Economics

Crumbling Infrastructure

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Published on The Economic Collapse on February 16, 2017

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11 Deeply Alarming Facts About America’s Crumbling Infrastructure

 

 

 

 

 

No matter what your particular political perspective is, if there is one thing that virtually everyone in the United States can agree upon it is the fact that America’s infrastructure is crumbling.  Previous generations of Americans conquered an entire continent and erected the greatest system of infrastructure that the world had ever seen, but now thousands upon thousands of those extremely impressive infrastructure projects are decades old and in desperate need of repair or upgrading.  The near catastrophic failure of the Oroville Dam is a perfect example of what I am talking about.  We should be constructing the next generation of infrastructure projects for our children and our grandchildren, but instead we are in such sorry shape that we can’t even keep up with the maintenance and upkeep on the great infrastructure projects that have been handed down to us.

Once upon a time nobody on the entire planet could even come close to matching our infrastructure, but now our crumbling infrastructure has become a joke to much of the rest of the industrialized world.  Sadly, this is just another symptom of our long-term economic collapse.  We simply are not able to put as much of our money toward infrastructure as previous generations of Americans did, and as a result we have a giant mess on our hands.  The following are 11 deeply alarming facts about America’s crumbling infrastructure…

#1 According to the American Road and Transportation Builders Association, nearly 56,000 bridges in the United States are currently “structurally deficient”.  What makes that number even more chilling is the fact that vehicles cross those bridges a total of 185 million times a day.

#2 More than one out of every four bridges in the United States is more than 50 years old and “have never had major reconstruction work”.

#3 America does not have a single airport that is considered to be in the top 25 in the world.

#4 The average age of America’s dams is now 52 years.

#5 Not too long ago, the American Society of Civil Engineers gave the condition of America’s dams a “D” grade.

#6 Overall, the American Society of Civil Engineers said that the condition of America’s infrastructure as a whole only gets a “D+” grade.

#7 Congestion on our highways costs Americans approximately 101 billion dollars a year in wasted fuel and time.

#8 According to the U.S. Department of Transportation, over two-thirds of our roads are “in dire need of repair or upgrades”.

#9 In order to completely fix all of our roads and bridges, it would take approximately 808 billion dollars.

#10 Federal spending on infrastructure has decreased by 9 percent over the past decade.

#11 According to Bloomberg, it is being projected “that by 2025, shortfalls in infrastructure investment will subtract as much as $3.9 trillion from U.S. gross domestic product.”

The quality of our infrastructure affects all of our lives every single day.  For instance, we all simply take it for granted that safe, clean drinking water is going to come out of our taps, but recent events have shown that is not necessarily always going to be the case.

Just ask the residents of Flint, Michigan.

Water pipes, sewer systems and water treatment facilities all over the nation are aging and are in desperate need of repair.  Of course the exact same thing could be said about our power grid.  It was never intended to handle so many people, and on the hottest days of the summer the strain on the grid is very evident.

And of course the power grid is exceedingly vulnerable to an electromagnetic pulse event, and this is something that I covered in my book on getting prepared.  It has been projected that it would only cost a couple billion dollars to harden the grid against an EMP event, but our politicians refuse to spend the money.

Meanwhile, President Trump is completely correct when he says that our airports look like something that you would see in a third world country.  Most of our airports are at least several decades old, and they are definitely showing their age.

But things are even worse when you look at other systems of mass transit around the country.  While other nations such as Japan and China are investing huge amounts of money into high speed rail, we are doing next to nothing even though what we currently have is absolutely pathetic.

I could go on and talk about our ports, schools, waterways, parks, etc. but I think that you get the point.

President Trump’s instincts are right on the money when he says that he wants to spend a trillion dollars on infrastructure.  Without a doubt, we desperately need it.

The problem is that we are flat broke.

We are 20 trillion dollars in debt, and we are adding more than a trillion dollars to that total every year.

So where are we going to get the money?

It is easy for liberals to say that we should raise taxes, but how much more are you going to squeeze out of U.S. consumers?  Two-thirds of the country is living paycheck to paycheck, and we just learned that U.S. household debt has risen to a grand total of 12.58 trillion dollars.

Once upon a time, America was the wealthiest nation on the entire planet and we could afford to construct bold, new infrastructure projects from sea to shining sea.

But today we have the biggest mountain of debt in the history of the world and we can’t even afford to repair what we already have.

When I speak of our long-term economic collapse, this is precisely the sort of thing that I am talking about.  We have clearly been in decline for a very long time, and anyone that would suggest otherwise is simply not being honest with you.

 

Civilization and Collapse

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Published on Momentum Institute on Fenruary  11, 2017

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Inside the Diner: Getting a Handle on Wealth

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Published on The Doomstead Diner on January 15, 2017

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In response to my recent article The First Law of Wealth, one of the regular Diners JRM began a thread to discuss the nature of Wealth and how we define it.  Below you will find some of the differing perspectives on what Wealth is or is not, and how they define the concept.

Note:  As with all Inside the Diner compilations, the Napalm has been edited out for a smoother read.  Full version is available Inside the Diner for those wearing fireproof BVDs.

———————–

From JRM:

This thread is for discussion of a tangent which appeared recently in RE's thread, The First Law of Wealth. The basic theme was and is the question, What is wealth, really?  I take this to be basically a philosophical question.  My contention has been that Adam Smith's definition of wealth, which has been the accepted mainstay of modern economics, is deeply inadequate and problematic — both formally within the field of economics and less formally in everyday usage outside of this field.

Smith defined wealth as "the annual produce of the land and labour of the society".  The concept is further elucidated by Smith in his writings, of course. The Wikipedia article on Wealth, in attempting to be more specific or clear, states, "This "produce" is, at its simplest, that which satisfies human needs and wants of utility."  The concept has always been a bit contentious, rough and ambiguous.

I have proposed that wealth is better understood as well-being. This concept is also a little vague, but I find it more clear than Smith's.  I proposed that we in the contemporary world should seek to gather together a more thoroughgoing theory of well-beinga General Theory of Well-being derived from various sciences, physical and social, as well as of relevant sub-fields within philosophy such as ethics and aesthetics. 

The notion that wealth is better understood as well-being (synonym: health) occurred to me when I read the etymology of the word, which roots the word "wealth" in the Old English word weal.
 

Quote

weal (n.1)

"well-being," Old English wela "wealth," in late Old English also "welfare, well-being," from West Germanic *welon-, from PIE root *wel- (2) "to wish, will" (see will (v.)). Related to well (adv.).

http://www.etymonline.com/index.php?term=weal&allowed_in_frame=0

 


The English word "health" has a different Old English root, but the concepts are intertwined. ( http://www.etymonline.com/index.php?allowed_in_frame=0&search=health )  I take health to be at least roughly synonymous with well-being, if not a perfect synonym, and treat these as synonymous here.

A General Theory of Well-being (health) can (hypothetically) be derived, with some time and effort, from a study of the application of the concept of health and well-being as it appears in various sciences, be it medicine, biology, ecology, psychology, etc.–, but also in philosophy such as in ethics and aesthetics.  No such General Theory seems yet to exist, and so any progress in defining wealth in these terms may well depend first on such a General Theory.

I believe a very potent key to unfolding this inquiry into a possible General Theory of Well-being, and thus of wealth, may be found in the concept and science of resiliency — which is an important topic in systems science and theory.  Resiliency is a principal concept wherever health and well being are discussed philosophically and scientifically. This is so in psychology, ecology, medicine and so on, and I believe this is hardly a coincidence.  Resiliency and fragility are more than merely philosophical concepts; they are fundamental attributes of all systems.  And systems can be found … nearly everywhere, be they natural systems or artificial ones.

I believe that if a General Theory of Well-being should emerge from its current incipience, not only would this precipitate an inevitable re-framing of economic theory on the level of a paradigm shift in the field, but it would constitute the basis of a re-framing of our entire modern world view as a whole.  This would transform the entire field of education, of commerce, of architecture, of design generally….  The result would be a revolution in nearly all academic disciplines and a return to the unity of knowledge which pre-modern people had always taken for granted.

 

From JRM

Hypothesis:  Resiliency is a concept with applications across many disciplines, scientific and beyond.

Evidence:

http://www.ecologyandsociety.org/vol12/iss1/art23/table1.html

I'll compile a list of online resources which discuss resilience across various disciplines over time, and invite you to add to this list. 

Speculation:

I strongly suspect that when we gather together functional definitions and descriptions of the concept of resiliency in many fields of knowledge, in their simplest terms, we can set these next to one another and discern what is common to each, thus constructing a universal concept of resiliency alongside a general theory of resiliency.  I further speculate that the association of knowledge of resiliency from many fields will result in cross-fertilization between disciplines (subject areas). 

I believe some of the weaknesses of theory in, say, economics (e.g., in economic resiliency theory) may be revealed by association with the concepts and applications of resiliency theory in other disciplines, with psychology and economics, medicine and ethics/aesthetics, politics and history informing and enriching one another via this association and an associated interdisciplinary dialogue.

This is necessarily a critical inquiry, in the sense that a critique of disciplines and their theoretical orientations is likely to emerge with such a rich, interdisciplinary investigation. 

Inevitably, the philosophical concepts of fact and value will come into play here.  These two have been strangely at odds with one another vis-a-vis the fundamental division of the academic realm (education) into "the humanities" on one side (and associated "soft-sciences" such as social science generally …)  with "hard" physical sciences on the other.

Further speculation:

Until recently, most people have been fairly comfortable discussing wealth as "material wealth" (tangible, thus amenable to scientific analysis and with a clear definitional boundary) as if it were wholly "material," and thus a discrete concern in relation to "non-material wealth" (which has oftentimes been treated as an "aside" in economics).  My hunch is that this is largely due to the traditional popularity of a "fact/value" distinction in philosophy.
( https://en.wikipedia.org/wiki/Fact%E2%80%93value_distinction ) This also relates to our cultural habit of assuming that science cannot directly address ethical and aesthetic questions … and that ethical and aesthetic questions ought not be allowed to "muddy" or "muddle up" scientific ones.

(Edit:  In the near future, I hope to demonstrate why it is that material, tangible "wealth" can neither be conceptually, theoretically or practically be sharply segregated from non-material aspects of wealth.  These "two" are interdependent to the core.)

This is all rote habit in the dominant culture, so finding a bridge which all sides would be comfortable with will certainly present a challenge. 

I believe that bridge is near at hand, and not so "impossible" as we tend to suspect.

Doomer Context:

This being the Doomstead Diner, you may be wondering what any of this has to do with Doom or Collapse.

My basic answer is …

(a)  At least some of the challenges and risks in Collapse can be at least partially addressed or ameliorated by altering maladaptive, dysfunctional and inappropriate systems  and habits, before, during and after Collapse.

(b) Doing so will likely require a more thorough comprehension of just what it means for systems and habits to be maladaptive, dysfunctional and inappropriate.

(c) "Prepping" should not be an isolated, purely individualistic (or familial, or tribal…) activity, because…

(d) We're all in this together.

(e) Etc.

 

From JRM

Those with an interest in Collapse should be interested in the complex systems theory concept called "adaptive capacity." Note that in the following definition of that term the principles are applicable across disciplines.
 

Quote

Systems with high adaptive capacity are more able to re-configure without significant changes in crucial functions or declines in ecosystem services. A consequence of a loss of adaptive capacity, is loss of opportunity and constrained options during periods of reorganization and renewal.
Adaptive capacity in ecological systems is related to genetic diversity, biological diversity, and the heterogeneity of landscape mosaics. In social systems, the existence of institutions and networks that learn and store knowledge and experience, create flexibility in problem solving and balance power among interest groups play an important role in adaptive capacity.

http://www.resalliance.org/adaptive-capacity

 

"In social systems, the existence of institutions and networks that learn and store knowledge and experience, create flexibility in problem solving and balance power among interest groups play an important role in adaptive capacity."

These are broad, general terms, of course!  This is just a beginning to understanding how what is true about ecosystems is similarly true about social systems.  What does "learn" mean in this context?  This sounds like a simple question, but its deceptively simple.  Real learning, if you think about it carefully, must necessarily be in accord with the facts, with what is real and true.  Otherwise, it's not really learning at all.

Facilitating real learning (genuine education) has a kind of value which Smith's definition of wealth simply does not take into account.  This is but one of probably thousands of examples in which the richness which is true wealth has no accounting in Smith's definition of wealth.  Only economism is so reductive in this way as to measure "an education" in tuition fees or future earning potential to ascertain its 'value'.  Economism, here, bears similarities with scientism, which is not science but ideology.  Both are illusory ideologies, artifacts of simple-minded reductionism.

It's also worth noting in this context that the essentially economistic modern economic world-system, rooted as it is in a "thin" value reductionism, can readily be shown to shore itself up through a kind of parasitism, or expropriation of "wealth" through the consumptive reduction of values external to itself: e.g., resilient and regenerative systems, genuine education, social well-being, etc.  These are food for the hyperindusrial system. Its waste product is fragility.  You might say it eats good things and poops out shitty things — or fragile, shallow, empty things.  It therefore must reduce real learning to pseudo-learning, real education to a farce.

Thus the popular culture term for it: "death culture".

 

From Ka

I don't think I see the point of this. First, I can't see treating 'health' and 'wealth' synonymously. Suppose you were in solitary confinement, fed three bland but nutritious meals a day, and had an hour a day in the exercise yard, you would be healthy, but would you say you were wealthy?

Secondly, in usual talk, people call people "wealthy" if they have the money to buy the things that (they think) will make them happy, and "poor" if they can't. I take it you want people to stop thinking that way. Well, yes, but rather than go through complexity theory and talk of resiliency, wouldn't it be simpler to just point to the Sermon on the Mount, or the Eightfold Path?

 

From Surly

Ts is a very thought-provoking post. For a good while I've been trying to put together disconnected thoughts about the ideology of "growth" and the morality of the spreadsheet. This kicked some of those ideas good and hard.

I'm gonna need a bigger boat.

From Eddie

I've been reading the thread, and I'll have to admit JRM loses me at times, but I agree that wealth amounts to more than money in the bank, or gold or diamonds.

But I have to distinguish wealth from "well-being"…..wealth implies a store of value, which would include JD's example of a pantry full of homegrown food. It might even include a well-exercised and well fed body that gets adequate sleep, because that prevents illness. But the general idea of physical health? I'm not so sure. It gets complicated.

Some people are born with defects that mean they live their entire lives with diminished health, even though they try hard to be healthy. Some people abuse their bodies terribly, and yet remain generally healthy. That's a karmic thing, in my book.

In any case, health can go from great to really bad, really quickly. Once you're at the age where bodies naturally decline, no amount of good behavior and good diet guarantees health.

There are so many valuable things we put little or no value on in our culture….like the air we breathe, which is literally life  itself, from moment to moment. Don't think so? Try holding your breath for a few minutes.

Time….the wealth of youth. Time to do so many things, yet most of us, me included, waste time like it was unlimited. But once again, karma plays a role in how much time we get in a lifetime. An accident can snuff out the healthiest, youngest person…and they're just….gone. When you get older, you become more appreciative of time, I think. But young people? Not so much.

So, those things are valuable to me. But I've never figured out a way to store time in a bottle. According to some experts I like, like Ugo Bardi, we won't lose air before climate makes it impossible to grow food and live….so I think putting air in a bottle is probably not much of a strategy either.

The greatest wealth of all might be in good DNA. That's intergenerational wealth of the best kind in my book. Whoever it was who decided all men were created equal didn't know much about genetics. But that's a karmic crapshoot too. You get what you get.

Another kind of well-being is self-image. If you are born with DNA that gives you a healthy psyche, and you have the right kind of parenting (like before age four) that shapes you into an individual with good self-esteem. Growing up with a parent or parents who are your strong advocate in the world outside the home. Growing up with happy siblings and parents who love each other gives a child wealth that they will carry with them every day of their life. But you get that or you don't. You can't lose it once you have it, and if you don't get it early, it's damned hard to get at all.

Things that make us physically comfortable and protect us from the weather. Housing, heating and cooling,  a decent mattress to sleep on…all those things contribute to well-being. Whether you can stockpile comfort? Some things maybe.

What I'm getting around to is that I think of wealth as some kind of stored value. And most stored values are physical world values. Values of well-being are largely not amenable to being deliberately stored for future use.

Money, as long as the system functions, is a store of wealth…and then, when the fiat currency dies, it no longer is. So fiat money and digital dollars in an account of some kind are fragile. But they are really convenient in the world that now exists. The problem is the future.

Gold has a host of issues, but it's durable. Silver is too. How to buy metals and store them is a subject for a different thread. They do represent wealth,in my opinion, all arguments to the contrary fly in the face of history.

Food is very storable these days…but the ability to grow food into the future is really valuable too. To me food resilience is real wealth. Stored food, seeds, a place to plant them, food animals…all those things are tangible wealth.

Stored fuel is real wealth, but it's expensive. But a propane refrigerator and a 3000 gallon propane tank will give you refrigeration for more than five years. Fragile? Only if war breaks out.

Solar PV panels are a form of real wealth. You need knowledge about how to use them. There's a lot to know. Fragile? Definitely. But durable too, good for decades if they aren't broken.

Transportation. A sailboat, fully provisioned, could be a ticket out of war zone. We've written a lot about that. Wealth, yes, but a boat consumes wealth too. I wouldn't have one unless it was also my house. Too much ongoing cost and too much maintenance required.

Tiny house, like Dr. Chia, with all its well thought-out systems. Definitely a form of wealth, to me.

 

From JRM

I don't think I see the point of this. First, I can't see treating 'health' and 'wealth' synonymously. Suppose you were in solitary confinement, fed three bland but nutritious meals a day, and had an hour a day in the exercise yard, you would be healthy, but would you say you were wealthy?

 


Let's begin with the simplest Venn diagram.
https://d2gne97vdumgn3.cloudfront.net/api/file/RXqIbx54RTKarFp7Bv4F

In the leftmost circle section write the word health.  In the rightmost circle section, write the word wealth.  In the center section of overlapping circles, write a question mark.  Under that question mark place an H. H, here stands for "hybrid concept".  Cats can't breed with dogs, but take a moment to imaginatively visionalize what the outcome may look like if a rat terrier bred with an abyssinian cat.

Tough, isn't it!

Now imagine that wealth and health have much more in common than this rat terrier and this abyssinian.  (They most certainly do!)  What you're beginning to do here is to re-frame both terms in the middle section of the Venn diagram. The trick here is to allow each term to modify the others a little, to re-contextualize it, to bring it into another meaning which is both health and wealth.

This task is impossible if the concept of wealth you're employing is very shallow, rigid and narrow.  And it's NOT EASY to make something shallow deep, something rigid supple, something narrow wide.  It's an act of imagination — but what we're imagining here is not something like a fiction, a unicorn, say.  We're imagining what's really there in order to see what is really there.

In this context, let's examine the typical bundle of carrots we find in our grocery store today in relation to the typical carrot found in a grocery store in 1950. 
 

Quote

fruits and vegetables grown decades ago were much richer in vitamins and minerals than the varieties most of us get today. The main culprit in this disturbing nutritional trend is soil depletion: Modern intensive agricultural methods have stripped increasing amounts of nutrients from the soil in which the food we eat grows. Sadly, each successive generation of fast-growing, pest-resistant carrot is truly less good for you than the one before.

https://www.scientificamerican.com/article/soil-depletion-and-nutrition-loss/

 


Through profit-driven breeding practices and profit-driven farming practices much of our food has become less beneficial to us, less nutritious. Less "healthy" (conducive to sustaining our well-being, our health).  The soil is less valuable than it once was. The food is less valuable than it once was. 
if "value" in this context is roughly equivalent to wealth, we're all less wealthy than we once were because of these practices meant to produce wealth.

Our pursuit of wealth, more often than not, results in a reduction of wealth.  Once you get that basic concept you can then examine most anything in our society and economy and find out whether and how this same thing is happening in that context.  It will shock your pants off if you look carefully. These are not a few isolated incidents but a whole way of life.  "Death culture".
 

Secondly, in usual talk, people call people "wealthy" if they have the money to buy the things that (they think) will make them happy, and "poor" if they can't. I take it you want people to stop thinking that way.

 


… and talking that way…

Actually, no. Not in everyday, ordinary life.  Not yet.  I think that will come if the paradigm shift continues to unfold and deepen.  In the mean while, just expect that the word "wealth" is much less clear in its meaning than it was yesterday.  Or last year. Or fifty years ago.

What I'm doing here is enriching the concept of wealth by attempting to remove it from its abstract context and to set the concept back down in the actual world in which we live–this concrete world.  A thing is abstract, in the philosophical sense, when it doesn't exist in the world of time and space. It is concrete when it does.  I'm talking about concrete wealth, and that breaks all the unwritten rules about wealth which economists and politicians (etc.) prefer us to utilize.

It's one of the many ironies here that when I speak of concrete wealth, as defined above, I seem to be making something very tangible less tangible!  After all, Adam Smith's "wealth" seems to be as tangible as could be!  No one could doubt that potatoes and barns and houses are both tangible  and of utility (which two components is the essence of Smith's concept of wealth).  But there is a method, and reason, for my madness!  As a careful observer and student of human ecology, ecological philosophy and ecological design over many decades, when I brought (and bring) my conceptual tool kit to things happening in our real, concrete, tangible world I keep seeing the same damn thing wherever I look!  One begins to notice a freaking pattern after a while. And the pattern is this: We modern, contemporary people, caught as we are in the fact and ideology of hyper-capitalism (a.k.a., hyperindustrialism)  have been plundering wealth as well-being like there's no tomorrow.   More often than not, we are reducing the well-being of living systems — personal/individual (our own bodies),
ecosystems (ecological, environmental), social (social health/well-being), emotional, aesthetic, spiritual…. Anything we are apt to call good or valuable is at risk or is being severely eroded in the name of "wealth production" — and it's about time for us to open our eyes and see what the hell is really going on here in the name of creating wealth!

We went so far astray because we have cultural blinders on. It worked out relatively okay for a while to use Smith's version of "wealth" as a guide, but now the consequences are much too severe to be ignored.  Let's stop ignoring it then!   I'm attacking the heart of the matter here. I want to pull those blinders off and show the naked world as it is. After all, we cannot honestly address a problem we cannot comprehend.

When I talk about "the naked world, just as it really is" I am talking not about objects, usually — which are real but only in a secondary sort of way.  I'm asking you to see everything as processes and flows, movement and relation.  Processes and relations.  This is my ontological frame of reference.  For me, processes and relations are primary, central.  Objects are real on in that they are fundamentally a matter of processes and relations.  This is why when I speak  of "the concrete" in relation to "the abstract" I sound a bit mad.   When I look at a thing, I see a flow.  Flows reveal a crucial aspect of relations.  All things are processes and relations.  (Smith, being an Early Modern, would not know what I mean.)

Also, I take disciplinary boundaries in knowledge fields as, at best, a heuristic device.  All useful knowledge, as I see it, is inter- or trans-disciplinary.  The field of knowledge is one.   Nothing so befuddles us as the perverse concept that we should stick to a discipline (subject area, e.g., economics, philosophy, psychology, anthropology, physics).

 

From Eddie

All good things come from Mother Earth, and we treat her rather abysmally. I personally doubt that we humans can collectively get over the extraction economy paradigm. You have to see the big picture, and you have to be interested in something besides how much money you can get from selling scarce resources. You have to look out for the welfare of future generations.

For the most part, the people who do recognize the problem are not the people making decisions on what gets done.

And it's very, very late in the game.

It's the bottom of the ninth, and the bases are loaded with fat cat billionaires.

 

From JRM

Oh, gawd, thank you!  This is precisely why I like dialogue, conversation…. If we stay with it we can, as RE puts it, "drill down".

I want to really drill down on this quote from you, Eddie. 

I've barely begun to give clear shape and specificity to the world-shaking insight which occurred to me when I learned the etymology of the word "wealth," which links wealth to well-being.  My whole view of the world began to dramatically re-orient, because I finally had the key which allowed me to fully see, understand…, comprehend what I'd be learning about since I was a kid. It was the Super Decoder ring that resulted in my own personal paradigm shift.  And there's no better way to give clear shape and specificity to a very complex insight than to write about it.  But I can't write about it meaningfully without a dialogue! It's too lonely an endeavor for me, sitting all day at a desk, thinking and writing all alone.  The writer/philosopher's life is too lonely for a gregarious guy like me.  And, besides, I need to test what I'm thinking about.  I don't want to go down blind alleys and get lost.  You fellas are helping me keep my path lit.  (We have some extraordinary people gathered here!  I feel very blessed by that.)

Anyway, a great place to Drill Down is around the concept of wealth as "stored value".  I love that! It's a very deceptively simple concept, because both terms, unbeknownst to most people, are wildly vague and ambiguous.  I consider this ambiguity to our advantage, here.

The term "value" is ambiguous and vague because when the word sits there all alone it's not qualified or characterized, as it would be if it had the modifier "utility (utilitarian?) value" — though even that is rather vague!  What we see here is that the word "value" has a great deal more dependency on particular context to have any meaning at all.   That said, I'm fully aware that in today's market economy a thing has "value" only in exchange, and the currency of that value is generally money (even gold is purchased with money).

So I've begun to examine the term "value" in "stored value".  Now let's look at "stored".  This term too is wildly context dependent to have much meaning.  As we all know, some "wealth" is "stored" exclusively in digits in a computer somewhere (in the cloud?)…. When that "wealth" suddenly evaporates, it does not evaporate in a literal sense, like water (which can be stored wealth).  Then there is the storage of vegetables, another kind of wealth.  Yes, we can see the vegetables in the pantry jars as wealth, but do we see the soil, air, water … the flows in those jars?  If we do not, we will miss the storage of seeds, the stored up knowledge and skills of the gardener… and we may miss the fact that those veggies were grown by someone who COULD have used those same hours (a form of wealth, hours) to earn thousands and thousands more dollars at another skilled activity.  Industrially grown vegetables are "dirt" cheap. But they do not store the knowledge and skills of growing them, the joy and freedom of doing so… They do not store the seeds of heirloom species. They do not store the social relations value which can only emerge in a community garden. They do not store food security.  They do not store the comfort of knowing that one has food security in a fragile food system (fragile mostly because 
of the fragility of the financial / economic system.)  They do not store the regenerative practice of caring for the soils nutrient value.  And I hope I'm making my point here, because, quite honestly, I could list the things not stored in industrial food until I am blue in the face.

