reached in Steve Keen’s Is This The Great Crash Of China?, in which he argues that a crash is inevitable, simply given those levels.

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The main advice we’ve always given with regards to debt deleveraging stands: get out of debt.

Meanwhile, the western financial press, which has been reporting on non-functioning markets for years as if they actually were still functioning, is worrying about a potential Fed rate hike, telling its readers and listeners that the US central bank ‘looks set to make a dangerous mistake’. But the real ‘mistake’ was made a long time ago.

And then there’s oil…….  trading at under $38 as I type.  Who would have believed this a couple of years ago?  And petrol is still as dear as it was when oil hit $147 in 2008.  I guess if the oil companies can’t make a profit at the front end, they have to recoup their losses at the bowser….

On a completely different tack, I have been working on Mon Abri MkII, and have probably come up with a final design, subject to Glenda’s approval……  I’ve even made a model of it:

housemodel

The rear and internal walls will all be made of core filled concrete blocks for thermal mass. I expect that the rear wall – which is 3.2m high – will be backfilled with as much as 2.5m of earth moved from cutting the flat pad for the slab floor……

The ‘missing bits’ at the front (North facing side) are literally all double glazing, and I may even triple glaze the bits in the peak that light the triangular wedge at the back. Starting in the middle, which is the living space, the low wall is under the kitchen windows.  The blank wall is the pantry/store room which is a replica of the one I built in Cooran, complete with hot water storage tank; the ‘new AGA’ will be against the right hand wall of this room, connected to the hot water tank. To the left of that is a bathroom, and to the left of that will be a bedroom.  The other end of the house is a mirror image, sans the pantry….

With all that thermal mass and heavy insulation, I expect this house to never drop below 18 degrees, even when it snows outside, as it would have done recently when Tasmania experienced low level snow three times in a fortnight!

Now all I need is a draftsman to finalise my plans……….  any takers?

Eleven more sleeps, and I’m off to the deep South…… and not too late either, it’s already getting almost too warm for me already up here in the sub tropics.





Three Evils of Capitalism

24 02 2015

Reblogged from https://leftymathprof.wordpress.com/3evils/

(Read the essay, or watch the 14 minute video version here in this little box, or on its Youtube page, or full-screen.)

Poverty and war have tormented us for ages, but they won’t for much longer; soon we will be forced to choose between harmony and extinction. Any compromise between those two extremes is nearing an end, because information and ecocide are both growing toward tipping points. And the new vision we need for survival is uncomplicated but also unfamiliar, especially regarding economics.

When people blame the problems of the world on “unregulated capitalism” or “predatory capitalism,” they are implying that capitalism itself is a good and healthy thing. They are implying that we have merely strayed from its sound principles into corruption, a superficial problem that can be cleaned up through reform. But these reformists are mistaken. They have not seen the world as it is; they have not understood what the principles really are. The evils of inequality, externalities, and alienation are inherent in any market economy. To halt the torment and destruction, we’ll have to learn how to share. That didn’t work in some previous attempts, but that just means we’ll have to try doing it differently; the reasons for doing it are still valid. Forcing it on people won’t work, so a change in law won’t be enough; we need a change in culture.

The problem is not “unregulated capitalism.” Writing regulations more carefully will not save us. Satan’s army of lawyers can find him a loophole whenever he wants to escape one of his contracts. And our plutocracy simply disregards its contracts — just look at all of the US government’s violations of its own laws. Money erodes its way through regulations as surely as water finds a way downhill. Any separation between government and big business, between regulators and regulated, is illusory: They share a revolving door, and sometimes a bed. The only way to avoid rule by the wealthy class is to not have a wealthy class.

And fighting against one Monsanto or Halliburton at a time is futile. It’s like Hercules fighting the Hydra: Each time he cut off one head, two more grew in its place. We must look deeper, to what Monsanto’s poisons and Halliburton’s wars have in common.

When Neo awakened from The Matrix, physical reality changed for him, but that film was only a metaphor. When we awaken from the propaganda all around us, physical objects are not changed, but their significance is changed, and our history and expectations are vastly changed.

The old world is dying; we must move on to the new world being born. How will we make the great change? I don’t know the details of that. But it has already begun; you can see it in the peaceful demonstrators being beaten by police. Awareness and understanding are spreading, and our foremost tactic must be to spread them further. When enough people see what is really going on, we will unite, and we will find a way to change things, and the violence will end.

1st evil:   INEQUALITY (3:30 in video)

The data in Thomas Piketty’s recent book shows that increasing economic inequality is a normal trend in capitalism, not an aberration. The problem is deeper than debt-based currency or any other particular method of exploitation and theft. It is inherent in all market economies, even barter economies: Market transactions increase inequality, because they favor whichever participant is in the stronger bargaining position. The only way to not have a wealthy class is by not having a market — that is, by sharing.

Increasing inequality is simplified in the board game Monopoly, which always ends with all the players but one totally impoverished. That’s the outcome even if no one cheats, so the problem is in the principles, not in “corruption.”

The recent study by Gilens and Page shows quantitatively that the USA is a plutocracy, not a democracy. Just a few people now own our homes, workplaces, debts, government, mass communications media, everything. Privately owned workplaces are little dictatorships; that’s why we hate Mondays. Progress brings higher productivity, but its benefits are pocketed by the owners of the workplaces; for the rest of us, progress means layoffs, not leisure.

