Central Banks

War on Cash 2 (Show Me the Money!)

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Published on the Doomstead Diner on February 11, 2016

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showmethemoney-Jerry-Maguire-1…Besides the major problem of WTF you do when the lights go out and/or the 4G network goes out on your cell phone are all those little transactions done each day, like for instance your kid buying a Hershey bar at the convenience store on the bike ride to school. Is every kid going to have her own plastic and cell phone to do these transactions also? Are you going to use plastic to buy some breathmints or condoms on the way to the local cathouse? Are you going to pay the hooker with plastic so your wife can see the charge on the bill? That's an even bigger problem for the Banksters and Politicians who are promoting this idea than the average J6P too.

 

What would Jerry Maguire (Tom Cruise) do when Rod Tidwell (Cuba Gooding Jr.) asks him to SHOW ME THE MONEY! ? Is Rod really going to believe Jerry has the money when he holds his smart phone up to him with a 1 and lots of zeros behind it on the new super OLED touchscreen?…

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The Leviathan

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Artwork: Anthony Freda
 
Originally Published on Clusterfuck Nation November 9, 2015
 

The economic picture manufactured by the national consensus trance has never been more out of touch with reality in my lifetime. And so the questions as to what anyone might do can hardly be addressed. How can I protect my savings? Who do I vote for? How do I think about where my country is going? Incoherence reigns, especially in the circles ruled by those who guard the status quo, which includes the failing legacy news media.

Federal Reserve has morphed from being a faceless background institution of the most limited purpose to a claque of necromancers and astrologasters, led by one grand vizier, in full public view pretending to steer a gigantic economic vessel that has, in fact, lost its rudder and is drifting into a maelstrom.

>For more than a year, the fate of the nation has hung on whether the Fed might raise their benchmark interest rate one quarter of a percent. They talk about it incessantly, and therefore the mob of financial market observers has to chatter about it incessantly, and the chatter itself has appeared to obviate the need for any actual action on the matter. The Fed gets to influence markets without ever having to do anything. And mostly it has worked to produce the false narrative of an advanced economy that is working splendidly well to the advantage of the common good.

This is all occurring against the background of a larger global network of economic relations that is quite clearly breaking apart. The rising tensions between the US, Russia, China, and the Euro Union grew out of monetary mischief “innovated” by our central bank, especially the shenanigans around debt monetization, which have created dangerous distortions in markets, trade, and perceptions of national interest. Nations are rattling sabers at one another and bluster is in the air. The world is bankrupt after thirty years of borrowing from the future to throw a party in the present, and the authorities can’t acknowledge that.

But they can provide the conditions for disguising it, especially in the statistical hall of mirrors that once-upon-a-time produced meaningful signals for the movement of capital. Instead of reality-based choices and decisions, the task at hand for the people in charge has been the ever more baroque elaboration of a Potemkin economic false-front, behind which lies a landscape of ruin scavenged by desperate racketeers. That this racketeering has moved so seamlessly into the once-sacred precincts of medicine and higher ed ought to inform us how desperate and perilous it has become.

The latest installment of the disinformation game was Friday’s employment release from the US Bureau of Labor Statistics. It was a “blockbuster,” implying blue skies everywhere from Montauk to Malibu. Except that no one with a remaining shred of critical faculty can be expected to believe it. 80 percent of the new jobs numbers were attributed to the mystical birth-death model, a pseudo-scientific fantasy of hypothetical new business starts and associated hypothetical new hires. Demographically, the most new jobs went to the over-55 age cohort — grocery baggers and Walmart greeters —  and the fewest to men 25 to 54 (that bracket substantially lost jobs). The official unemployment rate fell to 5.0 rate, with no meaningful discussion of the huge numbers of discouraged people who have dropped out of the workforce.

But the perception of an economy on full throttle chug sent the stock indexes up. The Dow, the S & P and the NASDAQ are the only signaling mechanisms that the legacy media pays attention to, and the politicos take their cues from them, in a feedback loop of false information that begets more delusional positive psychology in those same markets. I suspect the sentiment that reigns now is about nothing more than getting through the holiday season without a financial accident.

But this Fed now finds itself in a trap of its own making. Having so interminably yapped about the interest rate hike, the central bank will have to put up or shut up in December. Only the year-final BLS employment figures might give them an out, if the numbers don’t look so phosphorescent. I think the truth is, this phony baloney economy can’t withstand even a measly quarter-point benchmark interest rate hike. For one thing, it would blow up the operating models of Fannie Mae and Freddie Mac, the buyers of home mortgages who are keeping the construction industry on life support, as well as the parallel rackets in securitized auto and student loans. Imagine all the derivatives bets that would go south. In reality, the Fed knows that it will have to shovel more ZIRP money into the debt-saturated maw of a dying financial leviathan. It can do that, of course, and probably will in the coming winter of 2016, but when that time comes, it will have absolutely no credibility left. And the leviathan will be a little closer to heaving up dead on the beach.