And that's just one tiny fragment of all I have to say about storing wealth.  I'm all for storing wealth!  In fact, that's what this whole topic is about! But we cannot meaningfully discuss the storage of wealth without pointing out the immense gaping hole in our collective storage facility, out of which wealth is gushing much like the oil and gas gushing up out of the ruptured pipe in the Gulf of Mexico following the Deepwater Horizon calamity.

But I intend to go several steps beyond familiar ecological economics critiques in my exploration of the gushing waste and destruction of wealth which our society's wealth destroying death culture system is producing.  For when I turn my gaze away from the ecological and environmental ruin, I see also social ruin, emotional ruin, spiritual ruin spewing up out of that rupture. The very same rupture!  I want to stop this madness! Now.

But first we must understand why it is spewing up waste in the pursuit of "wealth".  And we can't do this without taking all forms of wealth into account, and seeing how they are all linked together. 

To do THAT is to usher in a paradigm shift not only in economics, but also in the very worldview which "runs" our world.

 

From Eddie

I see also social ruin, emotional ruin, spiritual ruin spewing up out of that rupture. The very same rupture!  I want to stop this madness! Now.

That would be nice. I do agree with this assessment.

 

From JRM

I don't think I see the point of this. First, I can't see treating 'health' and 'wealth' synonymously. Suppose you were in solitary confinement, fed three bland but nutritious meals a day, and had an hour a day in the exercise yard, you would be healthy, but would you say you were wealthy?

 


Eddie and I have begun to discuss the notion of the storage of wealth, and of wealth as something stored.

Here, Ka, you are in some sense — perhaps unwittingly — addressing this very same topic.  I would suppose that it is for the sake of simplicity that your question was directed at an individual person's wealth.  By starting with simple things, oftentimes, we can acquire a concept which we may later apply to more complex things.  So starting with an individuals wealth seems to make sense.  But this is a problem for us here because the dominant paradigm, which I seek to illustrate an alternative to, is focused on the accumulation (or storage) of wealth (as defined by A. Smith) in units smaller than the whole system.  Focusing on an individual perpetuates this atomistic approch.  Specifically, the focus on the isolated individual, as in your case illustration, seems very likely to be requesting of us to examine wealth in social atomism terms.  Social atomism assigns the individual as the basic unit of analysis for all implications of social life. It's a form of reductionism as applied to social systems.  Our prisoner is himself being "stored" (bound, contained) — but away from various kinds of wealth which are outside of his storage container. 

I'm attempting here to further develop the notion of storage, which I see as containment.  People can be "contained" in relation to — with — wealth, or  away from wealth.  Examples of being contained away from wealth are in prison, outside of a "wealthy" gated community, … or anywhere where food is stored with limited access (e.g., grocery store for those without job/money,  family pantry).  Containers have boundaries.  Boundary is our fundamental concept here.

For you to understand what I'm getting at about the proposed alternative paradigm of wealth, we have got to look at it without a social atomism filter on our goggles. If social atomism assigns the individual as the basic unit of analysis for all implications of social life, what would be the characteristic of it's "opposite" … out on the other end of a spectrum?  I will propose the term "social holism" as the contrast term.

I did not find a good, succinct definition and explanation of social holism on the web right away, so I settled upon offering this explanation of holism versus reductionism insteadhttps://www.youtube.com/watch?v=h_kbt7h1YRw  I only watched a few minutes in, so i don't know if it eventually gets into social holism, per se.  But if you grasp the holism / reductionism distinction you should have the basic idea.

The economic paradigm proposal I'm proposing takes a holistic perspective on all things: wealth, health, value, society, individual people — everything — even money.  I have no interest in atomism of any kind other than for the purpose of contextualizing the "atoms" in a holist perspective.

I do not believe in atomistic wealth at all. Nor do I see true wealth as fully containable — because wealth, like all things in the real world, are process, flows and relations.  Even the five gallon bucket of dried pinto beans, to be "wealth" must eventually become unsealed, cooked and served.  And the use of gold for exchange implies and constitutes a flow and a relation.  It is not fully contained.  But neither is a cell, nor an individual — in biological terms.  In the cell, health and function depend upon a semi-permeable membrane.  The same is true of whole organisms, in some sense. And of whole communities…. Even Earth is not a fully closed system.  It requires its relationship to the sun, for example, as a whole living system.

Flow. Process. Relation.               Not static, rigid, fully internalized objects.

 

From RE

When you talk about wealth, you have to first consider the hierarchy of needs.

Before anything else as a Homo Sap, you need Food, Shelter, Water, Breathable Air and Clothing.  These are all material things.  The first 4 are absolutely essential, the last could be optional in a climate warm enough year round.  However, even in quite warm climates with primitive people they don't usually go around buck naked.

In Industrial society, the first 2 always cost money.  Water has in the past been free, but now Water bills if not paid directly are paid with taxation.  Air is still generally free, but in quite a few places is now not fit to breath.  Clothing always costs money.

Now, here in the FSoA, before you can even start to think about Wealth enough to afford Health Care, you have to have enough to cover all those basics, plus a few more now necessary like transportation and communication.  The problem here is that for half the population, they only have enough to cover the basics.  If you don't have enough for food or shelter, you're not going to be very healthy.

Now, once above the median income, you start to have enough money for some Health Care, but depending on what your health issues are, it can get quite expensive to try to stay healthy.  Insurance itself is quite expensive, so you're now moving up the ladder of costs you have to pay out each month before you can even begin to think about saving some material wealth for security, whether that material wealth is measured in canned foods, dollars or gold coins.

Only after you have covered all these material things and health coverage and some savings can you begin to start to look at other sorts of wealth, like spiritual wealth or environmental wealth.  People in India for example are too busy just trying to get enough food to eat each day to be able to do much in the way of enhancing their spiritual wealth or the environmental wealth.

The problem here is that all the essentials of living have been thoroughly monetized.  So the general definition of wealth is how much money you make or have piled up in savings.  Until we can run a society that is free of money, this will continue to be the general definition of wealth.  A lot of money buys you good healthy food to eat, you can afford to shop organic at whole foods.  A lot of money buys you health, you can afford 7 heart transplants like David Rockefeller.  A lot of money buys you a relatively clean local environment to live in, you can build a beautiful McMansion in the Rocky Mountains overlooking a river full of fish with clean air to breathe.  The only form of wealth money does not buy directly would be Spiritual Wealth, but even here having all the other things well covered gives you time to contemplate existential questions.  Not to say you can't do this even if you are materially poor, since it doesn't cost any money to dwell on the nature of existence, but usually if you are worried about where your next meal will come from that is more at the forefront of your thinking.

So anyhow, when I use the word "Wealth", because of the nature of a society that is run on money, I'm talking about monetary wealth, not all the other types of wealth which you might define.  I think most people use this definition when talking about wealth.  If you want to avoid confusion, it would probably be a good idea to create a new term for the other areas.

 

From JRM

I think most people use this definition when talking about wealth.  If you want to avoid confusion, it would probably be a good idea to create a new term for the other areas.

 

 

Quote

"Edward S. Herman, political economist and media analyst, has highlighted some examples of doublespeak and doublethink in modern society. Herman describes in his book, Beyond Hypocrisy the principal characteristics of doublespeak:

What is really important in the world of doublespeak is the ability to lie, whether knowingly or unconsciously, and to get away with it; and the ability to use lies and choose and shape facts selectively, blocking out those that don’t fit an agenda or program."

https://en.wikipedia.org/wiki/Doublespeak#Origins_and_concepts

 


I'm concerning myself here mainly with how the word "wealth" is used in doublespeak, and especially as it is used "unconsciously".  If we do not understand what real wealth is, we are subject to other people's use (and abuse) of the word.

It is good that we keep in mind that "wealth," as the term is now popularly used, is "generated" through the clear-cutting of intact, old growth forests — which are "replanted" as tiny monocrop saplings … and through the dropping of bombs on towns and cities full of innocent non-combatants….  It is "produced" by damming wild rivers, fracking the hell out of oil and gas fields, and blasting the hell out of mountains under which coal can be surface mined.  It is created through the destruction and replacement of locally owned businesses with corporate giants….  And if a child gets asthma from the burning of coal, that creates "wealth" in the hands of those doctors who "treat" the asthma.  (I put "treat" in scare quotes because if a doctor wants to "treat" coal-caused asthma she will seek to shut down the coal burning plants. That will be the principal treatment method.)

Undoubtedly, the world's largest store of "wealth" is in the form of fossil fuels, which, if burned, would surely result in the mass extinction of most currently existing Earth species.

That's doublespeak, and doublethink.  It is, in other words, false.

I will not allow the word wealth to be misapplied for the sake of convenience.

All true wealth must be produced via either sustainable (thus good) or regenerative (better) practices.  Anything else is doublespeak and doublethink. 
And that's just the start, because man cannot live on bread alone.  We have more than merely material needs, such as our need for belonging, connection and community.  It is not enough that we be merely sustainable or regenerative in ecological terms. We must also become sustainable and regenerative in social terms. Etc.

 

From RE

I will not allow the word wealth to be misapplied for the sake of convenience.

 


Your problem here is that you can't communicate with people if your definition of wealth is radically different from theirs.  You have to use commonly accepted definitions of a word to be understood.  For Wealth, according to Merriam-Webster, the definitions are:

Definition of wealth

    1
    obsolete :  weal, welfare

    2
    :  abundance of valuable material possessions or resources

    3
    :  abundant supply :  profusion

    4
    a :  all property that has a money value or an exchangeable value b :  all material objects that have economic utility; especially :  the stock of useful goods having economic value in existence at any one time <national wealth>

It's not a lot different than your beef with the fact the righties have the word "Libertarian" sewn up.  You want to try and "take back" this word from them.  Now you want to redefine what the commonly held notions are of "Wealth", to take that word back.

I don't think you will be too successful with getting back either word.  Define a new one, and you might communicate the ideas better.  Using a word most people use differently than you do just spawns confusion.

 

From JRM

"Your problem here …."

 

No, actually. It's not my problem alone. It's also your problem, and the problem of anyone and everyone subject to the misappropriation of words. 

Curiously enough, your post began with

"1
    obsolete :  weal, welfare" (a.k.a., well-being)

Along come some people who decide to hijack the word wealth removing its original meaning from back when it was "weal" (well-being).  Adam Smith writes a voluminous text with a voluminous title, "An Inquiry into the Nature and Causes of the Wealth of Nations" in which he redefines wealth as so much personal, familial or national property-stuff.  He gets folks to buy into his definition, and pretty soon dictionaries are calling the earlier definition "obsolete".  If in twenty, fifty or a hundred years Smith's version is decided to be "obsolete," as well it may, it will begin to look like a tennis match, the ball flying back and forth across the net.  So who's right, then, over the long haul?

I say I am.  So I'll keep the original meaning of the word, thanks.

My argument is much better than Smith's.  He didn't understand complex systems half as well as I do.  I'm standing on the shoulders of giants.

https://youtu.be/kleqF3X1_l4

 

From RE

I suggest using the word Weal then to get back to the original meaning you wish to communicate.


Weal seems to me to be precisely what you are talking about, and it's a word already in the dictionary!  So you don't even have to define a new word here!  You've already GOT one to use!

I could write a whole blog on this with no problem whatsoever.  I'll start a paragraph…

Here on the Diner, we are concerned not so much with the "Wealth" of society as the "Weal" of society.  It's not a word commonly used anymore, but it should be.  The word and concept of Wealth that developed from Weal is destructive to our society and our planet…

 

From Palloy

In English as spoken by the English, "weal" is not obsolete, and is almost always qualified as "the common weal", and hence British Commonwealth, etc., meaning the welfare of the nation/Empire.  I suppose there could also be "the personal weal" and "the family weal".  Since I think you want to compare/contrast "personal weal" with "personal wealth", it would definitely make sense to use another phrase. 

The family weal has implications of giving value to family relationships, which can be paramount in peoples' lives – if you have a good, loving relationship betweens spouses, and between them and their children, poverty of wealth can be endured/overcome.  "When I were a lad, …"

https://www.youtube.com/embed/Xe1a1wHxTyo

From Lucid Dreams

Currently I'm reading one of JMG's latest books Dark Age America.  He talks about wealth and money, and he points out that money is not the norm in terms of our species time on Earth.  However, the arrangement without money, from a western POV, seems to be feudalism. 

Another idea that seems to work against money, I don't know too much about, and that is anarchy as a political movement.  I've never read any books on the subject, but I suppose I will soon because I have been growing interested in it lately.  Yet, it seems to me like just another idealistic movement that won't work simply because of it's composition of idealism.  I've learned that too much idealism just equals delusions.  There is maybe room for a smattering of idealism in daily life, but beyond that and you are setting yourself up for agitation, friction, and needless strife.  I'm well qualified as I have spent my entire life wallowing in idealism.  Even now, having identified this problem of mine, I still find it hard to ascend up out of the pit of idealism.  Idealism works in the realm of spirituality, and that is it's proper place it seems to me. 

JRM, this idea of yours is one of idealism.  On the one hand we have the empires practice of Newspeek to deal with.  They take over words all of the time and change their meanings, and they typically change them to their opposite meaning…which is what Newspeek is.  Not just words, but ideas and institutions."  "The Ministry of Health" being the place one would go to get tortured.  "Freedom is Slavery" and the like.  On the other hand, the idea of wealth is central to a corporeal existence, and it's defined as stuff and how much stuff you have, and what that stuff is. 

Yet there is the usage of wealth such as "he has a wealth of knowledge."  That means he has a lot of knowledge and knowledge is not a physical good.  It just means there is a lot of knowledge in his possession.  There is also spiritual wealth.  There are different types of wealth.  The common wealth, however, is money and and the things that money can buy. 

In this case, you cannot claim Newspeek because everybody uses the term "wealth" to mean material abundance.  The definition of the word has not been changed, you, JRM, are trying to change it, and so I agree with RE that you should just use another word.  This is similar to the debate we had about the word "cult."  Here on the Diner I believe the dictionary is judge and jury in these cases.  We rely solely on words to communicate via this forum.  The dictionary's purpose is to define words, and so we must acquiesce to those definitions.  The meaning and usage of words is a very nuanced thing, but in this case it is even less so than with the word "cult." 

There is a world of difference between the ideas of "wealth" and "value."   "Quality" is another word that comes to mind. 

You can't force spiritual ideas onto people.  It just doesn't work that way.  That's why the great spiritual practitioners simply point in the direction that leads to enlightenment.  You have to go their yourself or it doesn't work.  I'm of the opinion that real wealth comes from a spiritual place because in the end we all die and we can't take our "wealth" with us.  Doesn't stop us from trying.  The real wealth we are here for is an intangible wealth that is made of experience and knowledge.  I believe when we die we can take that with us, if only to help navigate our way back to source. 

 

From JRM

The dictionary's purpose is to define words, and so we must acquiesce to those definitions. 

 


Good, comprehensive dictionaries include the usage of the word wealth as I'm using it here.  And words are always changing.  They change when people use them differently.  And there's no reason why a person cannot call for, suggest, a change in usage. 

My purpose here, in part, has been to reveal how the popular use of the word wealth in economics terms is flawed and should be altered.

If what I'm saying here is "idealism," that's fine.  I have often been called an idealist. It's not a word I prefer to use to describe myself, actually.  I see myself as an intelligent person who despises falsity and ignorance being employed in "official" places as part of a system of deception, foolishness, destruction and oppression.   I will not stop sharing my thoughts about such things because it's supposed to be "idealism" which is supposed somehow to be ridiculous, silly or irrelevant.  Of course, if no one here is interested in some part of what I have to say, they can just ignore that part — this thread, for example.  It's not everyone's cup of tea, obviously.  But it matters to me.

 

From Lucid Dreams

The dictionary's purpose is to define words, and so we must acquiesce to those definitions. 

 

 

 

 

Good, comprehensive dictionaries include the usage of the word wealth as I'm using it here.  And words are always changing.  They change when people use them differently.  And there's no reason why a person cannot call for, suggest, a change in usage. 

My purpose here, in part, has been to reveal how the popular use of the word wealth in economics terms is flawed and should be altered.

If what I'm saying here is "idealism," that's fine.  I have often been called an idealist. It's not a word I prefer to use to describe myself, actually.  I see myself as an intelligent person who despises falsity and ignorance being employed in "official" places as part of a system of deception, foolishness, destruction and oppression.   I will not stop sharing my thoughts about such things because it's supposed to be "idealism" which is supposed somehow to be ridiculous, silly or irrelevant.  Of course, if no one here is interested in some part of what I have to say, they can just ignore that part — this thread, for example.  It's not everyone's cup of tea, obviously.  But it matters to me.

 


From one idealist to another, I understand your frustration. 

It's not that your ideas are ridiculous, silly, or irrelevant, it's just that they are ideal.  Economics is a "science" that can never be ideal.  It's made of statistics (lies), propaganda, lies, theories, and finally the reality that results from the combination of all of those things.  The truth is that economics is a lie.  It's just the science by which the men at the top stay at the top.  They are at the top because they want all of the wealth for themselves and they are vile enough to do whatever it takes to ensure it stays that way.  They are perfectly happy with their wealth, and they want the rest of the world to see things exactly the same way that they do.  They want us in competition with one another for wealth. 

No matter how you slice it, corporeal wealth is made up of materials.  Wealth is just having a lot of something desirable. 

I don't know…kinda feels like I'm pissin' in the wind here. 

 

From RE


You're not pissin' in the wind, because the word "wealth" is used commonly to describe the material world, generally speaking.  JRM wants to REDEFINE the word to encompass more than just material things.  As long as $MONEY$ rules the world, this is not going to happen.

Money will rule the world until the Monetary System Collapses, which it will eventually.  They always do collapse.  Neal Stephenson called the monetary system the "System of the World" in his trilogy The Baroque Cycle.  I highly recommend it for a read.

 

For still more on Wealth, including all the Napalm, join us inside the Diner!

2017: The Year When the World Economy Starts Coming Apart

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Published on the Our Finite World on January 10, 2017

Dicuss this article at the Economics Table inside the Diner

Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the “coming apart” process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.

[1] Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.  

Figure 1

 

 

 

 

Figure 1

The history of previous civilizations rising and eventually collapsing is well documented.(See, for example, Secular Cycles.)

To start a new cycle, a group of people would find a new way of doing things that allowed more food and energy production (for instance, they might add irrigation, or cut down trees for more land for agriculture). For a while, the economy would expand, but eventually a mismatch would arise between resources and population. Either resources would fall too low (perhaps because of erosion or salt deposits in the soil), or population would rise too high relative to resources, or both.

Even as resources per capita began falling, economies would continue to have overhead expenses, such as the need to pay high-level officials and to fund armies. These overhead costs could not easily be reduced, and might, in fact, grow as the government attempted to work around problems. Collapse occurred because, as resources per capita fell (for example, farms shrank in size), the earnings of workers tended to fall. At the same time, the need for taxes to cover what I am calling overhead expenses tended to grow. Tax rates became too high for workers to earn an adequate living, net of taxes. In some cases, workers succumbed to epidemics because of poor diets. Or governments would collapse, from lack of adequate tax revenue to support them.

Our current economy seems to be following a similar pattern. We first used fossil fuels to allow the population to expand, starting about 1800. Things went fairly well until the 1970s, when oil prices started to spike. Several workarounds (globalization, lower interest rates, and more use of debt) allowed the economy to continue to grow. The period since 1970 might be considered a period of “stagflation.” Now the world economy is growing especially slowly. At the same time, we find ourselves with “overhead” that continues to grow (for example, payments to retirees, and repayment of debt with interest). The pattern of past civilizations suggests that our civilization could also collapse.

Historically, economies have taken many years to collapse; I show a range of 20 to 50 years in Figure 1. We really don’t know if collapse would take that long now. Today, we are dependent on an international financial system, an international trade system, electricity, and the availability of oil to make our vehicles operate. It would seem as if this time collapse could come much more quickly.

With the world economy this close to collapse, some individual countries are even closer to collapse. This is why we can expect to see sharp downturns in the fortunes of some countries. If contagion is not too much of a problem, other countries may continue to do fairly well, even as individual small countries fail.

[2] Figures to be released in 2017 and future years are likely to show that the peak in world coal consumption occurred in 2014. This is important, because it means that countries that depend heavily on coal, such as China and India, can expect to see much slower economic growth, and more financial difficulties.

While reports of international coal production for 2016 are not yet available, news articles and individual country data strongly suggest that world coal production is past its peak. The IEA also reports a substantial drop in coal production for 2016.

Figure 2. World coal consumption. Information through 2015 based on BP 2016 Statistical Review of World Energy data. Estimates for China, US, and India are based on partial year data and news reports. 2016 amount for "other" estimated based on recent trends.

 

 

 

 

Figure 2. World coal consumption. Information through 2015 based on BP 2016 Statistical Review of World Energy data. Estimates for China, US, and India are based on partial year data and news reports. 2016 amount for “other” estimated based on recent trends.

The reason why coal production is dropping is because of low prices, low profitability for producers, and gluts indicating oversupply. Also, comparisons of coal prices with natural gas prices are inducing switching from coal to natural gas. The problem, as we will see later, is that natural gas prices are also artificially low, compared to the cost of production, So the switch is being made to a different type of fossil fuel, also with an unsustainably low price.

Prices for coal in China have recently risen again, thanks to the closing of a large number of unprofitable coal mines, and a mandatory reduction in hours for other coal mines. Even though prices have risen, production may not rise to match the new prices. One article reports:

. . . coal companies are reportedly reluctant to increase output as a majority of the country’s mines are still losing money and it will take time to recoup losses incurred in recent years.

Also, a person can imagine that it might be difficult to obtain financing, if coal prices have only “sort of” recovered.

I wrote last year about the possibility that coal production was peaking. This is one chart I showed, with data through 2015. Coal is the second most utilized fuel in the world. If its production begins declining, it will be difficult to offset the loss of its use with increased use of other types of fuels.

Figure 3. World per capita energy consumption by fuel, based on BP 2016 SRWE.

 

 

 

 

Figure 3. World per capita energy consumption by fuel, based on BP 2016 SRWE.

[3] If we assume that coal supplies will continue to shrink, and other production will grow moderately, we can expect total energy consumption to be approximately flat in 2017. 

Figure 5. World energy consumption forecast, based on BP Statistical Review of World Energy data through 2015, and author's estimates for 2016 and 2017.

 

 

 

 

Figure 4. World energy consumption forecast, based on BP Statistical Review of World Energy data through 2015, and author’s estimates for 2016 and 2017.

In a way, this is an optimistic assessment, because we know that efforts are underway to reduce oil production, in order to prop up prices. We are, in effect, assuming either that (a) oil prices won’t really rise, so that oil consumption will grow at a rate similar to that in the recent past or (b) while oil prices will rise significantly to help producers, consumers won’t cut back on their consumption in response to the higher prices.

[4] Because world population is rising, the forecast in Figure 4 suggests that per capita energy consumption is likely to shrink. Shrinking energy consumption per capita puts the world (or individual countries in the world) at the risk of recession.

Figure 5 shows indicated per capita energy consumption, based on Figure 4. It is clear that energy consumption per capita has already started shrinking, and is expected to shrink further. The last time that happened was in the Great Recession of 2007-2009.

Figure 5. World energy consumption per capita based on energy consumption estimates in Figure 4 and UN 2015 Medium Population Growth Forecast.

 

 

 

 

Figure 5. World energy consumption per capita based on energy consumption estimates in Figure 4 and UN 2015 Medium Population Growth Forecast.

There tends to be a strong correlation between world economic growth and world energy consumption, because energy is required to transform materials into new forms, and to transport goods from one place to another.

In the recent past, the growth in GDP has tended to be a little higher than the growth in the use of energy products. One reason why GDP growth has been a percentage point or two higher than energy consumption growth is because, as economies become richer, citizens can afford to add more services to the mix of goods and services that they purchase (fancier hair cuts and more piano lessons, for example). Production of services tends to use proportionately less energy than creating goods does; as a result, a shift toward a heavier mix of services tends to lead to GDP growth rates that are somewhat higher than the growth in energy consumption.

A second reason why GDP growth has tended to be a little higher than growth in energy consumption is because devices (such as cars, trucks, air conditioners, furnaces, factory machinery) are becoming more efficient. Growth in efficiency occurs if consumers replace old inefficient devices with new more efficient devices. If consumers become less wealthy, they are likely to replace devices less frequently, leading to slower growth in efficiency. Also, as we will discuss later in this  post, recently there has been a tendency for fossil fuel prices to remain artificially low. With low prices, there is little financial incentive to replace an old inefficient device with a new, more efficient device. As a result, new purchases may be bigger, offsetting the benefit of efficiency gains (purchasing an SUV to replace a car, for example).

Thus, we cannot expect that the past pattern of GDP growing a little faster than energy consumption will continue. In fact, it is even possible that the leveraging effect will start working the “wrong” way, as low fossil fuel prices induce more fuel use, not less. Perhaps the safest assumption we can make is that GDP growth and energy consumption growth will be equal. In other words, if world energy consumption growth is 0% (as in Figure 4), world GDP growth will also be 0%. This is not something that world leaders would like at all.

The situation we are encountering today seems to be very similar to the falling resources per capita problem that seemed to push early economies toward collapse in [1]. Figure 5 above suggests that, on average, the paychecks of workers in 2017 will tend to purchase fewer goods and services than they did in 2016 and 2015. If governments need higher taxes to fund rising retiree costs and rising subsidies for “renewables,” the loss in the after-tax purchasing power of workers will be even greater than Figure 5 suggests.

[5] Because many countries are in this precarious position of falling resources per capita, we should expect to see a rise in protectionism, and the addition of new tariffs.