Psychopaths seek positions of power over others, and even people who are not already psychopaths become corrupted by power if they acquire it; strong evidence of that was given by the Stanford Prison Experiment. We see cruelty wherever the opportunity for it arises — in prison guards, police, soldiers, workplace managers, business tycoons, dictators, or even democratically elected politicians — though in that last case, they cover it up by conducting much of their work in secret and lying about the rest. All these bullies proclaim, and perhaps believe, that they are deserving and that their victims are not.

Clearly, we should reorganize our society so that there are no concentrations of power. That requires not only replacing markets with sharing, but also replacing authoritarian hierarchical government with peer-to-peer networking. This is why I’m an anarcho-commie, which means share and don’t hit, the first two things we all learned in kindergarten.

2nd evil:   EXTERNALITIES (6:17 in video)

Any market transaction is negotiated by a buyer and a seller, but it may affect other parties besides those two. Such effects are outside the considerations of the negotiations, and so they are called externalities. During the crash of 2008, Wall Street traders often reassured one another with the acronym “IBGYBG,” which stood for “I’ll be gone, you’ll be gone.”

Externalities are more due to indifference than outright malice, and so you might think their effects would be random — sometimes harmful and sometimes beneficial — but it doesn’t work that way. The proverbial “bull in a china shop” is not motivated by malice, but he is never beneficial.

Market prices are far from true costs, because they leave out the externalities. Thus the market is not at all the “wise and efficient” allocator of resources claimed by its worshipers. Conventional textbooks gloss over this topic, as though it were something minor, but in fact externalities are enormous: War, poverty, and ecocide are inevitable consequences of any market economy. And by the way, the ecocide is a lot worse than most people realize; feedback loops are about to send us over a climate cliff.

A living whale is an awesome creature, but it has no monetary value. The parts of a recently killed whale are worth a million dollars in quick profit to someone who doesn’t care about the consequences elsewhere. That’s why the whales are disappearing. And that’s why the ecosystem is disappearing too, though it’s larger, more abstract, and harder to see.

You might think that the few people in power would get together and conspire to save the planet that they have seized for their own. But that’s not how they’re behaving.

For instance, a few years ago, the Arctic began melting rapidly. That’s one of the climate feedback loops, and it should have been a wakeup call to stop using fossil fuels before they kill everyone. But instead the plutocrats said, “oh goody, now it will be so much easier to extract fossil fuels from the Arctic!”

The market compels its biggest players to compete against each other in offering quick profits to investors, without regard to consequences. Any big players who find scruples will fall behind in the competition, and will be replaced. We need to overthrow not just the big players, but the entire system.

3rd evil:   ALIENATION   (9:06 in video)

The problem is not just in our rulers. It’s in all of us, in our culture, in the so-called “American dream“: You keep your stuff in your house, I keep my stuff in my house, and God help the guy who doesn’t have a house, because no one else can help him, in our present socioeconomic system. We get the illusion that my well being doesn’t depend on yours, and I don’t need to care about you, and in fact I can’t afford to care about you. We blame the less fortunate for their bad luck, because that’s easier than facing up to the fact that we might be next, that the system is unjust, and that we don’t know how to fix it. We may try to be kind, because that’s human nature, but that’s swimming upstream against the current of separateness.

How blind are we to our own culture? Compare it with physics. An apple’s mass, volume, and colour are objective and measurable traits, independent of any observer. The “owner” of the apple is merely a story that we agree upon, one that can be changed by whoever controls the courts. And yet it has become impossible for us to imagine an apple without an owner.

Our possessions separate us psychologically, and that in turn legitimizes our material separateness. Apathy and alienation seem inevitable and normal. We are forced to compete against each other for survival; friendships become commodities and strategic alliances. We’re distrustful, and our anxiety about lack of security is medically harmful. The wealthy are harmfully stressed too, by their desire to stay ahead, and by their lack of the things that money can’t buy. Lacking meaning, purpose, and direction in our lives, we turn to drugs and entertainments. We see ourselves alone and helpless, and few of us realize that everyone else is alone in much the same way.

No wonder random shootings have become commonplace in our shopping malls. The only thing that can make us safe is a change to a culture in which everyone cares about everyone else and no one gets left behind. But that kind of caring will require sharing. To shelter the homeless and to end the prevalence of sh*t jobs, we’ll have to restructure the entire economy, and we’ll have to change how we feel about one another.

We’ve been told — and some of us have believed it — that it’s human nature to be greedy, selfish, and lazy. We’ve been told that humans work only for private gain, and work well only in competition. We’ve been told that our culture and behaviour can’t change. But none of that is true.

The Fall from Grace was 10,000 years ago, with the invention of the word “mine,” and we’ve lived in its shadow ever since. But throughout the 200,000 years before that, we lived cooperatively, without rulers, sharing everything of importance, and that’s still our deeper nature, our genetic heritage. You can see the cooperation at any traffic merge.

“Half full” and “half empty” are optimistic and pessimistic observations of the same glass. But human nature is not just what we observe. It’s what we choose and aspire to be. Even if the reformists were right — that it is possible to make selfishness viable — why would anyone want to? Right now our culture encourages our worst behaviour; let’s replace it with a culture that brings out our better side.

I’m hoping for a miracle. That doesn’t necessarily involve supernatural intervention; Charles Eisenstein defined a “miracle” to be simply an event that most people believe impossible until it happens. The miracle I’m hoping for — and actually, I believe it is possible, even if a lot of people don’t — is that some good ideas will spread very quickly, and people everywhere will begin sharing and cooperating. That’s the only thing that might still save us from the rapidly accelerating ecocide. Can we shed our cynicism, and see with new eyes, and give each other the inspiration we need?