 

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.

Bond Market Collapse and the Banning of Cash

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Aired on the Doomstead Diner on May 22, 2015

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…Bitcoins, a relatively new form of electronic money are also often hawked as the latest and greatest solution to keeping your money safe. Except EVERYBODY KNOWS about Mt. Gox by now. From Wiki:

Mt. Gox was a Bitcoin exchange based in Tokyo, Japan. It was launched in July 2010, and by 2013 was handling 70% of all Bitcoin transactions.[1] In February 2014, the Mt. Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer.[2][3] In April 2014, the company began liquidation proceedings.[4] It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time.[5][6] Although 200,000 bitcoins have since been "found", the reason(s) for the disappearance—theft, fraud, mismanagement, or a combination of these—are unclear as of March 2014.[7]

You think Fraud, Mismanagement and Hacking will STOP if money goes cashless? OF COURSE NOT, IT WILL GET WORSE! There is no computer system ever that is foolproof and incapable of being hacked, and of course the rewards for hacking such a system or “mismanaging” it gets bigger all the time, so the Best & the Brightest spend all their time figuring out how to do that…

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Pandora’s Box

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Aired on the Doomstead Diner on January 28, 2015

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…Well, the Worst Nightmare for the Clowns & Jokers in Brussel Sprouts has come to pass, as Alex Tspiras and the Greek Syriza Party won a BLOWOUT victory in the latest round of Greek Elections. They are so far out in front of everyone else on the Popular Front over there that not even election rigging could fix that one.

Alex has promised to go to the WALL against the Troika Austerity that has been hammering down on Greece for the last 6 years, since the initial financial crash in 2008. Bascially Syriza has opened up the window and shouted to the world, “We’re Mad as HELL, and we’re not gonna take it anymore!”

This basically amounts to opening Pandora’s Box here, because the Brussel Sprouts are now between the Rock and Hard place. If they cut the Greeks loose, the Euro collapses even faster than it already is collapsing. If they capitulate and forgive Greek Debt, every other PIIGS Nation will pul the same stunt, beginning with the Spaniards, but quickly moving through the Portuguese, Italians and Frogs too. Soon as one of these major debtor nations has debt written down, they ALL will want their debt written down…

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SWISSIE CAPITULATION!

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Aired on the Doomstead Diner on January 18, 2015

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http://cdn.news12.com/polopoly_fs/1.5585827.1372415753!/httpImage/image.PNG_gen/derivatives/display_600/image.PNG…The folks worst hit here in the short term are the Forex traders who were short on Swissies, figuring they would stay pegged to the Euro as promised by the SNB. At least two of the currency trading firms blew up immediately after this, FXCM and Excel with losses in the $100s Millions, and somebody out there took that hit, although we don’t know precisely who that is yet. Client accounts are supposedly segregated out here, but anything caught up in the trading when this went down is now GONE. Precisely how much anyone with an account with these two firms will be able to get back out and when is an open question. No doubt quite a few folks will get Corzined on this one.

Meanwhile, over in Greece in a not entirely unrelated event, now all 4 of TBTF Greek Banks had to go to the Greek Central Bank for “Emergency Liquidity Assistance”, basically because there is an ongoing RUN of the Greek Banks and everyone with any CFS is trying to get their money OUT of them before they go Tits Up and convert everybody’s savings to New Drachmas, destined to be about IMMEDIATELY worth less than a roll of Charmin.

These banks, which Zero Hedge has reported as “systemic” have basically run OUT of collateral that even the ECB which accepts almost any stinking dogshit will accept for them to hand over a few more Euros. At first it was just 2 banks referred to as systemically important, without revealing which onesd they were. The obvious reason here that the identity of these banks is not being revealed is that would of course ACCELERATE and already ongoing diarreah attack they are undergoing and they would squirt out still more liquified Brown-25. This ploy however did not work, so now the run is on all of them. LOL…

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Ukraine Frenzy and Trapezoid of Doom

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on March 7, 2014

Ukraine hiccups, Russians double down on ‘blunder’, Pot meets Kettle.

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Figure 1; Cost vs. credit using WTI price from Commodity Charts.com, (click on for big). The premise of the Triangle of Doom is that fuel supply remains both plentiful and affordable until trends collide at the end of this year or beginning of 2015. This is a best-case scenario, with policy makers avoiding errors that damage credit or interfere with world petroleum extraction. Abenomics and the ongoing Russian fiasco in Ukraine look to be fatal errors, the best-case scenario has to be reconsidered, with the triangle morphing into a Trapezoid of Doom with a rapidly-approaching dead end.