Clearly, governments do not want the problem of falling wages (or rather, falling goods that wages can buy) impacting their countries. So the new game becomes, “Push the problem elsewhere.”

In economic language, the world economy is becoming a “Zero-sum” game. Any gain in the production of goods and services by one country is a loss to another country. Thus, it is in each country’s interest to look out for itself. This is a major change from the shift toward globalization we have experienced in recent years. China, as a major exporter of goods, can expect to be especially affected by this changing view.

[6] China can no longer be expected to pull the world economy forward.

China’s economic growth rate is likely to be lower, for many reasons. One reason is the financial problems of coal mines, and the tendency of coal production to continue to shrink, once it starts shrinking. This happens for many reasons, one of them being the difficulty in obtaining loans for expansion, when prices still seem to be somewhat low, and the outlook for the further increases does not appear to be very good.

Another reason why China’s economic growth rate can be expected to fall is the current overbuilt situation with respect to apartment buildings, shopping malls, factories, and coal mines. As a result, there seems to be little need for new buildings and operations of these types. Another reason for slower economic growth is the growing protectionist stance of trade partners. A fourth reason is the fact that many potential buyers of the goods that China is producing are not doing very well economically (with the US being a major exception). These buyers cannot afford to increase their purchases of imports from China.

With these growing headwinds, it is quite possible that China’s total energy consumption in 2017 will shrink. If this happens, there will be downward pressure on world fossil fuel prices. Oil prices may fall, despite production cuts by OPEC and other countries.

China’s slowing economic growth is likely to make its debt problem harder to solve. We should not be too surprised if debt defaults become a more significant problem, or if the yuan falls relative to other currencies.

India, with its recent recall of high denomination currency, as well as its problems with low coal demand, is not likely to be a great deal of help aiding the world economy to grow, either. India is also a much smaller economy than China.

[7] While Item [2] talked about peak coal, there is a very significant chance that we will be hitting peak oil and peak natural gas in 2017 or 2018, as well.  

If we look at historical prices, we see that the prices of oil, coal and natural gas tend to rise and fall together.

Figure 6. Prices of oil, call and natural gas tend to rise and fall together. Prices based on 2016 Statistical Review of World Energy data.

 

 

 

 

Figure 6. Prices of oil, coal and natural gas tend to rise and fall together. Prices based on 2016 Statistical Review of World Energy data.

The reason that fossil fuel prices tend to rise and fall together is because these prices are tied to “demand” for goods and services in general, such as for new homes, cars, and factories. If wages are rising rapidly, and debt is rising rapidly, it becomes easier for consumers to buy goods such as homes and cars. When this happens, there is more “demand” for the commodities used to make and operate homes and cars. Prices for commodities of many types, including fossil fuels, tend to rise, to enable more production of these items.

Of course, the reverse happens as well. If workers become poorer, or debt levels shrink, it becomes harder to buy homes and cars. In this case, commodity prices, including fossil fuel prices, tend to fall.  Thus, the problem we saw above in [2] for coal would be likely to happen for oil and natural gas, as well, because the prices of all of the fossil fuels tend to move together. In fact, we know that current oil prices are too low for oil producers. This is the reason why OPEC and other oil producers have cut back on production. Thus, the problem with overproduction for oil seems to be similar to the overproduction problem for coal, just a bit delayed in timing.

In fact, we also know that US natural gas prices have been very low for several years, suggesting another similar problem. The United States is the single largest producer of natural gas in the world. Its natural gas production hit a peak in mid 2015, and production has since begun to decline. The decline comes as a response to chronically low prices, which make it unprofitable to extract natural gas. This response sounds similar to China’s attempted solution to low coal prices.

Figure 7. US Natural Gas production based on EIA data.

 

 

 

 

Figure 7. US Natural Gas production based on EIA data.

The problem is fundamentally the fact that consumers cannot afford goods made using fossil fuels of any type, if prices actually rise to the level producers need, which tends to be at least five times the 1999 price level. (Note peak price levels compared to 1999 level on Figure 6.) Wages have not risen by a factor of five since 1999, so paying the prices that fossil fuel producers need for profitability and growing production is out of the question. No amount of added debt can hide this problem. (While this reference is to 1999 prices, the issue really goes back much farther, to prices before the price spikes of the 1970s.)

US natural gas producers also have plans to export natural gas to Europe and elsewhere, as liquefied natural gas (LNG). The hope, of course, is that a large amount of exports will raise US natural gas prices. Also, the hope is that Europeans will be able to afford the high-priced natural gas shipped to them. Unless someone can raise the wages of both Europeans and Americans, I would not count on LNG prices actually rising to the level needed for profitability, and staying at such a high level. Instead, they are likely to bounce up, and quickly drop back again.

[8] Unless oil prices rise very substantially, oil exporters will find themselves exhausting their financial reserves in a very short time (perhaps a year or two). Unfortunately, oil importers cannot withstand higher prices, without going into recession. 

We have a no win situation, no matter what happens. This is true with all fossil fuels, but especially with oil, because of its high cost and thus necessarily high price. If oil prices stay at the same level or go down, oil exporters cannot get enough tax revenue, and oil companies in general cannot obtain enough funds to finance the development of new wells and payment of dividends to shareholders. If oil prices do rise by a very large amount for very long, we are likely headed into another major recession, with many debt defaults.

[9] US interest rates are likely to rise in the next year or two, whether or not this result is intended by the Federal reserve.

This issue here is somewhat obscure. The issue has to do with whether the United States can find foreign buyers for its debt, often called US Treasuries, and the interest rates that the US needs to pay on this debt. If buyers are very plentiful, the interest rates paid by he US government can be quite low; if few buyers are available, interest rates must be higher.

Back when Saudi Arabia and other oil exporters were doing well financially, they often bought US Treasuries, as a way to retain the benefit of their new-found wealth, which they did not want to spend immediately. Similarly, when China was doing well as an exporter, it often bought US Treasuries, as a way retaining the wealth it gained from exports, but didn’t yet need for purchases.

When these countries bought US Treasuries, there were several beneficial results:

  • Interest rates on US Treasuries tended to stay artificially low, because there was a ready market for its debt.
  • The US could afford to import high-priced oil, because the additional debt needed to buy the oil could easily be sold (to Saudi Arabia and other oil producing nations, no less).
  • The US dollar tended to stay lower relative to other currencies, making oil more affordable to other countries than it otherwise might be.
  • Investment in countries outside the US was encouraged, because debt issued by these other countries tended to bear higher interest rates than US debt. Also, relatively low oil prices in these countries (because of the low level of the dollar) tended to make investment profitable in these countries.

The effect of these changes was somewhat similar to the US having its own special Quantitative Easing (QE) program, paid for by some of the counties with trade surpluses, instead of by its central bank. This QE substitute tended to encourage world economic growth, for the reasons mentioned above.

Once the fortunes of the countries that used to buy US Treasuries changes, the pattern of buying of US Treasuries tends to change to selling of US Treasuries. Even not purchasing the same quantity of US Treasuries as in the past becomes an adverse change, if the US has a need to keep issuing US Treasuries as in the past, or if it wants to keep rates low.

Unfortunately, losing this QE substitute tends to reverse the favorable effects noted above. One effect is that the dollar tends to ride higher relative to other currencies, making the US look richer, and other countries poorer. The “catch” is that as the other countries become poorer, it becomes harder for them to repay the debt that they took out earlier, which was denominated in US dollars.

Another problem, as this strange type of QE disappears, is that the interest rates that the US government needs to pay in order to issue new debt start rising. These higher rates tend to affect other rates as well, such as mortgage rates. These higher interest rates act as a drag on the economy, tending to push it toward recession.

Higher interest rates also tend to decrease the value of assets, such as homes, farms, outstanding bonds, and shares of stock. This occurs because fewer buyers can afford to buy these goods, with the new higher interest rates. As a result, stock prices can be expected to fall. Prices of homes and of commercial buildings can also be expected to fall. The value of bonds held by insurance companies and banks becomes lower, if they choose to sell these securities before maturity.

Of course, as interest rates fell after 1981, we received the benefit of falling interest rates, in the form of rising asset prices. No one ever stopped to think about how much of the gains in share prices and property values came from falling interest rates.

Figure 8. Ten year treasury interest rates, based on St. Louis Fed data.

 

 

 

 

Figure 8. Ten year treasury interest rates, based on St. Louis Fed data.

Now, as interest rates rise, we can expect asset prices of many types to start falling, because of lower affordability when monthly payments are based on higher interest rates. This situation presents another “drag” on the economy.

In Conclusion

The situation is indeed very concerning. Many things could set off a crisis:

  • Rising energy prices of any kind (hurting energy importers), or energy prices that don’t rise (leading to financial problems or collapse of exporters)
  • Rising interest rates.
  • Defaulting debt, indirectly the result of slow/negative economic growth and rising interest rates.
  • International organizations with less and less influence, or that fall apart completely.
  • Fast changes in relativities of currencies, leading to defaults on derivatives.
  • Collapsing banks, as debt defaults rise.
  • Falling asset prices (homes, farms, commercial buildings, stocks and bonds) as interest rates rise, leading to many debt defaults.

Things don’t look too bad right now, but the underlying problems are sufficiently severe that we seem to be headed for a crisis far worse than 2008. The timing is not clear. Things could start falling apart badly in 2017, or alternatively, major problems may be delayed until 2018 or 2019. I hope political leaders can find ways to keep problems away as long as possible, perhaps with more rounds of QE. Our fundamental problem is the fact that neither high nor low energy prices are now able to keep the world economy operating as we would like it to operate. Increased debt can’t seem to fix the problem either.

The laws of physics seem to be behind economic growth. From a physics point of view, our economy is a dissipative structure. Such structures form in “open systems.” In such systems, flows of energy allow structures to temporarily self-organize and grow. Other examples of dissipative structures include ecosystems, all plants and animals, stars, and hurricanes. All of these structures constantly “dissipate” energy. They have finite life spans, before they eventually collapse. Often, new dissipative systems form, to replace previous ones that have collapsed.

The one thing that gives me hope is the fact that there seems to be some type of a guiding supernatural force behind the whole system that allows so much growth. Some would say that this supernatural force is “only” the laws of physics (and biology and chemistry). To me, the fact that so many structures can self-organize and grow is miraculous, and perhaps evidence of a guiding force behind the whole universe.

I don’t know precisely what is next, but it seems quite possible that there is a longer-term plan for humans that we are not aware of. Some of the religions of the world may have insights on what this plan might be. It is even possible that there may be divine intervention of some type that allows a change in the path that we seem to be on today.

The First Law of Wealth

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Published on The Doomstead Diner on January 8, 2017

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The First Law of Thermodynamics:

Energy is neither created nor destroyed, only transformed from one form to another.

 

How is wealth created?  Is it created at all?  An important idea in capitalist epistemology is that the capitalist system creates wealth, and that those who become wealthy within the system do so by creating that wealth.  Do they really?

The issue here is the idea that some people are "Wealth Creators".  Bill Gates, Elon Musk, Mark Zuckerberg, they all got incredibly wealthy, right?  So they must have "created" wealth, right?  This concept depends a whole lot on whether you view the idea of "wealth" from the POV of the Individual or from the POV of the System as a whole.  Which lens you use on this microscope on makes a HUGE difference on how you view the distribution of wealth in the society at large.

In order to better elucidate my POV, I am going to use 3 different examples of biznesses that supposedly  "create wealth".  I will look at my own last bizness of the many I have been involved with first, the Gymnastics Bizness.  Then I will look at the Dental Bizness, which is my friend Eddie's type of biz.  Then I will look at Tesla, Elon Musk's really BIG bizness, currently creating tons of wealth for Elon. lol.

The Gymnastics Bizness

Now, in the case of the Gym Biz, what the Gym Owner does is to insert himself in between well to do parents of kids who can afford a pretty high price tag of around $400/mo to be on the Team and coaches who know how to teach gymnastics.  Then there are lots of recreational gymnasts who come for 1 class a week for around $100/mo.  The typical gym has between 500-1000 gymmies running through it at any given time.  Because it is such a pricy sport to be putting your kid into and it is an optional thing to do (you don't absolutely NEED to do gymnastics like you need to have your teeth drilled when you have a toothache), the clientele has a pretty high average income.  Poor people do not send their kids to a gymnastics school.  So I put the average income for the Victims here at around $100K.

Now, if out of the 1000 Gymmies you have 200 on Team, that is $400 X 200 =$80K/mo income, x12 = $960K/year.  Your 800 other Rec gymmies are paying $100/mo for another $80K/mo, another $960K/year.  Total gross income here around $2M for a well organized gymnastics school.

On the outflow end of this conduit, the gym owner has the cost of his facility, equipment, salaries for coaches and the taxes & insurance he has to pay.  Facility costs can vary tremendously from old warehouses to custom buildings.  Equipment also varies from old beat up stuff bought used to brand spanking new stuff from Spieth-Anderson or AAI.  Coaches are almost universally paid low wages, often teenage ex-gymnasts are used as coaches at Min Wage before they even go to college.  You gotta be a really first class coach to get out of this Min Wage level and actually make a living at coaching the sport.  Even so, you never get into 6 figures as a coach unless you own the gym and run the conduit scheme.

Depending on the market they insert themselves into, Gym Owners can both become exceedingly rich or they can fail miserably, I've known both types over the last 30 years.  In neither case though did anyone "create" any wealth.  All they did was sieve wealth from one end, the victims, on the way to it's other end downhill in this process.  The gym owners who got rich were the ones who were best at soaking their victims, but they never created any wealth here.

Where did that wealth come from?  Well, many of the parents here are professional, doctors, dentists, lawyers and so forth.  They in turn were using their own conduit schemes to sieve wealth from their victims.  They have nice big paychecks incoming, so they can afford to pitch $400/mo after tax income to keep gymmie happy.  In fact it costs a good deal more than that when you include all the meet fees, team leos and warmups, private lessons etc.

The Dental Racket

So now let us look at one of the Victims of the Gym Biz, the Dentist with his prized young daughter with this quite rare talent of extreme coordination, strength and flexibility  and also pychological qualities of fearlessness and a drive to succeed, who sees Simone Biles/Mary Lou Retton/Shannon Miller/Shawn Johnson/Nadia Comanice on TV at the Olympics and wants to make her a STAR!  How is he "creating wealth" to do this?

In order to analyze the Dental Biz in detail,, I made a new Infographic to examine how the Dental Conduit Scheme works!

There are 3 basic Nodes here, the Dental Victims, The Dentist and the higher level extractors taking profit from the Dentist, which makes him a second level Victim.

I used some average numbers here, giving the low level Victims an average take home salary of $50K (which is probably a high estimate) and the Dentist an average take home salary of $250K (which is probably a low estimate).  I put the tax bill for the Dentist at a 50% rate, so it costs also $250K in taxes for the dentist every year.

For the wage slaves working for the dentist answering the phones, filling out the medical records and dealing with regulations and insurance companies, I figured 8 employees each making around $60K average, for around a total of $500K.  A dental hygenist might make a bit more, a records clerk less.

The dentist also has to buy a lot of expensive stuff to run his bizness, those gold fillings don't come cheap these days you know!  Nor does the hardware for implants or aything else.  You also gotta upgrade all the time and buy those expensive new Digital X-Ray Cameras, and you gotta fly all the time all over the country to Utah and other spots for getting your continuing education credits to maintain your license.  Then there are the Malpractice Insurance bills.  ::)

So, in order to maintain a $250K/year income here in this Conduit Scheme, the Dentist needs a Gross Income of around $2M before expenses, taxes, insurance, materials etc etc etc.  All of that money has to come from the Victims of the Dentist, each making an average of $50K.

So one way to look at this is how many Victims the Dentist needs to cover $2M in costs, and how much they have to pay him each year?  If the Dentist has 100 Victims, then each Victim would need to pay the Dentist $20,000 every year to keep this conduit scheme going.  Obviously, people making $50K a year cannot afford to pay $20K of that to a Dentist!  So really the Dentist needs more like 1000 Victims to be successful with the conduit scheme.  Now you are down to $2000 per victim, which is a bit more affordable at a $50K salary.  BUT, can a single dentist really drill the teeth of 1000 different people every year? 

I Googled the cost of Dental Fillings in TX.  :icon_sunny:
 

Quote

On average, a silver filling costs between $50 and $150 for one or two dental surfaces. However, the price increases to the $120 to $300 range, if three or more surfaces require a filling. The good news is that dental insurance covers a majority of the cost since a filling is considered a necessary procedure.Sep 20, 2013

Mansfield, TX Dentist Explains the Cost of Dental Fillings | Mansfield, TX
mansfielddental.com/2013/09/the-cost-of-dental-fillings/

 


Call the average cost $200.  To work up a $2000 bill, each patient of the 1000 needs 10 fillings every year.  So the dentist needs to drill 10,000 teeth each year, in 250 working days.  That's 40 a day, 5/hr in an 8 hour day.  So he has to drill & fill a tooth every 10 minutes, with a 10 minute break every hour to check for Doom on the Diner. lol.

Another way to look at it is how much money the Dental Biz needs to bring in each day to cover those $2M in bills.  If you figure the dentist works 5 days a week 50 weeks out of the year, he has 250 days of extracting money from the Victims.  That means that every last day of that 250 days, he has to bring in $8000 from the Victims.  If he is working 8 hour days, that works out to $1000/hr!

Now, since I do not have PRECISE numbers on this to work with, these are all just estimates.  BUT, even if you knocked my numbers down by half, you can see why it is not sustainable.  The folks who pay the bills at the BOTTOM cannot retire the debt and costs that the Dentist has!  They just don't make enough money to do that!  Somebody somewhere is working up a nice debt bill.  No wealth has been created, just an ever increasing pile of debt!

The only way this shit gets paid for these days is through ever increasing debt, and the asset in this example goes on the side of the Dentist and the liability goes on the side of the Victim. That is straight economics.  You cannot make something from nothing.

Clearly here, the Dentist has created no wealth, all he has done is insert himself into a position where he can serve as a conduit between people who have dental pain or issues and those free of dental pain or issues.  Unlike the Gymnastics Biz, it is not optional to visit or not visit a Dentist when you have a bad enough toothache. You have no options here within the borders of the FSoA, you MUST pay whatever the Dentist will charge to relieve your pain.  Unless you cross the border into Mexico, you will bankrupt yourself if you make an average salary trying to pay off the dentists for fixing your teeth.  I have visited at least a dozen different dentists over the course of my life trying to repair teeth here in the FSoA that other dentists in Brazil ruined in my childhood and adolescence.  Every root canal and every cap cost me $thousands$ on a very average salary of median income for the time period. You are talking at least a dozen of these things over the time period.  In the end, all that money went to waste, every single one of those teeth had to be pulled out of my mouth by a Mexican Dentist, who did it at the Bargain Basement price of $25 a tooth, whereas a Dentist here in Alaska would have charged me $300 a tooth to do the same job.  It's a great racket here in the FSoA if you can get licensed to do it.  Every last Dentist that I ever visited owned a Mercedes and had a nice huge McMansion to live in.  I paid for that, along with all the other Dental Victims.

Why can dentists here in the FSoA charge such high prices for these tasks?  Because they run a gated profession with few Dental Schools relative to population size and they make it EXTREMELY difficult for a foreign trained dentist to get licensed to practice dentistry in the FSoA.  So there exist a LARGE pool of victims (basically everyone since everyone has some kind of dental problem at some point), and a relatively SMALL number of dentists licensed to do the job on your teeth that needs to be done.  So they can pretty much set the price as they please, the only constraint on this being what the other local dentist will charge, since most people will not cross the border into Mexico.  As a Dental Pain Sufferer, you are over a barrel if you cannot make the border crossing to Mexico, you MUST pay whatever the Dentist charges or else suffer agonizing pain until you figure out how to yank the offending tooth out of your mouth yourself.  This is called a contract under DURESS, and it is illegal in Tort Law.  In reality, you are not obligated to pay any of these charges by tort law.  In reality, all dental patients shoudl file a Class Action Lawuit against all Dentists and strip them of their criminally stolen money and property.

The Elon Musk Flim-Flam

OK, we have now moved through 2 types of Small Biz, the Gymnastics Biz and the Dental Biz.  To finish off for the day here, let us look at BIG BIZNESS, Elon Musk's Tesla, Gigafactory Battey facility and Rocket Ship Biz.

Not a single one of these biz makes any profit at all, but they have a Market Cap of $BILLIONS$  WTF did all the money come from so Elon could build his toys without making a dime of profit for YEARS?  Can you imagine going for years with a negative net income and still getting credit to keep going?

Like all of the really large corporations and big biz of our society, it is all run on CREDIT, and if you are well enough connected the credit has been quite endless.  The "money" flowing down through the society into all the small biz like Gymnastics Schools and Dental Offices actually begins with these very large corporations and their associated banking industry, they are all created through the massive issuance of debt in the form of corporate bonds.  The other big money creation mechanism is from Goobermint bonds, debt which the population is supposed to retire through paying their taxes.  The debt of corporate bonds is supposed to be retired by profits from the industry, again which the population at large is supposed to provide the money for by buying the products.  In reality, in neither case can the population ever make enough money to retire the debt either created by the corporations or by da goobermint.  This can be masked for a long time, but if you notice just about every large corporate entity eventually goes bankrupt.  The railroads all went bankrupt, the big automotive companies like GM and Chrysler went bankrupt, and the airlines like TWA and PanAm also went bankrupt.  Then new ones pop up with new issuance of debt and reorganizations, mergers and acquisitions, but they too will all go BK in the bye and bye.  No wealth was created here in any of these industries, only an ever increasing pile of debt along with a lot of landfill.

Similarly, Da Goobermint never created any wealth either by issuing out its vast quantities of debt.  While certainly Goobermints have built many roads, bridges, tunnels, power plants, sports stadiums etc, the maintenance cost on all of it is always greater than the revenue brought iin through taxation to pay for it.  So the only way to keep going with it is to issue out still more debt. Which they do as long as they can, but eventually smaller countries like Greece get cut off from the bond market, at which time their economy immediately tanks.  Similarly, any large corporation cut of from the corporate bond market immediately goes BK.

The "wealth" Elon creates is simply a bigger pile of debt somewhere else, bur unlike the gym owner or dentist, he has inserted himself into the very TOP of the food chain, getting his debt money directly from the folks in charge of manufacturing money, the TBTF banks.  Elon hardly needs Victims to bilk at all selling Teslas, hell he's only sold around 150,000 of them since 2008!  In the end, he's really bilking the taxpayer, who will end up with all the bad debt he has created on their balance sheet.

Nobody in this whole chain of events ever creates wealth.  They only sieve wealth in various types of schemes and rackets on it's way down the thermodynamic hill.  So where then IS the wealth "created"?

It's not created, it's EXTRACTED.  The wealth is the resources of the earth, and all that debt money that is created are little tickets (or now digibits) which allow you to buy some of the resources, most particularly the energy resource of oil.  Those little tickets trickle down through the rest of the economy, and various types of biznesses and rackets insert themselves along the way as the energy moves its way down the thermodynamic hill.  Who gets the privilege of creating these little debt tickets?  The folks who control the energy of course, which is why the Energy Industry and Bankstering Biz are so closely related.  It's why the Rockefellers who controlled Standard Oil ALSO founded the Chase Manhattan Bank, now JP Morgan Chase.  They issue the credit to buy the Oil, and it gets burned up all the way down the line in various stages as it moves through all the rackets.  The BEST rackets are at the very top of the food chain here, like Elon Musk or Mark Suckerbug's rackets.  Neither one creates any wealth though.

By the time you get down to small time rackets like the Gym Biz and Dental Biz, you're getting close to the end of the line on the way down to the final stop, the end consumer of everything that happened above in the chain.  The end consumer DEFINITELY creates no wealth, but rather destroys what is left of it on its way to its final destination as waste in the landfill or CO2 in the atmosphere.

What wealth there was in the Earth was captured over billions of years by photosynthetic organisms collecting energy from the sun.  Animal life just extracts that energy from the plant, then eventually both die and sequester carbon, and then after that Homo Saps evolve to burn up all that energy, and develop an economic system which does that.  Very rapidly too!

How long does the game last?  Only as long as there is a big enough thermodynamic gradient to support a downhill flow of the energy.  It appears we are getting quite close to the point where no work can be done exploiting the energy flow left.  At least not on the scale globally we have been doing it anyhow.

Going Cashless

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Published on The Doomstead Diner on December 22, 2016

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One of the hottest topics in Collapse Economics these days is the prospect of the "Cashless" society.  Denmark is flirting with being the first country to go completely cashless, along with the other Scandinavian countries of Sweden and Norway.

In debates about the future of cash money, Denmark is often cited as the possible World’s first cashless society. Is that true? An investigation on the current state of cash in Denmark. 

Cash is dirty.
Cash is expensive to print.
Cash is for criminals.

Opponents of paper money, such as established economists Bofinger and Haldane, have declared the war on cash. In 2016, this is more apparent than ever before. The European Commission for instance currently assesses a potential ban of the 500 Euro banknote, as “these notes are in high demand among criminal groups.”

More so the finger is often pointed to Scandinavia, to show how some countries are already on the move to become ‘cashless societies’ – to eliminate cash whatsoever. And Denmark could be the World’s first. Hold up – is that true?

http://www.matoska.com/catgraph/3005-001b.jpg Money is symbology for a credit system that allocates the resources available in a society. It can be just about anything, as long as what you choose as the physical symbol is hard to counterfeit.  In Africa for a long time, Cowrie Shells were used as money.  They were relatively rare and about impossible to counterfeit.  Similarly, Gold and Silver have been used as the symbol, the metals themselves are elements and can't be counterfeited.  However, they can be alloyed with other metals, thus debasing the coinage made with them.  This was what the Romans did as their civilization collapsed.  They weren't able to keep bringing in enough gold and silver to keep coining up to have enough money in circulation.

The metals are in relatively short supply for a growing population, and they tend to be hoarded as well taking them out of circulation.  So in the modern era, paper money which was hard to counterfeit was developed as the currency and means of exchange.  The way paper money is traditionally made hard to counterfeit is through fine engraving and special paper and ink.  However, modern scanners made the engraving easy to duplicate, and if you have enough scientific expertiese and a big enough budget, the paper and ink can be duplicated as well.

http://www.accountingformanagement.org/wp-content/uploads/2016/01/balance-sheet.png Money originates in the banking system as credits and debits on a balance sheet.  Then the bills get printed up, and each one has a Serial Number on it.  At the origin point when it first gets handed out over the counter with fresh bills, the bank has a record of the serial numbers and the person that money was handed to.  After that though, there is no keeping track of where those bills go or to who.  In theory you could track it if in every transaction the serial numbers were recorded, but in practice that is never done, it's too cumbersome.

Because it can't be tracked, cash is very useful in the Black Economy, for things like drug deals and making bribes to politicians.  Its also useful to hide your transactions from the Tax Man.  If you begin to believe your banking system is untrustworthy or unsafe (they always are, but sometimes more than others), people start taking their money out of the banks and stuffing it in mattresses instead.  This can make a bank insolvent, because it needs deposits as part of its capital.  When you deposit your money in the bank, it becomes an unsecured loan to the bank, which they will then use as the basis for making other loans.  Making loans and originating money is how banks MAKE MONEY.

So, as far as Da Goobermint and the Banksters are concerned, paper money is not very good.  Da Goobermint wants to be able to track all transactions so they can be taxed and the Banksters want your money in the bank as much of the time as possible so they can use it for more lending. How can we solve these problems, they wonder?

https://historyinlivingcolor.files.wordpress.com/2013/11/westernunion803kanawhastreetcharkanawhablv_edited-1.jpg?w=670 Well, until the advent of the modern computer and the internet, it was basically an insoluble problem.  However, once the communications systems were in place and enough places where transactions take place were wired into it, the possibility of being all electronic balance sheet transfers became possible.  It goes back as far as the Telegraph and Western Union and the ability to "Wire Money".  It further expanded with the Telephone, which made Credit Cards possible.  If you remember back to the early days of American Express, if you used your card at a restaraunt they would call AMEX to get a verification, and once verified the transaction was cashless, going from your credit line over to the restaraunt's bank account.

At first, these credit cards were available only to the very rich, and few people used them.  The verifications were done manually and when the restaraunt called for verification, there was a live person on the other end of the line who did the verification of your account, on a big old clunky IBM Mainframe at the Amex Headquarters.  However, as the computer systems and communications systems improved and you could put Point of Sale (POS) terminals in stores, it became possible to issue Credit Cards to many more people.  Thus Master Card and Visa were born, and banks began issuing out Debit cards as well.

http://blog.couponrani.com/wp-content/uploads/2013/12/creditcard.jpg This brings us up to today, where at least in the FSoA pretty much everybody has Plastic of some kind, and over 90% of all transactions are done this way, so cash has become unecessary, at least as far as the Banks & Goobermint are concerned anyhow.  They would like to see cash eliminated entirely, because this is good for them.  Not so good for the average J6P though who is worried his money isn't safe in the bank and one day it will just be…GONE!  Also not good if he currently runs some type of cash bizness and wants to hide some of the income from the tax man.

What's the PROBLEM with taking cash out of the system entirely then?  Well, as long as you have complete faith that your computer systems will be up and running 100% of the time, communications up 100% of the time in 100% of locations and the system won't be hacked, there is no problem.  Unfortunately, none of those conditions are true even in the 1st World countries, and definitely not true in 3rd World countries.

http://www.telegraph.co.uk/content/dam/news/2016/11/13/113589873RupeesNEWS-small.jpg In places like India, vast areas of the country aren't even wired for electricity, much less have full internet coverage available 24/7.  Many in the population don't even have bank accounts or ID.  The only way they function in the society is with cash.  They get paid in cash, they buy their groceries with cash, they pay their rent with cash.  When India recently took its two largest denomination bills out of circulation, it created instant HAVOC, and is still causing havoc.  They may very well never recover from this poorly planned and executed monetary experiment.  It's already created a massive deflation in their housing market, as people simply don't have working money to pay the rent with.  Getting replacement bills out into circulation also has been a clusterfuck and goods are becoming hard to come by whether you have working money or not, because the supply chains are breaking down.

Now, in a place like Denmark where just about every square inch of the country is wired up, you wouldn't have this same kind of problem if you went cashless, although even in Denmark there are people who live off the official economy and depend on Cash to work.  Besides that though, you run into all sorts of problems on occassions where you have a power outage or communications outage or the computers with all the account information go down, even for short periods of time.  All of a sudden, everyone in the checkout line at the grocery store can't pay for their food.  Everyone commuting home from work can't pay the fare on the light rail.  Everyone whose gas gauge is on empty can't fill up on gas at the pump.  etc, etc, etc.  Anyplace that does go 100% cashless is going to run into these problems, and I think TPTB have to know this.

Even though I use Plastic almost all the time myself, I always do carry enough cash to buy groceries or buy gas if the debit card doesn't work.  At my local grocery store this has occurred twice due to the system being down itself, and then a couple of other times because my account at the bank was "frozen" due to suspicious charges being dropped on the card number.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/500%20euro_0.jpg What is more likely than 100% cashless is that just the large bills will be taken out of circulation, but how large is large?  In Europe, they have a €500 note, that one is just about certain to go the way of the Dinosaur.  Here in the FSoA, the largest note is a $100 Ben Franklin.  This would be harder to get rid of, because even just for buying groceries a family can spend $300 in the checkout line, I see that all the time with overflowing baskets of food.  You would need 15 Andrew Jackson's or Harriet Tubman $20s to cover this, which makes your wallet uncomfortably thick.

What you may have noticed however is that recently, in about the last year a new $100 note on new paper with more "security" devices has been substituted for the old $100 note.  My suspicion is these notes can be run through a reader and their serial numbers tracked.  All stores will be required to have the readers, which will probably be part of the POS terminal, and anytime you use such a bill, it will be recorded in the transaction.  You'll need your Goobermint ID to spend the bill.  So, similar to plastic transactions, the bill can be traced back to you.

http://www.usagold.com/images/coinstack.gif In the Black economy what may occur to circumvent this problem is a system of Barter may arise, and for this purpose such as large Drug Deals, Gold WOULD be very useful.  After the large exchange is done this way, then the street level exchanges are all done with the small bills still in circulation.  However, then when the drug dealer spends his money, he has to account for where he got it.  If he can't account for it, it's a criminal offense.

Because Gold and to a lesser extent Silver could be used in the black economy and to try and store wealth outside the Banking system, it will either be made illegal and confiscated, or any official transactions done with it heavily taxed.  So if you went to the Coin Dealer to exchange it for some of the paper currency, there might be a 50% tax on that transaction.  In the case of the Great Depression, Gold ownership was made illegal and the Gold confiscated and then revalued.  No reason to believe that would not occur again here as things further spin down in the Bankstering system.

http://www.knology.net/~bilrum/goldverbot-4128.jpg What you have to remember here is that "your money" doesn't belong to you, it's part of a very large and complex system of credit that has been evolving in this iteration since the Medici Banking era.  That system gradually spread its tentacles around the entire globe, and now most of the 1st World countries at least are fully wired up with the communication system necessary for all electronic transactions, fully recorded with everything bought and sold and by who to who.  It's the ultimate means of control over everything that goes on in the society, and as long as these systems are up and running, TPTB that run the system are going to use every means possible to maintain this control.  Even if a 100% Cashless society is not achieved, in the 1st World countries it will reach close to that goal before the system crashes in it's entirety.

The reasons it will crash in its entirety are many.  First of all, whether the money being moved around here is cash or digibit, the entire system is horrifically insolvent, and even if ovenight 100% of all depositors money was confiscated to recapitalize the banks, it still would be insolvent.  There's more debt out there than there are credits to balance it, because of the interest charges on all the loans.  On top of that you have trillions to quadrillions in derivative bets which can't be paid off.  Then you have the problem that either cash or digibit, money is not flowing through the system to the end consumer to buy the products of industrialization. Some still have access to the credit, but fewer all the time as people drop out of the work force.  Finally, what the money actually REPRESENTS, the resources available to the society are depleting, especially measured against the increasing global population size.  So you can't make it work long term no matter what you use for money.

What the conversion to (mostly) cashless can do is stretch out the Extend & Pretend a while longer, so it's likely to be undertaken in 1st World countries, at least if the monetary system doesn't reach critical mass and crash before a further changeover can be implemented.  The possibility such a system could be implemented in India or other 3rd World countries is exceedingly small, thus the reason they attempted to exchange one paper bill for another, and in the process took themselves one step closer to complete collapse.

The mostly unanswerable question is just how long the the Extend & Pretend game can be extended out here?  All you can say for sure is that it will crash at some point in the future, but pegging a date to it is quite difficult, if not impossible.  You have another variable in the equation, which is the political instability that arises as more people lose more purchasing power, whatever the money is that is being used.  You also have the geopolitical instability as different countries jockey for position trying to control what is left of global resources, mainly China, Russia and the FSoA there.  There are inumerable possible Trigger Events that could set off a cascade failure at any time, so any kind of mathematical prediction is useless because of a discontinuity in the function.  WAG though, it's hard to see how it holds together more than another 5 years, but it's just a guess.

So, even if the Banksters and Da Goobermint get their wish and convert to all digimoney, don't sweat it too much because it won't last all that long.  When it does crash, you'll have much bigger problems than trying to hide income from the Tax Man or keep your wealth safe from thieving Banksters.

http://playgrad.ru/uploads/posts/2012-07/1342419304_zombie_wallpapers-39.jpg

F is for Frugality, G is for Get the Fuck out of Dodge…?

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Published on the 22 Billion Energy Slaves on October 24, 2016

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F is for Frugality

 

Being frugal, according to dictionary.com, means being:

economical in use or expenditure; prudently saving or sparing; not wasteful.

Living frugally means imposing austerity on yourself in order to have better control over your life. It means wresting control away from the exploitative systems that govern the world we live in. Frugality is not a competitive sport to be boasted about online; it's more of an aspirational art form.

There are endless ways of being frugal without incurring any loss of life quality. In fact, most people report that their lives feel more grounded once they begin practicing frugality.

There are many good reasons for being frugal. In his 1970s book Muddling Towards Frugality, Warren Johnson lays out a whole philosophy regarding living well by focusing on what you need rather than what you want. One of the best reasons, however, is that it might save your life. Living in a state of permanent entitlement is a  psychological achilles heel for many. Watching middle class people lose things they consider themselves entitled to is usually a very sorry spectacle. Frugality, or voluntary simplicity, or voluntary poverty is about jumping off the work-to-consume treadmill and getting onto the (much slower) work-to-live one.

Living frugally does not mean living in poverty. Poverty is a trap that can be impossible to escape from. The systems of our industrialised technocratic psychopathically-designed society are set up to funnel wealth upwards from the masses to a few people at the top. Those caught in the trap often find they have no way of escaping it: they are literally powerless.

Some people have the good fortune to be able to practice frugality before it is thrust upon them by outside forces. If you are one of them you should count your lucky stars. It's no fun going from being comfortably middle class to being without a place to call home and unable to afford even a cup of coffee (as I can attest) but if you get enough practice in you can at least salvage the basics of existence and then fill the upper levels of your hierarchy of needs pyramid with things that are free, or very cheap. These things are free (presently):

– Going for a walk
– Keeping fit
– Singing
– Creating works of art
– Making love
– Meditating
– Talking with friends
– Stroking kittens
– Joining a fight club

We live in a time where, in some ways, it is easy to be frugal. Our societies are awash with cast-off clothes, toys, electronics and materials that nobody wants. 90% of our fossil fuels end up as waste heat, and about half of the all the food we produce ends up in landfill. There is plenty of room for frugality at either end of the scale.

But that window is rapidly closing. Within ten years we're likely to have witnessed the end of industrial civilisation as the EROEI of oil drops below 1. At this point those who do not know how to live very cheaply and simply will be – let's just say – at a considerable disadvantage.

If you want some ideas, have a look at Britain's most frugal pensioner.

Published on the 22 Billion Energy Slaves on November 1, 2016

G is for Get the Fuck out of Dodge…?

 

Homelessness is already spiking in cities across the USA


Should disaster strike, being located in a large city is likely to present a number of problems specific to the urban denizen. Due to their concentrated nature, any large scale and ongoing outage in electricity and/or fuel is likely to put the city dweller at a considerable disadvantage to those living in less heavily populated areas. Urbanites often say they feel safer in cities. It's what they know, and often it is where they grew up. And to a certain extent they may be correct: relief efforts during the initial stages of a cataclysm are usually focused on large metropolitan areas where the largest number of people can be serviced via centrally-located distribution points. The shops may all be empty as just-in-time distribution systems enter a state of paralysis but it's a reasonable expectation that there will be an aid agency on hand to give out some food and bottled water to anyone willing to queue up for hours or days. What's more, cities contain much of the most valuable infrastructure in the country, including government offices and centres of finance, so it is likely that much of this will be secured from chaotic elements by the Army.

That was the good news.

The bad news is that due to the concentrated and hyperconnected nature of cities a crucible effect will take place and collapse will be a lot speedier and lethal than in non-urban settings. In a recent report the Pentagon states that by 2030 the world's megacities will be ungovernable hothouses of urban decay filled with rioting youths, collapsing infrastructure and chronic levels of crime. Here's a quote from OffGuardian (link):

"According to a startling Pentagon video obtained by The Intercept, the future of global cities will be an amalgam of the settings of “Escape from New York” and “Robocop” — with dashes of the “Warriors” and “Divergent” thrown in. It will be a world of Robert Kaplan-esque urban hellscapes — brutal and anarchic supercities filled with gangs of youth-gone-wild, a restive underclass, criminal syndicates, and bands of malicious hackers."

 
In large cities, rich and poor live cheek by jowl, meaning the wealthy and even the reasonably well-off are likely to be easy targets for gangs of looters. Should an economic collapse occur at the same time it is likely that the police, ambulance and fire services will not be paid, meaning they will be less willing to risk their lives by entering 'no go' areas—if they even bother to turn up to work at all. Forced acquisition of housing will also likely occur in this scenario as squatters and the dispossessed exploit the lack of law and order.
 
Even on a very basic level, surviving in a large city in which the power has been shut down is likely to be very difficult—if not impossible—for most. Without access to land to grow or catch food, city dwellers will find themselves unable to feed themselves in short order. Climate will also be an exacerbating factor, with apartment dwellers in cold regions finding it impossible to heat their living spaces, and those living in very hot regions unable to use air conditioning. Without power, water will not run from taps, and toilets will not flush. Backed up sewage systems will spread disease, as will the exploding rodent population feeding off the mounds of uncollected garbage and unburied bodies. People who have not prepared for such eventualities by gathering food and equipment to help them through such a period of turmoil will be at a considerable disadvantage and may find the psychological pressure alone too much to bear under the circumstances. 
 
With urban dwellers having invested in very little in social capital it's likely to be a case of 'every man for himself' within a matter of days of disaster striking. And disaster could strike in the form of a natural cataclysm, such as a tornado or a flood, or it could be man-made, such as a grid outage caused by computer hackers, or a nuclear or chemical strike. It could even be something as mundane as a sudden currency devaluation, sending the economy into a tailspin. Furthermore, it is worth bearing in mind that large cities present easy targets for state and non-state terrorists.
 
Of course, escaping to the countryside will also present its own set of challenges, and it would be wishful thinking to assume that the majority of the urban population could easily move out to grow vegetables and raise chickens. A potential half-way house might be the sprawling suburbs that surround many cities (especially in America). It is not beyond the scope of our imagination to see that many of the houses could be retrofitted to provide better protection against the elements, and the extensive lawns surrounding them turned into food producing spaces. Due to their large size many so-called McMansions could house several families at a time, assuming the materials they are made from hold together, and new localities would form in this way.

This Week In Doom: The “Hamilton Elector” edition


That-Was-The-Week-That-W-That-Was-The-Week-473964gc2smFrom the keyboard of Surly1
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Originally published on the Doomstead Diner on December 11, 2016

“In a hundred years time, perhaps, a great man will appear who may offer… a chance at salvation.   He'll take me as a model, use my ideas, and follow the course I have charted."
–As quoted in “Der Führer als Redner,” Adolf Hitler, by Joseph Goebbels


On December 19 of this year, the 538 members of the electoral college will meet to cast their votes to actually decide the outcome of the election of 2016. Those people appalled or mortified by the election of Donald J. Trump as President are hoping that "Hamilton Electors" will rise up and in a fit of conscience serve as a deus ex machina to deliver the US from inaugurating a president who lost the national popular vote by somewhere north of 2.6 million votes.

What these people are hoping for is an electoral college revolt. I'm not liking their chances. We have to remember that the framers of the Constitution didn’t trust direct democracy, period. The Electoral College is a fail-safe to protect the presidency from a candidate who’s popular but unfit for office. The name "Hamilton Electors" stems from Alexander Hamilton's explanation of the need for a check upon the popular passions. Writing in Federalist 68 , he said the body would consist of 

A small number of persons, selected by their fellow-citizens from the general mass, will be most likely to possess the information and discernment requisite to such complicated investigations.

In other words, anything BUT a rubber-stamp for the popular will, a second level of discernment, to ensure that

"…the office of President will never fall to the lot of any man who is not in an eminent degree endowed with the requisite qualifications."

In other words, a "break glass in case of emergency" device to prevent panderers, prevaricators and pussy-grabbers from ascending to the office of mountebank-in-chief.

To which I say, "good luck with that." I rank second to none in my loathing for Trump and the gaggle of foxes he has assembled to guard the public henhouse.  Yet, in a recent article in The Atlantic on the subject, College of Charleston political science professor Claire Wofford explained

“there is no explicit federal or constitutional ban on electors selecting candidates as they wish, even if that means departing from the popular vote of the state.”

Past practice enables us to believe we have voted for a slate of electors who will faithfully deliver votes in the "winner take all" fashion followed by most states. In almost every other presidential election in history, members of the electoral college have voted in accordance with the popular vote. With notable exceptions. The election of Rutherford B Hayes over Samuel Tilden 1876 provides an instructive example of our nation's capacity for electoral skulduggery.

The 1876 election was a "reform" election. The administration of Ulysses. S. Grant was one of the most extraordinarily corrupt administrations of all time, even given low 19th century standards. In 1868 Grant was swept to electoral victories by a nation grateful for victory. But he made the mistake of appointing an assortment of military and business cronies to important offices in his administration at a time of unparalleled growth, western railroad expansion, booming manufacturing, and abundant opportunities for corruption.

The list of Grant era scandals is impressive: the "Gold Ring" and the Black Friday Gold Panic of 1869, (starring Jay Gould at the center of a plot to corner the gold market), the New York Custom House ring, the Star Route postal ring, a treaty breach to allow gold mining in the Black Hills, the Whiskey Ring of 1876 (a tax evasion scam) and many more. Grant appointed reformers, but the public had had enough. Grant's personal reputation remained untouched by scandal. Yet In 1931, authors Frederic Paxson and Christian Bach wrote that 

personal scandal has not touched Grant in any plausible form, but it struck so close to him and so frequently as to necessitate the vindication of his honor by admitting his bad taste in the choice of associates.

In the conventions of 1876, the Rs nominated Governor Rutherford B. Hayes of Ohio, a reformer. The Ds nominated Governor Samuel J. Tilden of New York, setting the stage for the most contested election in US history.

In a voting result that resonates today, Tilden outpolled Hayes in the popular vote with 4,284,020 votes to Hayes' 4,036,572. But Tilden's 184 electoral votes were still one short of a majority, while Hayes' 165 electoral votes left him 20 ballots shy.

These 20 electoral votes were in dispute in four states: in Florida, Louisiana, and South Carolina, and Oregon. Each party claimed its candidate had won the state:  Democrats had won the state elections, and Republicans claimed the Democrats' used fraud, violence, and intimidation in the Southern states and "threw out" enough Democratic votes for Hayes to win in those states. Grant directed Congress to resolve the competing claims.

In January 1877 a 15 member Electoral Commission (comprised of eight Republicans and seven Democrats) met and voted to resolve the competing slates of electors. The result was the Compromise of 1877: the Electoral Commission ruled that the disputed votes belonged to Hayes, in return for which the last troops were withdrawn from Southern capitals. Quid pro quo: Hayes was awarded the White House with the understanding that Hayes would remove the federal troops whose support was essential for the survival of Republican state governments in South Carolina, Florida and Louisiana.

The departure of Federal troops meant Reconstruction was over. The net result was the abandonment of American blacks, civil rights, and the effect of federal law in the South. Political power in the Southern states devolved to the Democrats. Jim Crow was born, and hard won civil rights gained by blacks disappeared for generations. And to enforce the new order, "strange fruit" hung from southern trees. 

So in the same way that George W. Bush a 5-4 vote of a stacked Supreme Court to stop the Florida recount in 2000, Hayes won a presidency having lost both the popular vote and the Electoral College. But he did win the 8-7 vote of the Electoral Commission. Proving that laws are as perfectly elastic as they need to be.

So absent Hamilton Electors, an alien invasion or proof that the Russians hacked the election, we will have to deal with the horror of a Trump Presidency and his Chamber of Horrors cabinet whose members seem chosen precisely for their opposition to the premises of the agency they have been chosen to lead. This ought to be good for the doom industry.

When Reagan's "Sagebrush Rebellion" looks like a polite exercise in manners in comparison, what will "normal" look like? These people have, in Charlie Pierce's phrase, "a sweet tooth for authoritarian solutions to the inconveniences of democratic government." The game will be to get the feds out of the regulation business and send responsibility back to the states, who will avoid the responsibility like cancer and force it onto already broke localities, where it will disappear for lack of money.

Want an abortion, too bad, so sad, goodbye. Not a choice you get to make. Freedom from government regulation only applies to corporate persons and their owners and does not apply to use of your private parts. 

As Paul Ryan turns Medicare into a voucher system, and the voucher pays about fifty per cent of the premium, Trump-voting Uncle Fud will have to decide whether he can live on kibble and cat food in order to pay the premiums. 

As Trump-voting rural whites on disability suddenly have to work and there is no work to be had because automation took their jobs, who will they blame? They didn't realize those moochers and takers they threw under the bus during the campaign were themselves. Time to start cooking meth again.

As Betsy DeVos gets that hated federal money diverted from your local district, and public schools become charter schools where the voucher covers a fraction of the tuition, they'll at least have a choice as to which religious affiliation they choose for their kids. Snapping the spines of public teachers' unions is just an added bonus!

As the roads stop being paved, streetlights stop being replaced, as trash collection becomes occasional, as the drinking water becomes a fetid hellbroth of god-knows-what (a la Flint), as the bills mount and when people lose their homes, as we "Make America Great Again" by rediscovering the family values of three generations living together in a two bedroom house, who will they blame?

Trump voters will savor the satisfactions of having "gotten the government off their backs."  

 


banksy 07-flower-thrower-wallpaperSurly1 is an administrator and contributing author to Doomstead Diner. He is the author of numerous rants, screeds and spittle-flecked invective here and elsewhere, and once quit barking and got off the porch long enough to be active in the Occupy movement. Where he met the woman who now shares his old Virginia home and who, like he, is grateful that he is not yet taking a dirt nap, and who, like he, will be disappointed to not be prominently featured on an enemies list compiled by the incoming administration.

Roadmap to Currency Collapse

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Published on The Doomstead Diner on December 7, 2016

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One of the main questions those of us who have been observing collapse since the 2008 Financial Crisis have always tried to answer is just how a banking collapse would play itself out?  Lately, there have been ever more clues on the shape it will take as it moves around the globe.

The first indication came with Cypress and the "bail-in" of the depositors there, and Greece shutting it's ATMs down and then only allowing small daily withdrawals of cash.  In the last month, we've seen India declare all it's old "large" denomination Rupee notes declared void, issuing out new Rupees to take their place.  Ahead of us, we have the imminent failure of the Italian banks on the horizon along with the possible failure of Germany largest bank, Deutchbank.  Coming at some point even IF somebody loans more money to the Italian Goobermint to bail out Monte dei Paschi di Siena over the weekend.

DEFINITION of 'Bail-In'

A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a financial institution by external parties, typically governments using taxpayers money. Typically, bail-outs have been far more common than bail-ins, but in recent years after massive bail-outs some governements now require the investors and depositors in the bank to take a loss before taxpayers.

http://doomsteaddiner.net/blog/wp-content/uploads/2014/05/Money-Spigot-3-300x186.jpg Now, in the 2008 crisis in the aftermath of Lehman, the solution was a "bail-out" of the banks by pulling out Hank "the Skank" Paulson's "Big Bazooka" and charging it all up to the Taxpayers, as opposed to bank depositors in a Bail-in.  Of course, none of the taxpayers are too happy about that, so at least in Eurotrashland rules were set in place to do bail-ins.

Once you deposit your money in a bank, you have made an UNSECURED loan to the bank.  They're supposed to pay you back on demand, but of course if they go belly up and don't have the money and can't borrow it from someone else, your money essentially vanishes to the same place it came from, thin air.  Obviously, depositors who have this occur to them will be even more pissed off than the taxpayers, since your tax bill is spread out incrementally over time.  You don't instantly lose everything overnight, you just go broke more or less gradually as your taxes keep going up.

What bail-ins also do though besides pissing off a lot of depositors is they take a whole lot of money out of circulation, which of course is highly deflationary. Similarly, the exchange of the Rupee notes also is highly deflationary, because Da Goobermint is planning on taxing or confiscating the money that is deemed "suspicious".  That means the Indian whose money was taken no longer has it to spend on goods and services in the economy.

https://i1.wp.com/www.washingtonpost.com/blogs/ezra-klein/files/2012/08/weimar-mutilated-300x236.jpg So rather than the inflation so feared by folks like John Williams and Speedy Gonzalo Lira back in 2008, it now is looking more like an end game of deflation as both banks and goobermints confiscate money in order to try and balance their unbalanceable books.  Even if they confiscated all the money in circulation and on deposit in digibits though, the whole system is still net negative due to the interest charges that have accrued and there are so many NPLs (non-performing loans) out there.  Italy is in the worst shape there, with something like 20% NPLs, which is why their banking system is likely to topple first.