Credit and fuel cannot be considered separately, one affects the other. Economic problems tend to be blamed on monetary misadventures, yet our economies run on petroleum … which has become both scarce and increasingly expensive since 2000. Credit is offered as a both a palliative and as a abstract substitute for fuel but it carries its own ballooning costs. Strains ricochet through credit system and emerge unpredictably, panic takes many forms. The obvious strategy is resource conservation yet the establishment holds it in the same regard as child pornography; the conservationist is never invited to the dinner party, doing without is never part of any discussion. Conservation is no fun, it isn’t trendy or chic, it means no shopping which is bad for business … which requires endless streams of capital to annihilate and more tycoons to worship.

The outcome is conservation by other means. The status quo is rotting away in real time right under everyone’s noses, Russian intervention in Ukraine is a small component of a very large and malignant whole. Wasteful business as usual is kaput, it has exhausted itself: capitalistic niceties — its fare-thee-wells and discrete robberies — are swept off the table; in place there is the sending in of the tanks with the refugees clogging the roads cheering.

As the world burns through its affordable fuel supply the credit regime falls apart undone by diminished returns. Our surplus-cost-management economy cannot allocate resources that don’t exist, when confronted by scarcity managers punt. The command economy replaces credit with brute force. This is the process that has slithered out of the shadows in Ukraine; it is also why the West is frantic to put the Russian genie back in the bottle, to cobble together a credit/finance solution to the Ukraine problem.

It is hard to know what to make out of what is underway in Ukraine. Putin has decided to rock the boat and is doing so with vigor. In a tightly coupled world with brittle-fragile credit markets and the Russian dependency on Western credit, it is possible Mr Putin does not understand the risks. On the other hand, being in the energy business, and absent the need to soothe an sugar saturated- over stimulated population of television watchers and cell-phone fingerers, he might realize that the jig is up. He certainly is aware that the West will sacrifice just about anything and anyone to preserve their precious lifestyles, creature comforts, automobiles and the fuel needed to run them.

Then, again, what can Putin win? Russia cannot conquer Ukraine or control it, that is obvious; its first best chance with Yanukovych failed. Putin’s second best chance is to offer Ukrainians a security detail that will not hesitate to shoot Ukrainians. Russian ascendency in Ukraine is a vanishing asset. Aside from its rapidly depleting mineral resources Russia is bankrupt, it cannot afford Ukraine as an imperial bauble any more than could the Soviet Union which could deploy much more massive force, structured around popular ideology … and much more massive natural resources.

Ukraine is the latest American intelligence fiasco; hundreds of billions of dollars have been squandered by agencies that have no clue. The same agencies certainly know in minute, personal detail what animal rights- and anti-fracking activists are up to but are caught out by Ukrainians first and then by the Russians. The US president and the rest of the US establishment are embarrassed even as they refuse to acknowledge it.

The media is a frenzy of conflicting information and inflamed nonsense. There are suggestions on how to torment the Russians as if this is something the US has been specifically entitled by Our Creator to do. What passes of leadership in the US is made up of banker- and auto industry lackeys; it drowns in hypocrisy. Our military has meddled at stupendous cost in the affairs of other countries since the end of World War Two for the benefit of these same industries; the Russians are imitating the US. Perhaps just once the United States should do nothing, not even discuss Russia or Ukraine. The Canadians are doing nothing, the Swiss and the Chinese are doing nothing, not a word comes from Japan. Why not sit back quietly and let Russian ambition dig its own grave?

Some of the intimations of meddling are just dumb; that US funding caused the popular revolution that unstrung Yanukovych, or hired neo-Nazis bent on reviving the Third Reich. Agitators and extremists have had their part, but the ground was- and is fertile for removing Yanukovych who is both a common thief and a pro-Moscow partisan. Neither the US nor the EU paid hundreds of thousands of demonstrators to crowd into Kiev and other Ukrainian cities. Popular revolutions have been underway around the globe since 2008, this has everything to do with the governments’ dwindling ability to provide luxury lifestyles including jobs for their teeming multitudes of educated- and thwarted children. Revolutionary skills require time, practice and opportunity to acquire, the young are learning; now, success. Ukraine’s children have managed at least for a brief interval to free their country from some of its odious tycoons. The youths do not understand at this moment that both the car-waste Western lifestyle and tycoons are unaffordable extravagances but they are learning and as such the children are dangerous. Part of Putin’s violent reaction is the push-back by tycoons and the status quo that supports- and rationalizes them. In this sense, the US- and EU bosses should be supporting Putin and encouraging him to crush Ukraine’s young people! This is class war, as Warren Buffett has insisted, and up to a few weeks ago the Buffett class was winning, now … not so sure!