The problem after that becomes one of CONTAGION, because the Italian Banks are indebted to mainly the German banks, so if they go belly up the assets held by German banks are no longer assets, and they also become instantly insolvent.  Well'they're already insolvent, but at this point it becomes undisguisable with fraud and accounting rule changes.

If the ECB won't print fresh Euros to recapitalize the Italian banks, where's the money going to come from for this?  "Investors" (aka other TBTF banks) aren't going to buy $5B worth of equity and bonds, because they have already lost $BILLIONS$ down that rat hole.  So will there be an 11th hour Stick Save by the ECB to bail OUT again these banks, which generally puts the bill for it on the backs of the German taxpayer?  That's not very politically acceptable in Germany these days, they'd rather see the Italians go down the toilet, not really grasping they will follow the Italians shortly thereafter, possibly within nano-seconds.

http://www.leftovercurrency.com/Resources/banknote-5000-italian-lire-bernini.jpg Anyhow, given this rather deflationary trend and the likelihood that "your" money currently in your checking and savings account will get confiscated in a bail-in, it's pretty hard to see why any typical Italians right NOW at least are keeping any Euros in the banks in Italy.  The Italians also currently have the very real threat that once Beppe Grillo's  5 Star Movement (M5S) gets into power, they have vowed to return to the Lira.  If you have Euros in an Italian bank, POOF, overnight they magically convert to Liras, and then quickly devalue against the Euro and Dollar, while those currencies are still standing anyhow.  The ew Lira currency would be close to worthless for buying anything from outside of Italy, most importantly imported energy.  I would bet on a 50% devaluation within a month, and maybe 10 cents on the Lira in a year.

So as logical as it seems to take your money and run now, this is not so EZ for the typical Italian.  Setting up an account in another country is tough even if you are a Eurozone member, and then making your daily withdrawals and deposits not so EZ either.  If you are a small biz owner and have payroll accounts and such, using a foreign bank is also impractical.

On a small enough level of savings, say a few 1000 Euros, for the individual stuffing this in your mattress seems like a safer idea than leaving it in the bank at this point, but as the Indian example shows your paper Euros could be made worthless overnight and you would need to exchange them for "New Euros".  However, you still have the issue that it is not practical to pay many of your monthly bills in cash, around here they won't even TAKE cash at the power company.  They also won't take cash for my rent either.  All these payments MUST be done through the banking system.

http://vignette4.wikia.nocookie.net/theshatareu/images/2/29/10g_gold_bar_actual_size.jpg/revision/latest?cb=20120503095033 So where does this leave you with trying to protect "your" wealth in a serious banking crash and sovereign debt crisis?  For this, many people believe Gold is the safest way to store your wealth, particularly "Possessible" gold like collectible coins and tiny 10 gram slips.  "Paper Gold" is not looked on much better than Fiat Money since it is essentially the same kind of Ponzi scheme.

The problems this has are very similar to your paper money though.  First off, it's not very good for currently paying your bills.  I couldn't go over to the leasing office and pay my rent in Gold Coins any more than I could go in and pay in cash.  If I was running a small business, I couldn't pay my employees in Gold either.  You then also have the problem that every time you exchange Gold for some cash to go buy food at Safeway, you first have to stop in at a coin dealer and you have to pay a transaction fee of some amount.  Finally, your coin dealer himself actually has to have the cash to give you in return for the Maple Leaf or teensy-weensy Gold Chip.

https://www.overthinkingit.com/wp-content/uploads/2012/03/cortmok1-300x300.jpg There is a further critical problem with using gold as money, which is that over the millenia it has become highly centralized.  It began as deposits sprinkled out all over the earth and was gradually mined up, for ornamental jewelry and then used for coinage.  Over time, generally by some form of theft like the Spanish Conquistadores ripping off the Aztecs, all this gold got hoarded up and ended up going right back where it came from, in a hole in the ground.  Now though, the gold was "owned" by a few people, in the olden days a few Monarchs and a few Banksters.  Nowadays it's Sovereign Wealth Funds, TBTF Banks and a few filthy rich Hedge Fund managers who are also Gold Bugs.  Then you have another small cadre of people who have gold in the form of coin collections, and some with jewelry.  Most of the population though has no gold whatsoever.  So if you want to use it as money, what is the mechanism for getting it out of the hoarded piles and back into circulation for the population at large?

The answer to this dilemma often proposed is that the Banks then issue Notes on the gold, which would then be used as money.  The problem there is that unless the gold is redeemable for the note, the note is not really "gold-backed", thus you are right back to the fiat money problem.  In such a system, banksters ALWAYS print more notes than they actually have in gold bars in the safe.  That's the principle behind fractional reserve lending and also modern rehypothecation, where the same pile of gold is used as collateral for layers of loans on top of it.

http://static.wixstatic.com/media/f20e17_232aa51b70e2483d81bc605daae98fe6.jpg_256 At some point these Ponzis based on gold always collapse, and a few people get gold back for their notes and the rest are left with a piece of paper.  In general, the ones who end up with the gold are the guys with the combination to the vault.  Back in the mining towns of the Old West, this happened all the time.  The miners would go and have their gold assayed, then deposit it in the local bank where it was supposed to be safer than keeping it in your mining shack or carrying it in a pouch on your belt.  In return, you would get notes from the bank that you could use to go buy a haircut and a bath, a nice steak and bottle of whiskey at the saloon and spend the night in Miss Kitty's Cat House.  Then one morning you wake up and the local bankster has skipped town with the gold, and all you got left in your pocket are worthless notes.

All in all, this makes a system utilizing gold proxied by paper notes no better than the fiat system.  Unless you actually are using the coins themselves as currency, then all the same problems of bankster dishonesty remain.  If you do hoard your own gold at home and carry it around as currency, then you are vulnerable to theft from the other end of the spectrum, the highwaymen.

This is just your issues at the consumer level though, the much bigger issues come at the wholesale level, because once the banking lockup hits, stores can't pay their suppliers, suppliers can't pay the shippers etc, so whether you have either Cash or Gold, the products simply don't make it to the shelves to buy with money of any type.  If the problem goes on for any length of time, people start to get desperate, as has occured already in India as people raid warehouses for food.  That's only a one time solution though, because once the warehouse is emptied, it won't get resupplied until some new system is dropped into place.  Anything more than a week long "Bank Holiday", and you are in the Deep Doo-Doo..

Most places in the world still highly dependent on cash are hard pressed to get any kind of new currency regime going, again India is the Canary in the Coal Mine for this. To get a complete exchange done takes a month at least, and meanwhile tons of people have no money whatsoever to work with.  Farmers can't get seed, truckers can't get diesel, electric companies can't buy coal, etc.

http://media2.intoday.in/indiatoday/images/stories/round-up-story_647_111416014638.jpg

Here in the FSoA where most exchange is all digital now and most people have some kind of plastic card, debit, credit or a SNAP card, as long as it was pre-planned and ready, an alternate regime could be dropped in place overnight.  What this might entail would be a nation-wide bail-in of all depositors, taking 50% of everyone's savings and then using that to recapitalize the banks.  This of course is also highly deflationary.  It also would be EXTREMELY unpopular and you would be sure to see the Pitchforks and Torches surrounding Trumpty-Dumpty at the White House.

http://www.gabankruptcylawyersnetwork.com/files/2014/06/foreclosure-bank-owned.jpg Besides that though, it wouldn't really solve the problem, because in fact even after doing this these banks would still be insolvent.  Since the people just had half of their money stolen, now they don't have this money to pay their car loan and mortgage which means more NPLs and less assets for the bank.  Real Estate prices drop precipitously as people no longer have the money to buy the McMansions and more people go into foreclosure.  Rinse and Repeat.

The only advantage to this type of solution is it might allow the economy to function a while longer without complete breakdown that a paper system has to deal with on a virtually immedite basis.  So rather than complete havoc occuring within a week or two it might take a few months. Maybe.

Returning to the individual, what can you do here to in some way prepare for this eventuality to occur?  Well, as always you should be Prepped up with enough food to last through what hopefully is a temporary disruption of a few weeks to a couple of months.  You should have a reasonable amount of cash, again a couple of months worth of your bills, and hopefully they will take your cash at the gas company office if the banking system is down.  If you have enough money left over after this and think Gold is a good store of your wealth, go ahead and buy some.  Personally, I would not start buying Gold as a Hedge until I had at least 6 months in Cash and Food Preps, but 2 months is a minimum here.

Far as your digibit money in the banks is concerned, Credit Unions are probably somewhat safer than banks, but not by much.  Definitely keep the money in Federally Insured account and don't have more in any account than the insurance limit, which I think is around $250,000.  That's a lot and most people do not have near so much, in fact most people are lucky if they have one month of bills in savings.  Also, splitting up your savings to a couple of different banks might be a wise precaution.  How well the FDIC progam will work in a systemic crash is open to question of course, but it's better than nothing.

https://4.bp.blogspot.com/-QH93E9M2A9M/VvJRWUgpkNI/AAAAAAAABBM/mufh80pzoPAixMprKstmGMA6NMjXRUnEg/s320/thegeektools%2B%25282%2529.jpg The other digimoney many people support as a way to store your wealth are the Crypto-Currencies like bitcoin.  I don't recommend those at all.  In a systemic banking crisis I think those digibits will be worthless and not exchangeable for whatever the new currency regime is in your neghborhood.  Besides that, in all likelihood after a month of disruption, the Internet will go Dark and none of your cryptomoney will be available.

Now, if you are really loaded, there are only 3 other places you might try to preserve your hoarded wealth, the traditional investment vehicles of Stocks, Bonds and Real Estate.  In this type of deflationary crash, it's hard to imagine how any of the paper investments would hold much value, and they also generally suffer from the problem of being extremely illiquid.  It would be hard to sell them to get any new cash being offered up by Da Goobermint, certainly you could not unload them fast enough to use the proceeds for hopping at Walmart for more Preps..

Real Estate presents probably the best of these investments for the well-to-do, but you definitely don't want to be buying it with credit on a mortgage.  In a deflationary crash, it's likely to be underwater rapidly and you probably will lose your job and be unable to pay the mortgage.  So you need to have enough money to buy the property in cash, and few people have enough to do that, at least no more than a few acres of raw land in a cheap area of the country anyhow.

To wrap it up here, there aren't any real fullproof solutions to preserving all that much wealth in a systemic monetary crash, particularly one which goes global.  This crash will come at some point, the system has been patched together with spit, duct tape and bailing wire for almost a decade and it is teetering on the edge of the precipice.  Keep your fingers crossed that the "Smartest Guys in the Room" have a Plan B here to keep things running a while.  If not, we'll see the End of Industrial Civilization occur over a very short period of time.

https://collapseofindustrialcivilization.files.wordpress.com/2013/06/954819_597315660288355_1848092541_n.png?w=529&h=353

Finally, why do you think this problem devolves FIRST to Monte dei Paschi di Siena, the OLDEST bank there is in this system, chartered even before Columbus discovered invaded Amerika in 1492?  Monte dei Paschi start date 20 yers earlier.  Buehler?

 

If nobody comes up with a good rationale on this, I will pitch mine out.  To me, it is obvious, but do not know how others see this.  So I ask for some speculation here.

Modern Slavery

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Published on The Doomstead Diner on November 27, 2016

tuna

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I was reading today an article about the economics of the Fishing industry around the Pacific ocean, specifically around Hawaii.  Apparently according to an AP investigative report, aboard at least some of the Amerikan flagged vessels run by Amerikan companies, they have aboard undocumented workers who are not even allowed to leave the ship every 3 weeks or so when it docks in Hawaii or California to offload the latest cargo of frozen Ahi Tuna.

Hawaiian Seafood Is Caught by Undocumented Workers Confined to Ships Like Slaves

 HONOLULU (AP) — Pier 17 doesn't even show up on most Honolulu maps. Cars whiz past it on their way to Waikiki's famous white sand beaches. Yet few locals, let alone passing tourists, are aware that just behind a guarded gate, another world exists: foreign fishermen confined to American boats for years at a time.

Hundreds of undocumented men are employed in this unique U.S. fishing fleet, due to a federal loophole that allows them to work but exempts them from most basic labor protections. Many come from impoverished Southeast Asian and Pacific nations to take the dangerous jobs, which can pay as little as 70 cents an hour.

With no legal standing on U.S. soil, the men are at the mercy of their American captains on American-flagged, American-owned vessels, catching prized swordfish and ahi tuna. Since they don't have visas, they are not allowed to set foot on shore. The entire system, which contradicts other state and federal laws, operates with the blessing of high-ranking U.S. lawmakers and officials, an Associated Press investigation found.

I'm not terrifically shocked by this, since exploitation of 3rd World people by international capitalists has been ongoing for a long time in many industries, just look at the child labor in Indian clothing factories for example.  It is a bit surprising that they are flying under Amerikan flags though on these ships, I would have more expected them to flag the ship in Liberia or some other place in order to avoid this type of nasty publicity, but apparently whoever is running these companies feels invulnerable and simply doesn't care what the publicity is.

Now, 70 cents/hour may sound like a low wage to you and the fact these guys are confined to the ships for months if not years at a time may seem a bit like slavery (it is), but the reality is that most of these guys are probably glad to have this job.  Recall that in many of the places they come from, they live on $2/day, and that includes their families.  If they are on board the ship making $.70/hr and get paid for probably a 10 hour day, they are making $7/day!  They also have room & board, no cost there so the entire amount can be sent home to family as remittances, improving the standard of living for their children.  Essentially, they sacrifice their own lives to hopefully improve the chances for their children in the future.

This is the nature of Wage Arbitrage, and why the explicit slavery system was abandoned in the industrial era.  It simply was not necessary as long as there were vast numbers of people globally not yet on the industrial bandwagon who could be fed for peanuts through the industrial Ag system, which could provide their food at a much cheaper price then they themselves could produce it for.  In this way, the living of the subsistence farmer was undermined, and he HAD to join the industrial system in order to start getting the MONEY required to buy food from the industrial system.

In many cases after the "Green Revolution", food was simply GIVEN away to 3rd world nations as "Humanitarian Food Aid".  What this served to do was to keep upping the population size and then commensurately devaluing the value of labor.  Meanwhile, all the Perks of Industrial culture were being sold, like TVs and later I-phones, not to mention wiring up Electricity for your Village to power all those toys.  Globally, virtually everyone got sucked into this paradigm this way.

http://www.causemarketingforum.com/atf/cf/%7B4DE6F364-56AF-4866-A8D6-BE166D012F35%7D/TRU-UNICEF%20Poster%201.jpg I remember back to my own childhood, when during Halloween you could go "Trick or Treat for UNICEF, the UN Agency which supposedly is concerned with the humanitarian needs of children.  Then there were the Ads on TV for the Christian Children's Fund, with pictures of some sad eyed child from Guatemala, and you were told that for jusT $1/day, you could sponsor that child and make a difference in her life.  Tugs at your heart strings of course, and Lord Only Knows how many people signed up for a $30/month sponsorship of some child.  Most of the money in the end got eaten up by the bureaucracy behind the CCF, or the Red Cross, or whatever Humanitarian Agency it was you made your tax deductible contribution to.

For the whole system to work, it was always in need of expansion, and always in need of a source of cheap labor of some type.  In the beginning, this was explicit slavery, and the population of non-slaves got to live well on the backs of the population of slaves.  With the advent of the Industrial Revolution, a whole NEW source of slavery was accessed, the energy of the 22 Billion Energy Slaves contained in all those barrels of Oil that have been pumped up and burned over the last century.  Whoever "owned" this oil became far richer than any king or plantation owner in all the millenia before, and over time as more things became mechanized, more and more human labor became unnecessary.  As we reach the end of this cycle, now Robotics is the next "great invention" that allows products to be made without the input of human labor, thus further depressing the wage a given person can earn.  At the same time though, the population still continues to increase, and the now unemployed people cannot afford the cost of the products being made by the Robots! lol.  So it's already not a real succesful economic paradigm because of that.

The problem of course now in the Wage Arbtrage model is that no matter how low the price of oil goes or how high, the people who consume the oil and all the products made from it can't afford them anymore.  If the price of Oil keeps going down, then more jobs are lost, wages are depresssed, rinse and repeat until the banksters finally stop issuing credit to the extraction industry.

helicopterbenThe only way to get money to the consumers to burn the oil now is to truly GIVE it away in true "Helicopter" fashion, but they'll never do that.  Helicopter money is only for the corporations at the top of the pyramid.  Even if they DID start handing out free money to everyone, all that would do is create Price Inflation, so no matter how much free money you got, it would never be enough to keep up with the rising prices.

The way credit flowed through the economy in the early years of the Industrial Revolution was through the growth and build out of the system designed to burn the first the coal, then the oil resource.  The railroads were built, making possible new large cities in places in the interior of the FSoA not on large navigable rivers or coastlines.  That took a lot of workers, and so credit to buy all the new products of industrialization flowed down to those workers in the form of wages.  The development of the automobile and build out of the interstate road system opened up still more territory for still more growth, requiring still more workers.  There was a steady downhill flow of the credit from the creation point of the International Banking Cartel to the end worker/consumer, and the economy chugged along fairly well, albeit with some credit collapses along the way, many during the "Free Banking" period in the post civil war 1800s, and then in the 1930s with the Great Depression.

What salvaged the industrial model after the Great Depression was WWII, with enormous amounts of credit issued out to all sides to fight this war, which really was a resource war for hegemony over the necessary commodity to make it all work, Oil.  The War employed millions of men as soldiers, and millions of women back here as "Rosie the Riveters" in factories making the tools of modern warfare, the tanks, battleships, planes and aircraft carriers, and of course the gunz and bombz necessary to level as much destruction as possible on "the enemy".

Out of the ashes of that conflict, pretty much the entirety of Europe had to be rebuilt and a new Credit line was established for that, the Marshall Plan.  Again you had the downhill flow of credit from its creation point to the end worker/consumer, and the industrial economy was humming once again. Right up through the 1970s the build out continued as now cheap oil was being pumped from the desert sands of Saudi Arabia into the voracious maw of capitalism.

http://crudeoilpeak.info/wp-content/uploads/2013/10/US_crude_oil_imports_and_production_to_Jul2013.jpg By the end of the 70s, two things occured which began to slow down this machine.  First, the FSoA turned from a net Oil exporter to a net Oil importer.  The money circulating here to buy the energy for the factories no longer stayed inside the FSoA and recirculated, rather it began to flow outward toward other petroleum producing countries.  As muh as we became addicted to Oil, all these countries became addicted to the constant inflow of dollars, which had to be created in some manner.  So this required that the FSoA always run a trade deficit and keep expanding its credit balance sheet, partially on the books of the Federal Reserve, but mostly on the books of the TBTF Banks that own the Federal Reserve.

The other thing that occured is that for the most part, the original build out of the system was pretty complete in the FSoA by the late 70s early 80s.  Sure new subdivisions kept popping up on the ring roads of the new cities, but the real money to be made for the capitalists at the top of the pyramid was to further build the system out into the 3rd world.  Power Plants and electrical grids for EVERYBODY!  Roads and Carz to drive on them for EVERYBODY!  The whole WORLD could live the techno-cornucopian dream!

So the credit began to flow outward, not inside the FSoA for maintenance of what had already been built, but to new development and new mega-cities all over the world, from Mexico City to Delhi to Lagos, but most particularly to China, the Big Oyster ripe for development in the 1970s.  A HUGE population of workers who would accept slave wages together with a corrupt Goobermint that could care less about any of the environmental problems that come along with industrial development that had already spawned the environmental movement here in the FSoA as such tragedies as Love Canal and then the Exxon Valdez began to reveal the hidden costs of "progress".

The FSoa turned from being an industrial economy into a financialized economy in the bizness of exporting dollars to the 3rd world for further development.  Where the money was to be made here was in the interest charges on the dollars loaned to all these countries so they could pursue this type of development also.  This worked for a while too, particularly well in China which EXPLODED producing cheap products for ever more poorly paid FSoA workers to keep buying, even as their inflation-adjusted wages decreased.

https://www.businessblogshub.com/wp-content/uploads/2010/11/credit_card_debt.jpg At the same time that there was deflation in these products, from cameras to walkmans to TVs and Laptops, there was at the time vast inflation in housing prices, education prices for college, basically anything "made in Amerika" necessary for living and succeeding in this economy became ever more expensive.  Increase in prices in these areas counteracted any gains made from cheaper products being imported from overseas.  In addition, with the exception of the financial economy, any job you might take from manufaturing to teaching saw a stagnation in wages, and overall the purchasing power for the Amerikan consumer began to decrease steadily.  This was compensated for by offering up still more credit to the consumer in the form of Credit Cards, LIAR Loans for carz and sub-prime mortgages.  An accident waiting to happen, and happen it did in 2008.

The last decade has seen one spit, duct tape and bailing wire fix to this clusterfuck after another, from every Central Bank on the globe from Da Fed to the ECB to the BoJ to the BoE to the PBoC and beyond, to the International Banking Cartel organs of the IMF, the World Bank and the Bank for International Settlements, the "Central Bank of Central Banks".  If you have not noticed, nothing these folks have done over the last decade has done Jack Shit to improve the Global Economy, we sink further down the toilet every day.  On the way to a Tipping Point that will occur eventually, one that make 2008 look like a Sunday Picnic.

What is not grasped or talked about in public discussion for the most part is that the Techno-Cornucopian dream is just that, a DREAM.  All the great expansion of the Capitalist-Industrial system to the 3rd World did was to exhaust the resource on which it depends, OIL, that much faster.  So a resource which was SUPPOSED to laat 500 years from textbooks I read in 3rd grade got burned up inside around 30 as the population expanded exponentially and the quantity of energy needed to support such an expanding population also increased exponentially.  In 1900 the amount of energy required to keep the average Amerikan alive was a fraction of that required to do the same thing today, and there are many more Amerikans now than in 1900.  The same is true all through Europe, and all over the world really.  We depend on this stuff to run all the systems we created, and it becomes ever more expensive to dig up by the day.  At some point you reach an inflexion on the global level, and by all measures, we appear to have reached that inflexion point now.

http://1.bp.blogspot.com/_AoBmM_isubo/TREADv5bsUI/AAAAAAAARGs/sgefQenX294/s1600/standard.jpg The question now is just how we will manage this spin down and move our way back to a lower per capita energy future, and a lower population of Homo Saps running around the planet?  On the grand scale, at the moment things do not look too good in this regard.  There are Wars and Rumours of Wars just about everywhere.  Conflicts pop up daily like Mushrooms on a cold damp morning in Kennett Square, PA.  Leadership everywhere are clowns who all buy into further "growth".  The Chinese and Ruskies want to build a "New Silk Road" across the vast expanse of the Eurasian Continent.  It is not going to happen, the cheap energy to do such a thing is long gone already.

The only future for Homo Sap now is one which is much smaller, with less Hubris that we can not just rule the world and transform the planet to our desires but also populate the Universe wih our species in Interstellar Travel.  This dream began in Sci-Fi with folks like H.G. Wells and Jules Verne in text, and moved into the video era with narratives like Star Trek and Star Wars, and now we get this same narrative coming from people in Industry like Elon Musk, and even theoretical scientists like Stephen Hawking.  This is all BULLSHIT, and we must recognize it as so. Our future if there is to be one is much smaller, and we must re-learn the means and methods to provide for ourselves more locally on this planet, the only home we have or ever will have, for so long as it lasts in such a form that it can support higher level eukaryotic organisms like Homo Sap.

This can be DONE.  It can be done equitably as well, it does not require international war and nuclear weapons because resource constraints will take their toll everywhere, and civil wars will take down the population as they always have.  Pestilence and Disease will take down the population also.  Famine, Hunger and Drought also will be a feature of the coming tomorrow.  The Four Horsemen of the Apocalypse are coming on here now, for sure.  We do not need to help them with Nuclear Weapons, destroying our one and only home in this universe.

Humanity is much more than the things we have created from fossil fuels.  Humanity is the thoughts and ideas that all have, the observation of beauty in nature and beauty in thought and writing annd ideas.  This is SENTIENCE, which insofar as we know exists here and only here at this time in this universe.  At some point, this Bright Light of sentience here on this planet will be extinguished, that is a guarantee just as the death of all living things is a guarantee.  But it does not have to be TOMORROW, or even the day after tomorrow when this occurs. We can hold on a bit longer, if we try, if we work together, if we do not QUIT.

Know in your heart that Death is inevitable for all living things. You are destined for death and so is planet Earth.  All you can ever do is the best you can to extend the timeline between birth and death.  Fight the Good Fight with SUN☼, and make it last just as long as you can.

Ties that Bind

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Published on The Doomstead Diner on November 20, 2016

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The election of The Donald as the 45th POTUS of the FSoA has left a lot of people unhappy.  The majority of those people have a darker skin complexion than Trump himself, although a significant number of white folks don't like him too much either.  Mostly younger Millenial type whiteys there.  Older whiteys seem to believe Trump will make good on the promise to "Make Amerika Great Again".  It saddens me I am a member of such a gullible generation of imbeciles.  However, I have known even since childhood MOST people of any age or generation are imbeciles, so it does not surprise me in the least. lol

In the aftermath of that POTUS election over the last week, there have been street protests/demonstrations/RIOTS by the folks unhappy with the results of this latest sham election,and beyond that in some of the "Blue" states that overall did not support His Trumpness they are circulating SECESSION Petitions!  Californicators want to secede, so apparently do Oregonads.

Secession talk is not all that new, in fact of course you can go back to the secession by the southern states of the FSoA a while back which led to the Civil War here on this side of the pond..  Over in Jolly Old England more recently, the Brits voted to secede from the EU, and you can see how well that one is going!  Relatively speaking, a Brexit from the EU should be EZ compared to a Calexit from the FSoA.  The EU is only a couple of decades old, compared to the FSoA which is almost 250 years old.  CA got married to the FSoA as a State in 1850, so it has been part of this federation for 166 years.  The Brits managed to keep their own currency of Sterling, the closest thing CA has ever had to their own currency besides the Dollar are IOUs the state issued out in the aftermath of the financial crisis of 2008-9.  The UK is more or less independent in infrastructure from Europe, CA is tied up directly to many other states with water pipelines, electrical grid connections etc.

So all in all, CA is way more connected to the FSoA than the UK is to the EU, but the Brits and Euroclowns can't even figure out how to dissolve that marriage!  The folks who championed Brexit, Nigel Farage and Boris Johnson had no plan; they never expected to win.  The current Tory Goobermint has no plan either, for the not insignificant reason that about nobody in Da Goobermint there from either side really wants to Brexit.  That was a shout out from the Plebes, it's not something the Elite in power want at all.  So who really is out there to draft a plan for a Brexit?  Nobody, even if you could find a way to unentangle all the legal and financial obligation here.  Just drafting some kind of framework would take TEAMS of high priced lawyers going through REAMS of documents spelling out various and sundry regulations and connections.

The situation is an order of magnitude more difficult than Brexit for the Californicators and the Oregonads though, and all they currently have are internet petitions circulating with maybe a million electronic signatures on them from the Plebes.  They don't even have a popular referendum with a majority vote as of yet, and likely never will.

Returning back to the War of Northern Aggression here in the FSoA, it should be obvious that none of these financial arrangements comes apart peacefully with just a Vote and a Wave Goodbye.  When Bankster financial arrangements get messed up, cannon fodder dies by the truckload.  In that particular exercise in death & destruction, both Blue & Gray Grunts got sent to the Great Beyond wholesale.

Civil War Dead People

Approximately 620,000 soldiers died from combat, accident, starvation, and disease during the Civil War. This number comes from an 1889 study of the war performed by William F. Fox and Thomas Leonard Livermore. Both men fought for the Union.


This of course does not include the many more civilians who died or had their lives destroyed in this war.  What was the outcome of that?  Did anybody get to secede?  No, of course not.  A NEW and "more perfect Union" with all the same old states who were part of the Union before the war were part of it afterward.  Pols in CONgress all made nice with each other again and went out for drinks together on K Street. Carpetbaggers from the North headed down to Old Dixie and bought up assets for pennies on the Greenback Dollar.  The Confederate Dollar went totally worthless.

What most people do not grasp in these secessionary movements is that it is not the State you are trying to secede from, but the International Cartel of the Banking system.  That system goes back even further than the founding of the FSoA in 1776, you can trace this iteration of international banking to the Medici Era, beginning around the 13th-15th Century.

The Medici Bank (Italian: Banco Medici) was a financial institution created by the Medici family in Italy during the 15th century (1397–1494). It was the largest and most respected bank in Europe during its prime.[1] There are some estimates that the Medici family was, for a period of time, the wealthiest family in Europe. Estimating their wealth in today's money is difficult and imprecise, considering that they owned art, land, and gold. With this monetary wealth, the family acquired political power initially in Florence, and later in the wider spheres of Italy and Europe.

A notable contribution to the professions of banking and accounting pioneered by the Medici Bank was the improvement of the general ledger system through the development of the double entry system of tracking debits and credits or deposits and withdrawals.[2]

Giovanni di Bicci de' Medici was the first Medici to enter banking on his own, and while he became influential in the Florentine government, it was not until his son Cosimo the Elder took over in 1434 as gran maestro that the Medici became the unofficial head of state of the Florentine republic.

The Medici family had close connection to the Holy Roman Catholic Church, and produced 4 Popes.

The Medici were a powerful and influential Florentine family from the 13th to 17th century. There were four popes who were related to the Medici and each other.[2]

  • Pope Leo X (December 11, 1475 – December 1, 1521), born Giovanni de' Medici, was pope from 1513 to his death.[3]
  • Pope Clement VII (May 26, 1478 – September 25, 1534), born Giulio di Giuliano de' Medici, was a cardinal from 1513 to 1523 and was pope from 1523 to 1534.[4]
  • Pope Pius IV (31 March 1499 – December 9, 1565), born Giovanni Angelo Medici, was pope from 1559 to 1565. However, he was only distantly related to the other Medici Popes.[5]
  • Pope Leo XI (June 2, 1535 – April 27, 1605), born Alessandro Ottaviano de' Medici, was pope from April 1, 1605, to April 27 of the same year.[6]

So in reality it is pretty EZ to trace back the International Banking Cartel and it's Evil back at least this far, and it likely goes back further than that to the Babylonian Era and the Fall of the Tower of Babel, which I maintain was actually a Counting House, the Computer of its era.  The Christian Church, specifically the Roman Catholics, enabled the continuity of this Evil through the Dark Ages and into the Enlightenment.  This is where the ROOT OF ALL EVIL thing comes in.

The system migrated from its center in Venice, Italy northward as the Enlightenment proceeded and the Colonial Era began in the late 15th Century with the "discovery" of the New World by Christopher Columbus in 1492.  New banking centers emerged in London and in Amsterdam, and the new Joint Venture operations of the British and Dutch East India companies began, the emergent Corporatocracy.  In the late 1600s, the Bank of England was chartered with the genius elucidator of Gravitational Theory and Inventor of the Calculus Sir Isaac Newton at the helm as Master of the Mint in Jolly Old England. At the SAME time, the OTHER independent inventor of the Calculus, Gottfried Wilhelm Leibniz was advisor to Queen Sophie and the House of Hanover in Germany.  It is Leibniz' notation that survives today for doing calculus, not Newton's.  Higher Mathematics merged with Banking during this time, and it has been downhill ever since. lol.  It is no coincidence that England and Germany became the controllers of the Global Banking System and Industrial Civilization, this is entirely the result of the work of Isaac Newton and Gottfried Wilhelm Leibniz.

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Since that time, the same pattern has been followed everywhere as the colonial powers with their Gunz and Cannon overran all the stone age people outside of Europe and Asia, where the Chinese were running a competing Ag Society that was pretty equal to the Western version until the Enlightenment and the Scientific Revolution in the west, which allowed the Westerners to leapfrog the Chinese over this period.  While the Chinese stagnated at an Ag level, the West moved into Industrialization, harnessing first Peat, then Coal and then Oil to leverage up their power.

Every last migration of people and conquest since this period has followed the same pathway.  First the Military drops in to steal the land, then Colonists are dropped in to start working the land and extracting wealth, then the Banksters follow to provide the monetary conduit by which to trade these resources. The main important thing for the Banksters during the whole period up to today was to maintain the hegemony over the system of trade and the money that the value of any particular resource, manufactured goods or services are measured in.  This is completely arbitrary, but you must centralize and control the whole system to make it work.

Most places on earth outside of Europe and China around 1700 had no banking system whatsoever, and many didn't even use money. Once control over a given territory was secured by the Military (armed with Gunz & Cannon), they could then impose their banking system on that neighborhood.  And so it went on, one by one every location on Earth became engulfed in the same system, creating Binding Ties that are almost impossible to break, in fact impossible completely until the system itself breaks. The inability of the Brits to actually "Brexit"; the futility of the Californicators & Oregonads in hoping for "secession" all demonstrate the same priniciple, that while you can Check In to the monetary system here, you cannot Leave, you can only Check Out, aka buy your Ticket to the Great Beyond.  The monetary system we live under is LITERALLY the "Hotel California", "you can "Check Out but you can NEVER Leave."   You are totally trapped by this system, which beginning in this iteration around the 14th Century with the Medicis and has now extended its tentacles around the entire Globe.

Andrew Jackson tried to break this system prior to the Civil War in 1833 when he "killed" the 2nd Bank of the US, the predecessor to Da Fed after the 1st Bank of the US failed shortly after the Revolutionary War.

http://67.media.tumblr.com/52c7a3962cfabc83cb3d34bf76751d99/tumblr_o241j3Tgvz1ss6ffzo1_1280.jpg

Old Hickory did not "kill" central banking at all, he merely set up the Civil War, and then a series of Financial Panics that followed that war  from 1865 through to the founding of Da Fed in secret meetings at Jekyll Island prior to the Christmas of 1913.

1865–67 recession April 1865–Dec 1867 2 years
8 months
3 years
10 months
−23.8% The American Civil War ended in April 1865, and the country entered a lengthy period of general deflation that lasted until 1896. The United States occasionally experienced periods of recession during the Reconstruction era. Production increased in the years following the Civil War, but the country still had financial difficulties.[14] The post-war period coincided with a period of some international financial instability.
1869–70 recession June 1869–Dec 1870 1 year
6 months
1 year
6 months
−9.7% A few years after the Civil War, a short recession occurred. It was unusual since it came amid a period when railroad investment was greatly accelerating, even producing the First Transcontinental Railroad. The railroads built in this period opened up the interior of the country, giving birth to the Farmers' movement. The recession may be explained partly by ongoing financial difficulties following the war, which discouraged businesses from building up inventories.[14] Several months into the recession, there was a major financial panic.
Panic of 1873 and the Long Depression Oct 1873 –
Mar 1879
5 years
5 months
2 years
10 months
−33.6% (−27.3%) [nb 3] Economic problems in Europe prompted the failure of Jay Cooke & Company, the largest bank in the United States, which burst the post-Civil War speculative bubble. The Coinage Act of 1873 also contributed by immediately depressing the price of silver, which hurt North American mining interests.[17] The deflation and wage cuts of the era led to labor turmoil, such as the Great Railroad Strike of 1877. In 1879, the United States returned to the gold standard with the Specie Payment Resumption Act. This is the longest period of economic contraction recognized by the NBER. The Long Depression is sometimes held to be the entire period from 1873–96.[18][19]
1882–85 recession Mar 1882 –
May 1885
3 years
2 months
3 years −32.8% −24.6% Like the Long Depression that preceded it, the recession of 1882–85 was more of a price depression than a production depression. From 1879 to 1882, there had been a boom in railroad construction which came to an end, resulting in a decline in both railroad construction and in related industries, particularly iron and steel.[20] A major economic event during the recession was the Panic of 1884.
1887–88 recession Mar 1887 –
April 1888
1 year
1 month
1 year
10 months
−14.6% −8.2% Investments in railroads and buildings weakened during this period. This slowdown was so mild that it is not always considered a recession. Contemporary accounts apparently indicate it was considered a slight recession.[21]
1890–91 recession July 1890 –
May 1891
10 months 1 year
5 months
−22.1% −11.7% Although shorter than the recession in 1887–88 and still modest, a slowdown in 1890–91 was somewhat more pronounced than the preceding recession. International monetary disturbances are blamed for this recession, such as the Panic of 1890 in the United Kingdom.[21]
Panic of 1893 Jan 1893 –
June 1894
1 year
5 months
1 year
8 months
−37.3% −29.7% Failure of the United States Reading Railroad and withdrawal of European investment led to a stock market and banking collapse. This Panic was also precipitated in part by a run on the gold supply. The Treasury had to issue bonds to purchase enough gold. Profits, investment and income all fell, leading to political instability, the height of the U.S. populist movement and the Free Silver movement.[22]
Panic of 1896 Dec 1895 –
June 1897
1 year
6 months
1 year
6 months
−25.2% −20.8% The period of 1893–97 is seen as a generally depressed cycle that had a short spurt of growth in the middle, following the Panic of 1893. Production shrank and deflation reigned.[21]
1899–1900 recession June 1899 –
Dec 1900
1 year
6 months
2 years −15.5% −8.8% This was a mild recession in the period of general growth beginning after 1897. Evidence for a recession in this period does not show up in some annual data series.[21]
1902–04 recession Sep 1902 –Aug 1904 1 year
11 months
1 year
9 months
−16.2% −17.1% Though not severe, this downturn lasted for nearly two years and saw a distinct decline in the national product. Industrial and commercial production both declined, albeit fairly modestly.[21] The recession came about a year after a 1901 stock crash.
Panic of 1907 May 1907 –
June 1908
1 year
1 month
2 years
9 months
−29.2% −31.0% A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction. The fallout from the panic led to Congress creating the Federal Reserve System.[23]
Panic of 1910–1911 Jan 1910 –
Jan 1912
2 years 1 year
7 months
−14.7% −10.6% This was a mild but lengthy recession. The national product grew by less than 1%, and commercial activity and industrial activity declined. The period was also marked by deflation.[21]
Recession of 1913–1914 Jan 1913–Dec 1914 1 year
11 months
1 year −25.9% −19.8% Productions and real income declined during this period and were not offset until the start of World War I increased demand.[21] Incidentally, the Federal Reserve Act was signed during this recession, creating the Federal Reserve System, the culmination of a sequence of events following the Panic of 1907.[23]

There have been some notable attempts to break this system of control since Da Fed was founded and both ended in Assassinations.  First was the attempt by John F Kennedy with Executive Order 11110 to allow Da FSoA Goobermint to issue its own money based on its Silver Reserves.

Executive Order 11,110

President Kennedy’s Executive Order 11,110 gave the Treasury Department the explicit authority: “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.”

This means that for every ounce of silver in the U.S. Treasury‘s vault, the government could introduce new money into circulation based on the silver bullion physically held there.

As a result, more than $4 billion in United States Notes were brought into circulation in $2 and $5 denominations.

$10 and $20 United States Notes were never circulated but were being printed by the Treasury Department when Kennedy was assassinated.

It appears obvious that President Kennedy knew the Federal Reserve Notes being used as the purported legal currency were contrary to the Constitution of the United States of America.

“United States Notes” were issued as an interest-free and debt-free currency backed by silver reserves in the U.S. Treasury.

As most of you are familiar with I am sure, it was shortly after signing this Executive Order that JFK was Gunned Down from the Grassy Knoll in Dallas.

More recently, former and now dead Dictator for Life of Libya, Muammar el-Qaddafi tried to set up a Gold backed curreny system for all of Africa.  Muammar did not last long after coming up with this idea.

http://i2.mirror.co.uk/incoming/article86897.ece/BINARY/the-body-of-colonel-gaddafi-pic-rex-486010065.jpg

Fuck with the International Banking Cartel, you end up DEAD.  Play ball and start wars, you get to live while you send the next generation of Grunts out as Cannon Fodder on the latest piece of Earth Turf being fought over.  Which of these choices do you suspect The Donald will choose?  Try to stand up against the IBC or declare War on somebody?  Does The Donald strike you as a self-sacrificing sort of guy?

Given all of this history here, do you really think anybody will be "seceeding" from any of the Nation-States they currently are part of to become "independent" just by voting in Referendums?  Will the Frogs Frexit the EU when Marine LePen gets elected? Does Marine have The Plan that Nigel and BoJo did not have for negotiating a Brexit?   Will Beppe Grillo be able to joke his way out of the EU with an Italeave?  In a Pig's Eye!  None of these dissolutions can occur without the entire monetary system collapsing on itself, in which case (and inevitably at some point) EVERYBODY LEAVES!

Will this dissolution end in a peaceful manner with all the unhappy people all over the globe just waving goodbye to each other and saying "Good Luck, Godspeed, Wish You Well"?  My chances of Miraculous Recovery of my 20 year old healthy body AND winning the LOTTO at the same time are better than this.

Right now, all this secession talk along with the election of Populist Demigods like The Donald is just the warm up act for The Big Show to come, which will make WWII look like a Sunday Picnic.  A "peaceful resolution" to the problems of Resource Depletion and Population Overshoot simply does not EXIST.

Your best options at the moment are just to Duck & Cover, and try to get out of the way of the mayhem to come if you can.  Marching and Demonstrating for Peace, Love and Understanding at this point will work no better than meeting in Paris to resolve to voluntarily cut carbon emmissions.   Voting in the electoral charades is just more self-flagellation, you'll just come out the other side of that with scars on your back.

On the upside here, on a historical timeline, this will all be over pretty quick, 20 years tops IMHO.  So if you happen to be one of the Lucky Ones who survives the maelstrom  to come, you'll have the opportunity for a reboot, although granted with a significantly warmer and degraded planet.  I wish all of you who make it through the Zero Point the best of luck with this, and I will be rooting for you from the 50 yard line of the Great Beyond.  I sure as hell will not be amongst the survivors.  Remember the words of Illuminati Scumbag Sir Winston Chuchill as you fight the good fight:

http://www.ginnytonkin.com/wp-content/uploads/2015/08/going-through-hell.jpg

Private Property Myths & Legends

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Published on The Doomstead Diner on November 13, 2016

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http://www.thebluebook.com/inc/img/qp/144608/deahome.jpg "Private Property" is one of the most dearly held concepts you find amongst Western populations, and it is the foundation level principle for Capitalism.  For the average J6P, the sanctity of Pirvate Property is embodied in the cliche "A Man's Home is his Castle".  If you own a piece of land, what you do with it is your business and nobody else's.  Whatever wealth can be extracted from that land belongs to you and nobody else.

Just about none of what most people believe about private property is true of course, it's a fiction created since the beginning of the Agricultural Revolution around 10,000 BCE.  Around that fiction a body of laws developed over time, probably beginning with the Babylonian civilization but pretty well matured by the time of the Roman Empire.  We don't need to go back that far though to see how these concepts and laws developed, it's well represented in more modern history beginning with the Feudal period in Europe after the collapse of the Roman Empire.

In the aftermath of that collapse, the central goobermint of Rome was lost and populations dropped precipitously.  Rome as a city at it's peak during the Empire years is estimated to have been around 1.6M people, after the fall it dwindled down to fewer than 20,000 human souls.

Out in the provinces in places like modern Germany and Great Britain, populations fell back as well, to Hunter Gather level and basic horticulture.  The tribes that survived had no private property, they only controlled their patch of land through force, as a group, although they always had leaders, chiefs of the tribe.  Since force was necessary to maintain control over a patch of land, these were generally the toughest warriors.

http://cdn.zmescience.com/wp-content/uploads/2011/08/round-table.jpg Over time as battles were fought, won and lost by one group or another, feudal states began to emerge out of the ashes of the Roman Empire.  Successful Chiefs became Kings, and then as the territories controlled by a given King expanded, you got smaller Kings ceeding authority to the bigger King and you got more levels of "Noblemen" who now had their own piece of property to protect and defend, but also had to pay the Big King taxes on that land, because now all the land really belonged to HIM.  He was the "Crown" of this incipient Ponzi.

In order to raise money to pay taxes to the King, the Dukes had to raise this money (or grain, or lumber etc) from the population of the land they were now essentially renting from the King for the tax payments levied each year, which could get pretty onerous.  The folks who live on the land, the serfs, own nothing.  They are granted a place to live and enough to eat by their "Lord", as long as they produce enough surplus each year to both keep the Duke living well and paying his taxes to the King.

Over time, the feudal system of serfs who were basically land slaves morphed into incipient capitalism, and the Dukes would "sell" off pieces of their land to individual property holders, who then would be responsible for paying taxes on their smaller property.  You can see pretty clearly here how the Ponzi is developing.  The guy (gal) at the top, the King (or Queen in the case of England during much of the colonial era of the New World) did REALLY well, sieving up wealth from the entire population under his goobermint, known as Monarchy during this period.

http://www.historymuseum.ca/cmc/exhibitions/hist/cadeau/images/int01b.jpg Upon arrival in the New World aboard their sailing vessels, having had their vessel Chartered and given Letters of Marque by the Monarch, upon landing on some beach the Captain would jam a flag into the ground and exclaim, "I claim this land in the name of Elizabeth, Queen of England, Duchess of York, Defender of the Faith…" yadda yadda.  You wonder how the House of Windsor got so filthy rich?  REAL ESTATE!  They owned all of North America at one point, and even after the Revolutionary War they still owned plenty and still do in Canada.  Probably the single greatest theft of all time.

Now, none of the natives who are at Hunter-Gatherer level for the most part have any clue whatsoever that the Queen now owns all their land.  They don't even have a concept of land ownership at all.  When they get offered $24 in Beads for Manhattan Island, they think this is a sweet deal!  They don't grasp that signing this contract means they lose all rights to hunt on the land, in perpetuity.  Over time though eventually they do grasp this as more Europeans show up and keep encroaching on more and more land.  Treaties are signed under EXTREME duress where they are forced to cede more and more land, getting squeezed down to a few "Reservations" which are supposedly independent, but in reality the land is held "In Trust" for the tribe, by you guessed it, Da Federal Goobermint.

Now in the creation of the new so-called "Democratic State", instead of a single person like the Queen of England holding title to the land, the theoretical collective of the whole state and all the people it represents owns the land.  "We" as a people during the Revolutionary War stole the land from the Queen who stole it originally from the First Nations people who didn't steal it from anybody human since there were no humans here before they crossed over from Asia.

http://cdn.history.com/sites/2/2015/04/hith-oklahoma-land-run-E.jpeg This Goobermint can now sell, lease or make land grants to anyone, for instance they gave a whole lot of land in Oklahoma away to settlers back in the 1800s.  They sell leases for mineral rights, and they make rights of way for railroads.  What Da Goobermint gives, sells or leases, it can also take back through Emminent Domain.  In general this only occurs to individuals without much power, large land holders and corporations rarely get property clawed back this way by Da Goobermint.

As the industrial revolution progressed, land property was not the only form of property that becae important, factories and the "means of production" were another form of property that developed.  Said factories also were mostly owned and financed by the aristocracy that began the whole Ponzi to begin with, and not only did they own these factories, they also owned the money used to buy and sell these properties.  That was the thing not given up in all the wars no matter which side ever won, the money creation and banking business through which all these property sales are ever done, and the measure by which a property is valued at.  You can trace that power back to at least Medici Banking in the modern era, although it goes further back through the Holy Roman Catholic Church and to Rome before that.  There's a reason the Vatican has so much money too, you know.

So now there was a whole new level of property that needed to be taxed in order to function, and that taxation comes in the form of the profit taking by corporations and by the interest paid to banks on all the money flowing around the society, which is all debt money created by the banks themselves.  Goobermints don't create the money, they themselves have to borrow it from the banks in the form of Goobermint Bonds, which the banks then buy from Da Goobermint with freshly created money, here in the FSoA by Da Fed, a private corporation wholly owned by the TBTF Banks themselves, Goldman Sachs, JP Morgan Chase, Rothschilds, Rockefellers, etc.

Now that we have some background in the evolution of Private Property and its relationship to Money & Taxation, we can diagram out the progression here and how in reality, all property on earth has gradually been taken under ownership of ever larger entities over the last 10,000 years, and virtually no property is really private anymore.

property-ownership

Each stage in this progression requires ever larger and more onerous forms of taxation, interest charges and profiteering.  More and more of the global wealth is aquired by fewer and fewer people all the time, on a percentage basis anyhow.  The population at large, which at the top of the infographic all are relatively equal in wealth, at the bottom of the infographic are further and further impoverished as more and more wealth is sieved to the top of the people who control the corporations which then controls Da Goobermint, in the kind of "soft" Fascism you see today in the FSoA.  It's only soft in the sense that here at home, they're not yet rounding up the poor and sending them to the Gas Chambers and Incineration Ovens, but overseas are taking a much harder form of Fascism and bombing whole countries back to the Stone Age.

http://i2.wp.com/www.techchecknews.com/wp-content/uploads/2016/09/foundation-0020-elon-musk-tesla-spacex-large.thumb_.jpg?resize=310%2C165 What "Private Property" does is to sieve wealth from the hands of the weak and into the hands of the powerful.  How you gain power has evolved over the years, today it's not generally the biggest toughest Warrior, it's guys like Bill Gates and Elon Musk, who by virtue of intelligence rise to become the best thieves and con artists of their time.  They create their own conduits and then seek to monopolize them.  The Big Gorilla was fabulously successful with this in gaining a virtual monopoly over the OP systems of personal computers as they evolved, Elon Musk is trying to do the same thing by gaining virtual monopoly over battery technology.

On a smaller level, there are many other rentiers and professionals who insert themselves into this flow of funds upward, and then themselves become moderately rich as well.  Gated professions such as Medicine and Dentistry provide a legalized form of theft, which allows these folks to sieve wealth from the large population below them dependent on their services.  People who buy real estate and then rent it to others at a higher cost than the property costs them to run are also sieving the wealth upward this way.  Because they operate on a much smaller level than true champions of criminality like Bill Gates and Elon Musk, they don't get near as rich as those guys do, but they do a whole lot better than the folks beneath them in the pyramid they are sieveing wealth from.

There is an irony here, which is that these folks who insert themselves into the medium levels of the pyramid are the ones who are MOST pissed off about the taxation of their money by the people who are higher up the ladder than they are!  The thing is, they are doing exactly the same thing as those above in the chain, just at a lower level.  The issue here is that since the bottom level of the Ponzi has already been sucked dry of wealth, it's the next level up that needs to pay the freight to keep this system going.  Since they don't have as much power as the next group up above them, they will be taxed into poverty just as they taxed the level below them.  And then on we go up the chain until the whole Ponzi collapses.

https://blogshalom.files.wordpress.com/2015/01/wpid-first_they_came___by_eelyt-d3eufv3-2.png

http://www.thetravelclub.org/images/travelogues/monopoly/Monopoly.jpg To return to the fundamental point of this post, it is the system of "Private Property" which causes the vast inequities we see in the world today.  In the modern era, the folks that have become the wealthiest are those who gained control and monopoly over various technologies and conduits as they emerged.  The Rothschilds gained control over the credit creation bizness, the Rockefellers gained monopoly over the energy bizness, Gates got monopoly over the Personal Computer bizness, Bezos gained control over the Online Retail bizness, Suckerbug got control over the Social Media bizness, etc.  The greatest inequities and theft are at the top of the pyramid of course, but they exist all the way down to the bottom layer, which gets larger all the time as middle levels are squeezed down and as the top gets smaller all the time through mergers & acquisitions.

The origin of the whole scheme begins with theft though, the theft of the earth by powerful people from the weaker ones.  Whether it was the Europeans rolling over the First Nations people in the colonial era or NATO bombing the Middle East today to control the Oil conduit still remaining there, it's all about power and theft.  The laws surrounding Private Property simply codify this and make legal certain types of theft, but it is all still theft up and down the line, although theft at the bottom most layer is very minor, a misdemeanor in the grand theft ongoing here over all these centuries, and even millenia.

Private Property and Money are linked, two sides of the same coin.  You cannot run either of these systems without creating vast inequities and classes of Haves & Have Nots, which are fundamentally at odds with one another. At a certain critical mass, the population of Have Nots becomes so large that the population of Haves can no longer afford to keep them in check anymore, they can't afford all the police they need to protect "their" property, food riots break out and the whole system comes a crashing down.

How far away we are from such a critical mass in the FSoA and other places still functioning like Germany and China is an open question, but what is not open to question is that this Ponzi will crash and the current system will come to a close, just as the Roman Empire did.

What we need to do now is to plan for that day, that hour, that minute, that nano-second when it does finally roll over and die; and decide now how as a species we will live on into the future, at least for as many as survive this cataclysm anyhow.  That future if we are to have one CANNOT include Private Property and Money.

They are the Root of All Evil.

money-is-the-root-of-all-evil_2577-l

Georgist Macro-Economics and the Land Value Tax

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Published on Credo Economics on October 15, 2016

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The ideas of Henry George are still very relevant for economic theory. A site value tax would help to stabilise property market cycles and promote greater spatial efficiency. However, while helpful, market mechanisms like a site value tax will not, on its own, fully resolve the environmental crisis.

Why the real estate market plays an integral role in macro-economic conditions

Given the way that land was dismissed out of the theory, including in the writings of John Maynard Keynes, it was not that surprising that it has been left to a few economists working in the Georgist tradition to explore and unravel the interplay between the banking system and the real estate, housing and land markets in the explanation of the economic cycle. For example, (Harrison, 2005) and (Anderson, 2009)

The link between real estate and finance is clear and obvious. A great deal of the collateral underpinning bank lending is real estate and housing. In the UK about 70% of bank collateral is tied up in this way, with a similar large proportion in many other industrial countries. It is therefore not surprising that there is a close relationship between the economic cycle in the real estate market and financial crises.

Because it is “embodied”, any form of economic development has a spatial dimension. It “takes PLACE”. Economic development involves the need for locations – for factories, offices, roads, railways and housing. Some sites emerge as particularly favourable – particularly when opened up by infrastructure investment – often paid for by taxes. The wonder of the market economy is claimed to be that if prices signal that something is profitable more of that thing will be created. But you cannot increase the amount of land, and each location is always unique. So, during economic development booms, the land price soars in specific locations (the capitalised rents for owning particular locations). Recognising which locations to get hold of is a way of making a lot of money. You do this by getting credit to buy up land and property and then persuading politicians to spend tax money on infrastructure to boost the value of the purchased locations.

Tycoons can make serious money like this – as long as landowners can ensure that the value that they capture remains untaxed. A modern day example can make this point clearer. London’s extension of the Jubilee Tube Line to Canary Wharf cost £3.5 billion but increased property values by an estimated £13 billion along the route. Landowners did nothing to earn this windfall except owning the land. (TransportforLondon, 2004)

So who does create this rising value of land? What people are prepared to pay for a location reflects the value of adjacent amenities which are either public goods financed out of taxes or advantages created by the surrounding population living there, for example, social networks; a rich job market; services and cultural activities. These collective amenities incur costs and need to be maintained so it is only fair that the landowners should pay for them in taxation. When no taxation occurs, landowners get the desirable features for free and someone else pays, wealth is transferred into landowner pockets – as well as enriching the banking sector. (Lyons, 2012, p. 104)

The chief economics commentator for the Financial Times, Martin Wolf, put it succinctly when he described the gains made by landowners, as “the reward of owning a location that the efforts of others have made valuable”

Property market cycles and their bubbles

By making money for themselves like this from other people’s efforts, the finance and real estate sector also seriously destabilise the economy. Property market cycles tend to be about 14 years in length. The long run rate of interest is about 5% and, bearing in mind the rent that people pay, affordable house prices work out at a sum which is equal to about 14 years in rent. If land, house and property prices are bid any higher, debts become unserviceable and the housing and property market grinds to a halt.

Economic cycles tend to end in “bubbles”. The rising price of particular classes of assets like land or property creates a collective euphoria or mania. People borrow to buy this asset, or invest all their savings in it on the anticipation that they will make more money as its price continues to rise. Their credit inflated purchases chase up the price until the price of the asset and the servicing of debt become unsustainable. Confidence falters and the crash occurs. The big money is to be made by getting in a bubble early and getting out early. Banks are left with debtors who have lost money and cannot pay up who then have the collateral seized from them.

None of this would happen if the original idea of the Physiocrats, Smith, Ricardo and George had come to pass – that the landowners forfeit the rising land values (capitalised rental values) through a tax. A land value tax would remove the incentive for land price speculation pumped up by bank credit creation. There would be no point in speculation because gains would go to the taxpayer. There would be no
point in buying and hoarding land and then leaving it unused, on the anticipation that its value will rise. Hoarded land would have to pay tax, and if it was unused, it would still pay a tax, thus, speculative holding of idle land would lead to loss. A site value tax would release land onto the market and actually bring down land prices.

Spatial inefficiency

The failure to impose a site value tax has far reaching knock-on consequences for the natural environment because of spatial inefficiency. If, for example, we look at Ireland we can see that the speculative property boom that led to the financial collapse of 2008 led to a lot of building that was never completed, as well as a dispersed settlement pattern that is very inefficient in the use of space, infrastructure and resources. In the absence of land value tax, the system of land planning was abused to zone inappropriate areas as development land. Rezoned land went up in price and was sold on to developers for a windfall profit in which local authorities revenues were also swollen. The resulting spatial allocation of building resources made no sense. Ireland is now one of the most car dependant societies in Europe. Spread out like this, many Irish people have a sedentary and car based lifestyle which is partly why 61% are overweight or obese. (Osbourne, 2012, p. 134)

This car use also generates greenhouse gases making Ireland vulnerable to oil depletion and rising fuel prices.

Had there been a site value tax, landowners would have had to pay for vacant sites as well as used ones. They would have had an incentive either to use empty urban spaces or sell these spaces to those who would use them. This would have protected the countryside by making urban sprawl unnecessary. Cities and towns would have used urban space more efficiently and compactly. The need to travel distances would have been reduced and more people would be able and willing to get around by foot or by bicycle.

Arguments like these are persuasive – they suggest that smart taxation will go some way to help resolve a number of serious economic, environmental and social problems. It is why it is so encouraging that, in late 2014, the Scottish government are considering land reform and measures such as a land value tax. (Hunter, J. Peacock P. Wightman, A. Foxley M. n.d.)

This has led some thinkers to conclude that if “land” (expanded as a concept category to mean all “natural resources”) is given a price, either as a tax, or through some other mechanism like auctioning permits to authorise natural resource use, then all will be well. Humanity will be able to resolve the environmental crisis solely with market mechanisms. In the next few chapters we will examine why it is not as simple as that because this is still framing human-nature interactions inside an anthropocentric view. If we frame things through markets driven by what humans find desirable we are still seeing nature as a “resource” which is only of instrumental value. This very reductionist, human centred attitude is itself a major part of the problem.

Global Cooling Threatens Life on Earth

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Published on The Daily Impact on September 29, 2016

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I know. Not what you were expecting. (Photo by Serendigity/Flickr)

While the planet’s air, water and land are heating to dangerous levels because of human pollution, the world’s trade is cooling off, slowing down and coagulating in the deepening chill, threatening the well-being of every country and virtually every person. I remember very well in 2008 watching the most powerful members of Congress emerge from a come-to Jesus meeting conducted by the Treasury Secretary on what was about to happen to the world’s financial institutions and America’s economy. They had the pale faces and staring eyes of people who had just been introduced to the angel of death.

The world of trade and finance is confronting such a moment now, and is every bit as much in denial as it was in 2008. This time it’s not America’s Lehman Brothers tottering into an early grave and pulling half the world in with it; it’s Deutsche Bank.

Germany’s largest bank is not doing well. Its operating loss last year was almost seven  billion Euros; its share price has fallen almost 70% since April of 2015, and dropped over seven per cent in a single day this week, to just over 10 Euros. Go back to September of 2008 and read the news reports about Lehman, and feel the burn.

If Deutsche Bank’s share price drops another Euro, the total capitalization of the bank will be less than 14 billion Euros, which is the amount of a fine the U.S. Department of Justice has proposed to levy against the bank for its sins in handling subprime mortgage derivatives leading up to the deadly financial eruption of 2009. It’s not the only trouble the bank is in; it’s under investigation for transgression in currency trading, precious metals trading, and money laundering. It recently settled a massive case alleging manipulation of interest rates. (That’s it, I’m moving my money to Wells Fargo. Oh, wait….)

Masters of the Universe are talking openly about — and betting massively on —  a Deutsche Bank failure (yes, it’s another Big Short). The German government has vowed not to bail it out, but the bank’s assets, ravaged though they may be, represent nearly 60% of Germany’s gross domestic product. This is the very definition of too big to fail.

Meanwhile Germany’s second-largest bank, Commerzbank, which has lost nearly 40% of its market value this year, has just announced a desperate reorganization plan. It’s firing 10,000 people and downsizing operations in a manner that strikes some as more like butchery than surgery. Moreover, the seven Landesbanken are hemorrhaging capital because the global shipping industry, in which they are heavily invested, is imploding.  

Germany is hardly the only country whose banks are deeply troubled right now. This week the Organization for Economic Cooperation and Development — comprising 34 member democracies committed to improving world trade — issued a stern warning about pursuing toward the brink of disaster the policies that led to the crash of 2009. The warning was not only to Germany, but to Japan and the United States as well.

 “These developments [i.e. the awful performances of banks and corporations] exacerbate the challenges to improving well-being of people in both advanced and emerging economies.” The problem for the OECD is this: people are consumers, and if consumers don’t do well, they can’t consume enough, and in consumption-based economies, that’s a cardinal sin.”

The central banks, it seems to me, are trying to feed the wrong end of the horse; stuffing perfectly good hay in places where it doesn’t belong, while the animal starves. Making sure the banks and corporations have tons of money to play with, when they don’t use it to make products or hire people, helps no one but people who do not need help.

Of course, enormous forces are at work propping up these zombie banks and their pretensions, staving off any day of reckoning until the day after tomorrow, just as they were doing in 2008. How did that work out for them, anybody remember? But whatever they do, they cannot change the fact that out where stuff is manufactured, and shipped, and sold, the temperature is falling, the pipes are freezing up, and a new Ice Age has taken hold. Stop expecting us to congratulate you for giving away free ice cubes.

[Now, as the world churns, we return you to our regularly scheduled news programs, featuring Donald’s sniffles, Hillary’s emails and who’s running for president in 2020?]

SEE ALSO: “They’re Parking the Trains and the Ships and Planes…”
“World Trade is Coming to a Halt.”

Marginal Productivity Theory

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Published on Credo Economics on September 21, 2016

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This chapter describes the “marginal revolution” of neoclassical economics. The idea of marginal productivity and payments to “factors of production” was developed for ideological reasons to counter thinkers like Marx and George. The theoretical framework learned by generations of students is contradicted by the evidence. The ideas of capital and land in neoclassical economics are incoherent.

Economists tell us how consumers on the market, “voting” with their purchasing power got what they wanted and wealthy landowners got the economic theory that they wanted. It was economists like J.B. Clark that were necessary if your economics department was to become well-funded.Clark moved to Columbia University in 1895. The university was blessed by funding from Wall Street banker J. P. Morgan.

The key idea for theorists like Clark was that “factors of production” earned what they added to production “at the margin”. If adding an extra worker to the payroll adds more to production, sales and revenues, than that worker costs to hire, then it was in the interests of the employer to hire the extra worker. The same logic continued to apply as long as each additional worker enabled more money revenue to come in from extra production and sales than they cost. The process of adjustment by hiring more workers would stop at the point where the last worker (marginal worker) was adding as much to enterprise revenues as they were costing. Now what could be fairer than that? Employers would employ more workers until a point where each worker is being paid the same amount of money as the value they have added to production can be sold for.

The same logic is applied to explain the income being earned by the other “factors of production”, namely, an amount equal to the revenue from the sale of their marginal products. This idea was an ideological construction that suited business interests nicely.

Critics have pointed out the flaws in this reasoning. A technical argument about where a business person will no longer find it worthwhile, under tightly defined conditions, to add more and more labour to his capital, has been fudged as an ethical argument justifying the income distribution between that business person and his employees and ignoring the underlying social relationship between the wage labourer and the capitalist. In the words of Joan Robinson:

The very essence of the theory is bound up with a particular institution — wage labour. The central doctrine is that “wages tend to equal marginal product of labour”. Obviously this has no meaning for a peasant household where all share the work and the income of their holding according to the rules of family life; nor does it apply in a [co-operative] where, the workers” council has to decide what part of net proceeds to allot to investment, what part to a welfare fund and what part to distribute as wage. Joan Robinson quoted in (What is Wrong With Economics, 2009)

Neoclassical economics thus, emerged, originating in an ideological imperative, namely, the justification of property incomes. This new approach concocted an elaborate fiction that was subsequently fed to each generation of students which purports to describe how companies decide how much they are going to produce.

If you ask most business people what determines how much they produce they will probably say that they are limited by how much they can sell or how much capital they can raise to expand production – which will also depend on them convincing a capital provider of how much they can sell. To the neoclassical economist, however, what limits what a firm will produce is not only that it may have to reduce its prices if it tries to sell more but that, as the firm increases, its production its costs will rise.

In the textbooks there is a picture of what happens in the production arrangements of companies which goes like this: If a company wants to expand its output “in the short run”, it will find itself unable to alter the availability of some “factors of production” like its premises and its capital equipment. However, it will be able to vary the input of other factors of production like its labour force. But adding more and more workers to the fixed quantity of capital equipment will eventually lead to “diminishing returns”. The neoclassicals want us to believe that output will increase but at a diminishing rate. The reason is that the ratio of workers to capital equipment becomes less than optimal after a certain point. Indeed at some point adding another worker would lead to no extra output at all. The last worker would simply get in the way and might even reduce total production.

The implication of “diminishing returns” from the variable factors of production (e.g. labour) is that if companies try to expand output they find that their costs will rise. Let us illustrate by imagining a company in which, in the early stages of an expansion process, there is little labour and much capital equipment. In this company, in order to expand production by 10 units a week it would require one extra worker costing an extra £100 a week to hire. An example of what “diminishing returns” would mean is that, to produce a further 10 units a week beyond this might require 2 extra workers costing £200 to hire. An extra 10 units a week again might cost 4 extra workers at £400. This being the case, if this imaginary company is to be induced to produce more and more, its owners will want to be able to sell the greater number of units at higher and higher prices so that they can cover the higher and higher costs. Since the company is unlikely to be able to get consumers to buy more at higher prices its expansion will be choked off by the diminishing returns which has led to rising costs.

Well, that is the textbook story anyway – but it is a conceptual house of cards which was dreamed up for ideological purposes in order to justify the distribution theory. The idea of diminishing returns is 164 important because, if you think about it, it implies that to employ more workers the labour force must take a wage cut. In the imaginary story an employer who employs more people is getting less and less additional product for each additional worker. To induce him to do this, he has to be able to pay them less to make it worth his while. It’s obvious then, isn’t it that, if there is unemployment in the economy, it is because wages are too high. Wouldn’t you know it – once again the poor have only themselves to blame.

Steve Keen quotes Galbraith:

Neoclassical economics can be summed up, as Galbraith once remarked, in the twin propositions that the poor don’t work hard enough because they are paid too much, and the rich don’t work hard enough because they are not paid enough. (Keen, 2011, p. 119)

What all of this has got nothing to do with, however, is the real world. This theory has been tested against empirical research over a hundred times and shown not to be true. If the theory were true it would be demonstrated by rising costs as companies try to expand, but these are not the findings. A few companies have cost structures like this but the vast majority don’t. The evidence is in cited in Keen’s book Debunking Economics.

For example, a study by Alan Blinder surveyed 200 medium to large US firms which collectively accounted for 7.6% of America’s GDP admitted that:

The overwhelmingly bad news here (for economic theory) is that, apparently, only 11% of GDP is produced under conditions of rising marginal cost… Firms report having very high fixed costs – roughly 40% of total costs on average. And many more companies state that they have falling, rather than rising marginal cost curves. While there are reasons to wonder whether respondents interpreted these questions about costs correctly, their answers paint an image of the cost structure of the typical firm that is very different from the one immortalised in the textbooks. Blinder 1998 quoted in (Keen, 2011, p. 126)

Blinder’s research is not alone. Steve Keen mentions 150 empirical studies. Every study found the majority of firms acting in a way that contradicts the textbook theory. (Keen, 2011, p. 125)

The reason is that the idea of “diminishing returns” is wrong. It is far more accurate to describe short term expansion (or contraction) in an industrial economy as involving “constant returns” as production is scaled up or scaled down. The “constant returns” occur at the same time as an increase or decrease in capital utilisation.

Here is another imaginary example that is a little more realistic. You wish to set up a business in the clothing trade employing (mainly) women who each work with a single sewing machine. You do it by acquiring premises and putting a number of sewing machines in the factory. The price of the premises, the sewing machines and other equipment are your fixed costs. As you start up you may use only half of the sewing machines and half of the production space of the factory, depending on the size of the market but if your product becomes more popular you hire extra women to sew using the otherwise unused sewing machines and the previously unused factory space. The sewing machines and space brought into use do not cost any more. These are fixed costs that were already being paid for and are now being spread across a larger volume of production. Nor are there any “diminishing returns” to the increased labour input, because, just as before, each worker works with one sewing machine and in the same amount of space, specifically for their work.

Fact is that production in an industrial economy requires an often tightly defined specialisation of labour functions and/or a specific relationship of workers to production equipment. There is no point in varying the worker to sewing machine ratio. Two or more workers per sewing machine at any one time makes no sense at all. Likewise, at any one time, just one lathe will be used by just one worker. A blast furnace has just so many workers with specific functions. The technical ratios between specialist workers in teams and between the workers and machines cannot be varied. To have flexibility one must have spare capacity – and then employ that capacity in the appropriate ratios that make for team work and relate workers with specific trade skills to specific kinds of equipment. The capacity, unused and used, represents a fixed cost that, when spread over increasing production, brings unit costs down. Because expansion is an expansion of all factors of production in a technically defined and fixed ratio, no such thing as diminishing returns occurs. What occurs is that capital utilisation rises or falls spreading the fixed costs over a varying output.

All this was largely worked out by a critic of the neoclassical school, Piero Sraffa in a paper written in 1926 that was published in the Economic Journal (Sraffa, 1926 ). It forms the basis for the chapters in Steve Keen’s book from which I have taken this very brief account. Keen quotes Sraffa:

Business men, who regard themselves as being subject to competitive conditions, would consider absurd the assertion that the limit to their production is to be found in the internal conditions in their firm, which do not permit of the production of a greater quantity without an increase in cost. The chief obstacle against which they have to contend when they want to gradually to increase their production does not lie in the cost of production – which, indeed, generally favours them in that direction – but in the difficulty of selling the larger quantities of goods without reducing the price, or without having to face increased marketing expenses. (Keen, 2011, pp. 116-117)

This way of explaining things helps to explain the rise and rise of the marketing industry. If, as neoclassical economists claim, it is diminishing returns and rising internal costs that prevent companies selling more and more then why would they bother to advertise? If the adverts worked they would be pushing themselves into a zone where rising internal costs would choke off further production anyway. On the other hand, if unit costs fall as production expands, then as long as the price is greater than that unit cost the company will make more the more that it sells. What limits the company then is the ability to sell its product. If the company reaches full capital utilisation then what limits it is the ability to raise 166 new capital to expand – and that partly depends on being able to convince an investor of increased sales in the future.

Capital in neoclassical theory

The fact that the theory does not match reality does not stop marginal productivity theory and diminishing returns being reproduced in the textbooks because it is useful ideologically as an “explanation” of income distribution. “Land”, “labour” and “capital” “get what they contribute at the margin” according to the theory when things are presented in this way. It is not within the scope of this book to go into these ideas in depth because I am trying to review the foundational issues that underpin economics in a simple way. Unfortunately, it is not possible to ignore them either and, in fact, there is a whole set of questions about “capital theory” where Ricardian economists in Cambridge in the UK and neoclassical economists in Cambridge in the USA (at the Massachusetts Institute of Technology) clashed about how to understand the “returns to capital”. These are described in Steve Keen’s book Debunking Economics where he does a good job in describing a very complex debate in which neo-classicals like Samuelson eventually acknowledged that the Cambridge economists in the UK had established their point. In effect, the UK economists challenged the idea that profit is the reward for capital’s contribution to production.

For neoclassical theory to be a complete picture of income distribution in society it has to scale up from how individual firms operate. This meant that economists needed to assume that units of labour and “capital” were identical or homogenous entities that move between economic sectors and firms as they adjusted continually to try to achieve their optimal outputs. Now, that idea is understandable when it comes to labour moving from one company or economic sector to another. But a loom cannot “flow” into work as a lathe. A lorry is a piece of capital equipment that cannot flow into use as a computer. Land cannot flow either. It is stuck where it is.

Economists have had lots of fun over the years dreaming up metaphors to try to get around this problem. Much effort has been devoted to creating “models” where “capital” as a physical entity is thought of in malleable terms in order to rescue neoclassical distribution theory. Capital in a “putty” form, or models using capital that could be reconstituted in a different form like Meccano, have been put forward. This was all in order to have “capital” that could move from sector to sector.

J B Clark started the process with what was called the “jelly theory of capital”. Naturally, Clark recognised that capital goods differ from industry to industry and from time to time. To cope with this conceptual problem, he regarded capital goods as being specific and transient embodiments of a general and permanent “essence of capital”. This is the fund accumulated by the economy’s savings up to any point in time and ploughed into specific capital goods.

Mason Gaffney describes this way of thinking as “endowing capital with a Platonic essence”. The ancient Greek philosopher Plato thought that what we experience in the physical world is an imperfect reflection of eternal perfect “forms” that exist somewhere. Ideal objects that capture the “real essence” of the things dimly reflected in our imperfect everyday physical existence. Thus, particular machines – lathes, looms, tractors – were an imperfect reflection of the “essence of capital”. The rationale of thinking in this way is something like this: capitalists use their resources in processes that “turns over” capital. Assuming they are involved in production they start with money, go on to buy machines, buildings, materials and hire workers, organise a production process and then sell the products to make a “return” which brings their money back with, as they hope, more money than they started. In this process, and over time, they will hold back some of the money returned to replace and buy new machinery. (Gaffney, 1994)

However, the only thing that looms, lathes and lorries, as items of capital equipment have in common is the fact that they have a money value. Neoclassical economists ignore the differences and just count the money value of the different kinds of machines as the common element making for comparability and measurability. But there is a problem of using price as a common way of counting different kinds of capital goods. The price of capital goods depends on the rate of profit and the rate of profit is the very thing that you are trying to explain. What one can do, however, is think of “capital goods” as commodities which enter into the production of other commodities. With this idea, Piero Sraffa at Cambridge UK succeeded in showing that you could make calculations based, not on money prices, but from calculating commodity inputs into the economic process as “dated labour inputs”. Ultimately, any lathe, loom or lorry is made with labour and with other inputs. These other inputs were made from labour and even earlier inputs. The earlier inputs were made from labour and other inputs made even further in the past and so on. If you go back far enough, you only have labour inputs – but you have to adjust your calculations to allow, at each stage, for a profit rate which has been taken out; and for the fact that different kinds of commodities enter into the production of other kinds of commodities in variable ratios.

What this exercise establishes is that, rather than the rate of profit depending on the amount of capital used as neoclassical economists would like us to believe, the measured amount of capital depends upon the rate of profit.

This, in turn, grounded the idea that the distribution of income is not the result of impersonal market forces but reflects the power relationships between different social classes as well as the technical capabilities of factories.

In later chapters I will explore ideas about production not developed by either Cambridge, England or Cambridge, USA – to explore the idea that the production of society depends on one input in addition to labour that enters into absolutely all economic activity – energy. Since energy is a commodity that enters into the production of all commodities, it is absolutely crucial and, as we will see, if the amount of energy needed to produce energy rises, and if the amount of energy needed to produce other raw materials rises too, then society will be in deep trouble.

J B Clark was not just interested in providing ideological cover for the property income to capitalists. He was concerned about landed income too. Perhaps conscious of the need to counter the arguments of Henry, George Clark described “land” as just another purchased input, another form of capital. Adding land to the picture of capital as Clark did was, as Tobin pointed out, a step that destroyed the equation of the capital stock being equal to the society’s accumulated savings. One may save resources (hold back from consuming them) in order to create machinery instead, but no one saves up to create land. Leaving aside polders and other reclaimed land, land is already there.

No matter – for Clark capital could “transmigrate” into land – a metaphor that made land and capital the same kind of stuff. This theoretical sleight of hand had the useful function of getting rid of the Ricardian theory of rent and provided the appearance of an answer to Henry George in the process.

Henceforth, most economists just focused on “labour” and “capital” as concepts to explain production. Land, with its distinctive features – spatial, temporal and environmental, largely disappeared from economic theory.

Thirty years after Clark, John Maynard Keynes wrote his General Theory of Employment, Interest and Money and declared that the influence of land was restricted to an agricultural age. It was capital and particularly, financial capital, which was the important influence in the modern age (cited in Harrison, 2005, p. 142)

Trying their best to be helpful to the elite, the idea of rent was also muddled by creating a new definition for it. “Economic rent” is now said to be the difference between what each factor of production is paid and how much it would need to be paid to remain in its current use – a definition of rent that rests upon the idea of opportunity cost.

Taking land out of economic theory meant that economic theory was “dis-located” or “dis-placed”. The conceptual category of “land”, and the linked concept of “rent”, represented real influences in the world that the system of ideas called “economics” was struggling to represent. Making these categories disappear from the constellation of ideas that made up economic theory had serious implications. The theory lost dimensions of inclusiveness and clarity. It was impoverished. More events could now happen in reality than the concept system had terms to explain. What was disappearing from theory when the concept of land was fudged into the concept of capital was the likelihood of further investigations into the distinctive features of land – spatial, temporal, environmental and ecological – all those things that I have tried to put back into this book. Even considered in narrowly economic terms, land is a very distinctive kind of asset because it is one of the main forms of collateral for the banking and finance system.

Discussions of production as the relationship between capital and labour were no longer “grounded”. The embodiment of economic activity in the physical world disappeared. The sense that it entails natural fertility; specific production locations; the extraction of matter and energy sources from out of the planetary crust and, consequently, putting wastes back into the earth; into the rivers and the atmosphere. All these kind of things were effectively out of sight of the theory and out of the mind of the theoreticians. Out of sight and out of mind was exactly how the landed elite liked it – particularly in Britain where the power and inequality involved in landed property has been deliberately hidden by an aristocracy anxious to avoid the threat of a land value tax and to enjoy their privileges undisturbed.

Kevin Cahill’s book Who Owns Britain sets out the figures starkly: the UK is 60m acres in extent, and two-thirds of it is owned by 0.36% of the population, or 158,000 families. In Scotland it is even worse – 432 individuals own half the private rural land. In contrast 24 million families live on the 3m acres of the Britain’s “urban plot” – and then buy into the idea that Britain is a severely overcrowded country in which land is extremely scarce. (Adams, Tim 2011 ).

“Much of this can be traced back to 1066. The first act of William the Conqueror, in 1067, was to declare that every acre of land in England now belonged to the monarch. This was unprecedented: Anglo- Saxon England had been a mosaic of landowners. Now there was just one. William then proceeded to parcel much of that land out to those who had fought with him at Hastings. This was the beginning of feudalism; it was also the beginning of the landowning culture that has plagued England – and Britain – ever since.” (Kingsnorth, Paul 2012.)

However, in the last few years a large amount of landed property in the UK has been purchased by the moneyed members of the global elite from the descendants of early medieval gangsters. The astronomic house prices and rents in London as well as in some of Britain’s country estates is because the property magnates of the world are buying up the place. (Adams 2011)

Concluding remark – different meanings of “diminishing returns”

It was Ricardo who first utilised the concept of “diminishing returns”. He realised that different areas of land as a resource had different fertility and different degrees of desirability in other senses too e.g. distance to markets. He used this idea of differences in desirability in his theory of rent. Ownership of the most fertile land nearest to market meant the ability to charge more rent than in less fertile and more out of the way places. What happened was that the neoclassicals tried to adapt Ricardo’s explanation for rent for other factors of production by claiming diminishing returns in different circumstances – where factors of production were used in differing ratios with each other. As we have seen, this was not an appropriate thing to do in most industrial production processes but the idea of diminishing returns is useful in some contexts. As we will see, it is useful in office work and service contexts and it is, above all, useful in describing the relationship between the economic system and the ecological system. As the size of the economic system expands in relation to the fixed size of the ecological system, there are indeed diminishing returns. When the best sources of fuels, minerals and soils are used first, depletion means that the cost of extracting increasing amounts for economic use increases. More resources have to extract resources. Furthermore, if wastes and pollution from production increase then more resources have to go to deal with the consequences. This is diminishing returns. Those problems are the limits to economic growth. Ironically neoclassical economists seem unable to acknowledge these diminishing returns as a problem.

World Trade Lost at Sea

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Published on The Daily Impact on September 12, 2016

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Containers crammed with electronics, clothing and other potential Christmas presents are stranded at sea by the bankruptcy of one of the world’s largest shipping lines. There's more to come. (Photo by NASA)

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homo sapiens, well, that’s another question, for another time.)

But the fact is that homo sapiens ephemera simply cannot grasp the fact that a long, slow-burning fuse, however boring it is to watch, almost always leads to a terrible explosion. By that time, ephemera has forgotten the fuse and is always surprised. (“Wow, no one could have seen that coming,” he says.)

So it is with globalized trade, the system set up to allow increasingly impoverished people to borrow money on their credit cards to buy cheap crap — made in China by totally impoverished and sometimes enslaved people — at their local MartMart store. The brilliance of the system is that while the people who make the crap and the people who consume it remain impoverished, the corporations that manufacture, finance, transport, market and insure the crap get filthy rich. (Stay with me, homo sapiens ephemera, something’s going to happen in the next graph, I swear.)

Teensy flaw in the operating theory: once the lower (formerly known as middle) class has spent all its money and maxed out all of its credit and lost all of its jobs to the truly impoverished in the Third World because they work for so much less, there’s nothing left with which to buy cheap crap. Consequently — make that inevitably —  global trade has been slowing steadily since 2010, which you may remember was Year Two of the Great Recovery from the Great Recession. (I know, Ephemera, I lied about something happening in this graph, the next one, I promise. Stay with me! Where’s a good clickbait writer when you need one? “Financial genius reveals shocking truth about global bikini trade! You won’t believe your eyes!!!”)  

Okay, now that I’ve got you for a few more seconds, here’s what’s happened. After years of telling you about the burning fuse [Global Recession Accelerating toward Depression last October,  World Trade is Coming to a Halt [UPDATED]  in January and  They’re Parking the Trains. And the Ships and Planes and Trucks… in May, to name a few] something has finally blown up. Not the whole enchilada yet, but a big chunk of it. The seventh largest container-ship operator in the world is insolvent.

Who gives a farthing? You do, that’s who, because as a result YOUR KIDS MAY NOT GET THIS YEAR’S MUST-HAVE, EVERYBODY-ELSE-HAS-ONE XMAS TOYS! Talk about Apocalypse Now.

 89 monster container ships owned by Hanjin Shipping Company, South Korea’s largest shipping line, were at sea when the company asked for bankruptcy protection from South Korean courts. Immediately, ports worldwide began refusing them permission to dock for fear they would be unable to collect docking fees. If they did dock, they would be unable to unload without paying upfront the costs of unloading. If they did unload the cargo would not be moved from the terminal unless shippers were paid in advance. And of course refueling the vessels would require cash in advance.

Fourteen billion dollars worth of cargo, much of it Christmas merchandise that must be unloaded so to make the peak shopping season that begins the day after Thanksgiving,  is stranded on ships that need over half a billion dollars in cash to cover current expenses. The company has raised $90 million, and has asked the South Korean government for an emergency loan of $90 million, but prospects for avoiding liquidation are bleak. The company needs another $1.2 billion almost immediately to roll over maturing debt, and having incurred staggering losses for four of the last five years, may not be able to do it.  

Hanjin is hardly alone. The world’s shipping industry has been losing serious money since last year, and is on track to lose $5 billion this year. Industry analysts attribute the losses to an oversupply of ships, but another way to put that is to blame it on an undersupply of cargo.

Although four Hanjin ships have been granted protection by US courts and have raised the money to unload their cargoes in the U.S., havoc continues to spread through global commerce where Hanjin is being seen as merely the first card to fall.

I know. It took too long to explain. Tune in tomorrow, homo sapiens ephemera, for the 140-character version.  

Who are the parasites?

youtube-Logo-4gc2reddit-logoOff the keyboard of Brian Davey

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Published on Credo Economics on August 14, 2016

neoclassical-economics

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The radical implications of classical economics

Henry George and Karl Marx developed alternative radical theories out of the ideas of Adam Smith and David Ricardo.

The classical economists did not mince their words. As Mason Gaffney puts it:

… classical political economy was a remarkable phenomenon. Its major writers in England were able to portray the dominant class of rent-takers as idlers and superfluous drones. One surmises they got by with this because the idlers were proud of it. In their value-system, labour was not respected; conspicuous leisure was. Saving was regarded contemptuously as stinginess: conspicuous consumption was the mark of a gentleman and aristocrat. (Mason Gaffney, “the Corruption of Economics”. (Gaffney, 1994)

Ricardo and land rent

The Physiocrats, Adam Smith and especially David Ricardo theorised land rents as the ideal source for taxation. Ricardo’s key insight was that economic rent is not a cost of production. No one produced the land, it was a free gift of nature so there was no cost involved in using it for production. Landowners could charge rent for its use because of their ownership alone. Their income was not really a cost, it was a re-distribution of what had been produced but without the landowners doing anything at all, except diverting some of the produced income to themselves “unearned”. The value of a location is not the result of anything that the landowner does – the landowner reaps where they have not sown.

In Ricardo’s definition, rent arises in the difference between the costs of production from different acreages of land. Some acreages are preferable as locations because the soil is better, or these locations are closer to market and to sources of inputs that have to be transported in. At the preferable locations, more money could be made by farmers but landowners could ask more rental, siphoning off the monetary benefits of the advantageous location from the farmers into their own pockets because of competition between farmers.

The classical economists realised that if the landowners had their rental incomes taxed, they could not add the tax charge to the rental charge since renting farmers were already being charged up to the maximum that they were prepared to pay. If more rent was demanded from the farmers in order to pay for the tax that had been imposed on the landowner, it would be in the interests of the farmer to move. The tax would have to be paid out of the rent and could not be added on top of it. That was the theory anyway – if there’s going to be taxation, then it should be on land rents was their message. The trouble was that the landowners were politically powerful and able to block taxes being placed upon rents.

This is a recurring theme in economics. Economists have an idea – but the political power of interest groups is so powerful that the idea remains of purely theoretical interest. What did, however, happen early in the 19th century was a successful campaign against landowning interests organised by the Corn Law League. Tariff protection to prevent cheap grain being imported into the UK had kept grain prices high. This, in turn, had enabled a high rake off by landowners who could charge higher agricultural rents from their tenant farmers who were getting a good price for their grain. The people who paid were workers whose food prices were higher than they might otherwise be, and their employers who had to pay higher wages. Eventually the Corn Laws were swept away – a success for the growing industrial employers and for the economics of free trade – in the UK at least.

Henry George

Apart from their defeat by the Corn Law League in the UK, the landowners in many countries were able to hang onto their power and influence in the 19th century. However, towards the end of that century a campaign by American journalist, turned tax activist, Henry George, used the ideas of Ricardo and the classical economists, and gave landowners in a number of countries a serious scare. He succeeded in popularising the idea that taxes should focus on land rentals. What’s more he popularised a view of social inequality that focused on landownership as the cause. In the view of George, landowners acquired property titles that enabled them to channel the increasing wealth of society into their own pockets even though they made no positive contribution to the development process. Economic development inevitably takes a spatial form. It happens somewhere and if the landowners own that somewhere they can make money without doing anything else.

For instance, consider a railroad that joins a city to a town on the coastline. Now city people can travel to the coastal town with relative ease for holidays and recreation. The smart money will then move to buy land around the coastal town. When people want to build hotels they will have to pay rentals to the landowners. It is the landowners who are able to make the wealth that the railroads bring about by building and running hotels and the other facilities of a seaside resort. They don’t have to lift a finger to earn this rent. They just have to buy up the land – which they can often do cheaply because they have insider information and realise before anyone else what is being planned. Then the work of other people, developing a tourist resort, will make their newly acquired land valuable.

Towards the end of the 19th century, economists were pre-occupied, indeed obsessed, with analysing the sources, determinants and social rationales of interest and other income returns to private property. Apart from theorists and campaigners like Henry George, who focused in landowner rental income, the trade union and socialist movement were emerging and developing their own critical and challenging ideas. Influenced by theorists like Karl Marx, the very legitimacy of property income was in question. Answering Marx was a strong motivation for many economists. (Tobin, 1998)

Karl Marx

Marx’s key idea was that the source of property incomes was “surplus value” produced by labour. What workers and their families needed as wage income, in order to reproduce and maintain their own “labour power”, was less than the full value of what they produced. In effect, workers spent part of the day working for the wages to maintain themselves and their families (the next generation of workers) while the rest of the day they produced exchange value that was paid out to others as property income – distributed as profits, interest and rents.

For Marx, therefore, the division of income was explained in terms of the power asymmetry underlying the social relationships of capitalists and workers. Workers were driven to work for the employing class. They had no choice but to work on terms largely favourable to their employer because they, or their ancestors, had lost access to the means of production though processes like the enclosures. Their only hope was to organise for greater bargaining power and try to enhance their bargaining position by engaging in class struggle. (The working class were obliged to exchange their labour power on a market for wages but this was a market where there were trading under an institutionalised form of duress. Without access to means of production to work for themselves there was a structural power inequality underpinning the labour market).

On the question of land rents, both Marx and George agreed that they should be spent on public purposes. Though George did not agree on the nationalisation of land, it was enough for him to tax away the land rental from the landowners.

The first demand of The Communist Manifesto by Marx and Engels was the nationalisation of land and the devotion of its income to public purposes.

For a time, the ideas of Marx and those of George were competing forms of radical thought that located contemporary problems either in the capitalist class or in the landowning class. Both strands of radicalism had their roots in classical economic theory and conservative economists decided that classical economic ideas needed to be neutered. That is largely why we now have neoclassical economics. The conclusions that were being drawn from classical economics were suddenly very threatening to propertied people. As Gaffney explains in relation to George:

The menace George posed to rent-takers is clear from how he viewed them. To George, the landowner per se is non-functional (unproductive), a layabout drone, a drain on the hive, a transferee, a welfare case. Worse than that, he or she often makes the land itself lay about, too: then he or she is dysfunctional or counterproductive, a double-dipper. Worse yet, landowners become triple-dippers when they use their discretionary income and wealth to dominate politics and drain away yet more treasure through subsidies, public works and services, protections from competition, cheap credit, and so on. Often they are not just passive drones, but active predators. (Gaffney, 1994)

Landowners in the USA funded academic economists in order to put up a counter argument while using their influence in the universities to ensure that academics who supported George were fired. In this way, the others got the message in an era in which there was no such thing as academic tenure. It was a period in which businessmen, landowners and wealthy people were replacing clerics on the boards of colleges. Economics began to change. Classical economics became neoclassical.

Let them Eat Twinkies

gc2smFrom the keyboard of Thomas Lewis

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Published on The Daily Impact on August 29, 2016

http://blogs-images.forbes.com/jessethomas/files/2012/11/Hostess-Twinkies-box.jpg

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let them eat twinkies

 

A change in food stamp benefits for up to a million people such as this one is affecting WalMart’s profits. Something must be done. (Photo by FaceMePLS/Flickr)

In this, the eighth successful year of our Glorious Recovery from the Great Recession, things are really looking up for the American Lower Class, formerly known as Middle. The unemployment rate as calculated by the U.S. Government (adjusted for inflation, seasonally adjusted, smoothed, combed and curried) is down to a piddling five per cent, which is regarded by the country-club set as better-than-full employment, because, they suspect, thousands of people are working against their will. Moreover, the number of able-bodied adults capable of working, but not working, classified as “not in the labor pool” and therefore not unemployed (and thus not included in the calculation of the unemployment rate) is only up to 95 million people.

 

Things are looking so good for poor people that between 500,000 and 1,000,000 of them are being dropped from SNAP, formerly known as the Food Stamp program, this year. Some 20 states are reinstating the three-month limit on benefits to adults 18-49 who are not disabled or raising children. Thus freed from a crippling dependency on government handouts, these poorest of the poor are doing much better now, many of them actually motivated to go out and create jobs — in the field of heroin marketing, for example.

Surprisingly, it turns out there’s a downside to cutting Food Stamp benefits. It has been a serious blow to the sales of WalMart and Dollar General Stores — the sector of the retail market known as the Bottom Feeders. In addition to the fact that the employees of these stores need Food Stamps to survive (witness WalMart’s warm-hearted annual drive to collect canned SpaghettiOs so their employees and their families can have a Christmas Dinner), it turns out that the stores also need Food Stamps to survive.

Dollar General last week reported an 18% drop in its stock price after it reported disappointing sales, and found itself in a price-cutting war with WalMart, all since the food stamp cuts started to materialize. DollarTree reported similar problems. Cutting prices on staple items will reduce profits further, of course, but the companies hope it will allow them to hang on to their customers until things get better. (As we all know, things always get better, always before the system breaks down. That rule is as inviolate as the one we all relied on in 2008, the one that said: housing prices never go down.)

As we wait for things to get better, we cannot help but notice that they are getting worse. A Google Consumer Survey conducted this month found that more than 60% of all Americans — not just the Lower Class — have less than $1,000 in total savings. And 20% don’t have any. None.

Forbes, the magazine of the 1%, immediately ran a piece debunking the claim. “It’s Simply Not True,” thundered the headline. After clearing its throat for a number of paragraphs, down near the end, the article admitted that well, yes, it was true, actually, but irrelevant because these people have credit cards, don’t they? They’ll be fine.

So you see the problem.  

Dollar General CEO Todd Vasos said last week he has been surprised to learn that while things seem to be getting better on the surface, they are most definitely not getting better down where his customers live. There, rents are expensive and rising, home ownership is out of the question, and so is health care insurance, while the costs of health care and medicines are skyrocketing. But Mr. Vasos known exactly where to place the responsibility, and find the hope. “Our core customer,” he said proudly, “is very resilient,” and will “figure it out over time.”

So now we know the solution.

Dark Dynamics

gc2smFrom the keyboard of James Howard Kunstler
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ghost in the machine freda

 

Originally Published on Clusterfuck Nation  August 22, 2016

 


What the world is witnessing, without actually paying much attention, is the death of our debt-based economy — that is, borrowing the means to thrive in the now from a future that can’t really furnish it anymore. The illusion that the future would always provide was a legacy of the cheap energy era. That era ended in 2005. The basic promise is broken and with it the premise for living as we had been. The energy available today, especially oil, is no longer cheap enough to run the industrial economies designed to run on it. Any way that you look at the dynamic, Modernity loses.

With oil under $50 a barrel, and gasoline under $3 a gallon (back east), the public apparently thinks that the Peak Oil story is dead and gone. But when it costs $75 a barrel to pull the stuff out of the ground, and the stuff only sells for $47 a barrel, the oil companies’ business model doesn’t really work. The shale oil companies especially have been gaming the system by issuing bonds that pay relatively high interest rates in an investment climate where almost nothing else offers enough yield to live on, especially for pension funds and insurance companies. Two little upward bumps this year in the price of oil toward the $50 range prompted a wish that the good old days of high-priced oil were coming back, that the oil business would be profitable again.

The trouble is that high oil prices — say, over $100 a barrel, as it was in 2014 — crush advanced economies, so that demand for oil crashes, and with it productive activity. Without productivity, the debts issued by companies (and even governments) don’t get repaid. There really is no “sweet spot” in this energy cost equation.

A lot of wishful thinkers would like to believe that you can run contemporary life on something beside oil. But the usual “solutions,” solar and wind energy, don’t pencil out, especially when you consider that the hardware for running them — the photovoltaics, charge controllers, batteries, turbines, and blades, can’t be mass-produced and distributed without the very fossil fuels they are supposed to replace.

These matters add up to the essential quandary of our time. It has expressed itself in falling standards of living for what used to be the middle class, most particularly in the USA. European countries have tried to work around this problem with their rigid bureaucracies for keeping those already employed from losing their jobs. In France, Spain, and Italy, this has only made it much harder for people under 30 to get a job. The jobs picture for millennials in the USA is not much better, though there’s no structural job-protection for their elders who are still working here. They live in abject fear of termination by the HR ghouls of the big corporations.

Sooner or later the younger generation will explode in rage at the system and there is no telling what the result will be. We’re already seeing it in the black ghettos, where decades of accrued social dysfunction make the anomie and purposelessness — of young men especially — much worse. The newer loser class of people who once had good jobs and now have poor prospects of ever getting them back gets swept up in the mania for their incoherent champion, Trump, who shows no sign of understanding the essential quandary of our time. The tragedy of Trumpism is that the man so poorly represents a large group of Americans with genuine woes and grievances. And the larger tragedy of our country these days is that events did not prompt better leaders to step forward.

The explanation may be that people who actually understand the dark dynamics spinning out are rather pessimistic about the our ability to carry on under the familiar disposition of things. Hillary represents the forces in our national life that want to pretend that nothing is wrong, that all the splendid rackets of the day — Federal Reserve interventions, corporate debt-fueled stock buybacks, military log-rolling, medical racketeering, the college loan Ponzi, pension fund levitation, primary dealer bank interest rate arbitrage, agribiz Frankenfood proliferation — can just grind along like some old riverboat banger engine keeping the garbage barge of American life afloat. Thus, Hillary is shaping up to be the patsy of the century, likely to preside, if elected, over the biggest blowup of established arrangements that world has ever seen.

The debt problem alone is absolutely certain to express itself in at least three major ways: the crash of equity markets, the collapse of the bond markets, and the loss of faith in the value and meaning of whatever money you’re using. Any of those events would turn the economic life of the linked advanced economies upside down. Any of them could occur during the 2016 US election season.

 


James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Burning Down the House

gc2smFrom the keyboard of James Howard Kunstler
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Freda money

                                                                                                                                                          Anthony Freda

 

Originally Published on Clusterfuck Nation  August 15, 2016

 


There’s a new feature to the Anything-Goes-and-Nothing-Matters economy: Nothing-Adds-Up. The magicians who pretend to measure the growth of GDP (Gross Domestic Product — the monetary value of all the finished goods and services) came up with a second quarter “adjusted” figure of 1.2 percent. That would have to be construed by anyone acquainted with basic econ stats as perfectly dismal. And yet the Bureau of Labor Statistics put out a sparkly Nonfarm Payroll Report of 255,000 for July, way above the forecast 180,000.

There were so many ways to game the jobs number — between people forced to work more than one shit job and the notorious “birth/death model” used to just make up any old number for political purposes — that no one can take this information seriously. Anyway, the GDP number was instantly forgotten and the jobs number launched the stock markets to previously uncharted record altitude.

It’s that time of the year for the hedge fund boys, with their testosterone flowing, to start burning down their house rentals in the Hamptons. And it’s also the time of year for an ever more stressed financial system to go down in flames. And, of course, it’s a presidential election season. Even for one allergic to conspiracy theories, it’s not farfetched to imagine a coordinated effort by central banks — under government direction — to generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton. I think that is exactly behind the recent money-printing activities by the Japanese and European Central Banks, and the Bank of England.

Why would it end up in US markets? For bonds, because the Euro and Japanese bond sovereign yields are in sub-zero territory and the BOE just cut its prime rate lower than the US Federal Reserve’s prime rate; and for stocks, because the value of the other three currencies is sliding down and the dollar has been rising — so, dump your falling currency for the rising dollar and jam it into rising US stocks. It’ll work until it doesn’t.

Why do this for Hillary? Because she represents the continuity of all the current rackets being used to prop up belief in the foundering business model of western civilization. If she doesn’t get into the White House there may be no backstopping of the insolvent banks and bankrupt governments and a TILT message will appear in the sky. That TILT message is likely to appear anyway because, remember,  the authorities are only pretending that they can manage events. In fact, all of their “management” strategies and shenanigans only insure the further distortion of the basic operating system, which is already so far out of whack from twenty years of previous management efforts that nothing in banking and markets really works anymore.

Companies don’t make money, despite rising share prices. No one in his right mind buys bonds with negative yields — that promise to pay back less over time — so governments have to pretend to buy them. (In fact, they don’t so much “buy” them as simply extinguish them by playing three-card-monte with national treasuries.) And, of course, the masses of people in all these nations — including the patsy USA — sink ever deeper into penury every month.

The release of tension is being felt in the ground game of politics where outsider candidates here and abroad are rising on a tide of rage and resentment. The fecklessness and stupidity of the elites has been epic, sacrificing everything to maintain the illusion of normality. Nothing is normal and “the people” are finally onto it. Sadly, it looks as if both politics and finance are veering toward crack-up simultaneously. The daisy-chained Too-Big-To-Fail banks are already choking on the suicide bolus of derivatives. The equity markets are one algo accident away from cratering. The bond markets are a sick joke. And Hillary may win the booby prize of presiding over the smoldering wreckage of it all. When it happens, she will have no idea what to do.

 


James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

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Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

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Click here to visit Sustaining Universal Needs’ YouTube Channel! [...]

There is no excerpt because this is a protected post. [...]

In the echo-sphere of political punditry consensus forms rapidly, gels, and then, in short order…cal [...]

Discussions with figures from Noam Chomsky and Peter Senge to Thich Nhat Hanh and the Dalai Lama off [...]

Lefty Greenies have some laudable ideas. Why is it then that they don't bother to really build [...]

Democracy and politics would be messy business even if all participants were saints. But America doe [...]

A new book argues that, in order to survive climate change and peak oil, the global money economy ne [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

That politician that responded to Hansen, said, "I don't believe it would be game over. [...]

Glenn is knowledgeable about some pieces of the problem. Give him a chance to learn some more. It ma [...]

The gap between plateauing crude supply and burgeoning world demand is being increasingly filled by [...]

Not within the next year necessarily --- but almost certainly within a year of the end of BAU. [...]

@creedon - can't disagree about small scale organic farming especially if it is done with some [...]

Ellenanderson; we need growth like this: http://peakoil.com/consumption/un-report-says-small-scale-o [...]

@Creedon- I see that shortonoil is posting on that site and has a couple of interesting comments. I [...]

Usually, the biggest things are the hardest to see. We get hung up in the details and the blank spac [...]

http://peakoil.com/publicpolicy/donald-trump-saudi-arabia-and-the-petrodollar Who knows what events [...]

RE Economics

Going Cashless

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Simplifying the Final Countdown

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Bond Market Collapse and the Banning of Cash

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Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

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Kurrency Kollapse: To Print or Not To Print?

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SWISSIE CAPITULATION!

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Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

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Merry Doomy Christmas

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Peak Customers: The Final Liquidation Sale

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Collapse Fiction

Useful Links

Technical Journals

Kenya’s water abstraction must meet the projected growth in municipal and irrigation demand by the e [...]

This study focuses on the land use change and climatic variability assessment around Kamala watershe [...]

The intensity of precipitation is expected to increase in response to climate change, but the region [...]

Precipitation is still one of the most complex climate variables to observe, to understand, and to h [...]