The neo-Nazis are ascendent across Europe, in the US and elsewhere, certainly in Russia as well. The Nazis are willing to confront the corroded establishment where the rest are content to entertain themselves. Cartoonish and fearsome at the same time; the Nazis have no magic solutions to resource problems, they can no more deliver the American way of (wasteful) life than anyone else. All they can do is preside over decline then absorb their portion of the blame.

Ukraine’s problems are for their own citizens to solve, their first job is to form a new government, one that does not include US- and EU stooges or Goldman-Sachs alumni. Ukraine has been the place where both European and Russian empires have gone to die; no outside help is needed. The US has plenty of its own problems that are desperate for attention and investment including overdue preparations for hard times. Multi-billion dollar loan-slash-aid packages for Ukraine should be directed toward Detroit; it is long past time to make investments in our own for once.

Russia Sector Credit Flows

Figure 2: The Russian economy and finance is basically a money-laundering scheme that directs the returns from energy sales to tycoons. Funds flow from EU and UK banks by way of fuel customers to Gazprom and the Bank of Russia. Some funds are held as currency reserves, the rest flow to tycoons’ overseas accounts where they are used to purchase luxury real estate, yachts, artworks, gold and other easily exchangeable goods … The Bank of Russia uses overseas currency-in hand as collateral to refund roubles to commercial banks; these are distributed into the Russian economy. See ‘Debtonomics; Currency Crisis’ for an explanation of how the process works.

Russia lacks the ability to produce needed organic credit, it lacks infrastructure including strong banks, a freely tradeable currency, goodwill and the rule of law; instead there are weak banks, a rouble that circulates little outside of Russia, absence of trust and arbitrary rule by Putin. Because Russian credit is no good it requires external credit. Russia relies on the provision of European lenders acting indirectly through Russia’s overseas energy customers. Russia cannot support its own industry, which like industry everywhere, requires constant credit subsidy to function. A constant flow of new funds from overseas is necessary as the leakage to tycoon safe-havens is a collateral drain with an accompanying reduction in rouble purchasing power. If Russia holds onto its collateral the tycoons are starved of funds. The alternative is for the Bank of Russia to make unsecured loans in an attempt to ‘make good its purchasing power losses with volume’. The outcome is the vanishing lender of last resort and bank runs.

Unsecured rouble lending by Bank of Russia is indicated by red-outlined arrow. Russian banks are unable to distribute their own losses into the Russian economy, attempts to force such losses results is a vicious cycle- black market currency arbitrage and hyperinflation as in Argentina, Venezuela, Belarus, Iran and previously in Russia, itself. Citizens and speculators use whatever local currency they can get their hands on to ‘purchase’ the desired hard currency heedless of the affect on the exchange/inflation rate as indicated by the black-outlined arrow.

It is possible Russian foolishness will by itself trigger the exact crisis the Russians are desperate to avoid. Events that signal major economic turning points can be hard to identify as they occur, the background accompaniment tends to be rising interest rates:

On September 20, one day after a new high in the New York market (1929) — one which proved to be the interwar peak on the New York Times Index — the occasion presented itself. The Hatry empire collapsed in London. This was a series of companies, investment trusts and operating units with interests in photographic supplies, cameras, slot machines and small-loan companies, controlled by one Clarence Hatry. Caught up in the speculative fever, Hatry was having difficulty borrowing £8 million to buy United Steel and use it as a base for a wider coup in British steel. He tried to use fraudulent collateral from his various companies, was caught out and went into bankruptcy. Stock exchange dealings in the Hatry securities were suspended and the financier and several of his associates arrested. In the un-settlement, the bank of England rate was raised from 5.5- to 6.5 percent on September 26.

Apart from the Frankfurt Insurance Company in August and unlike other crashes, it was the only warning …

— Charles P Kindleberger, “The World in Depression, 1929-1939″

Putin looks to be the 21st century’s Clarence Hatry, whether the world or Russia can cope or not remains to be seen. Like Hatry, Putin has built a creaky empire out of a series of companies, investment trusts and operating units with interests in energy resources, pipelines, military hardware and ankle-breaking loan companies. Right now finance markets are pretending that nothing untoward has occurred. Then again:

It’s nerve-wracking to live in the historical moment of an epic turning point, especially when the great groaning garbage barge of late industrial civilization doesn’t turn quickly where you know it must, and you are left feeling naked and ashamed with your dark worldview, your careful preparations for a difficult future, and your scornful or tittering relatives reminding you each day what a ninny you are to worry about the tendings of events.

Persevere. There are worse things in this life than not being right exactly on schedule.

James Howard Kunstler

Ukraine looks to reduce its dependency on Russia by signing an agreement with Chevron to develop its oil and gas. The company will likely sell any Ukrainian gas it produces as quickly as possible leaving the country with the empty bag. There may also be gas reserves offshore but Ukraine needs a real government and Russia needs to grow up and act like adult. If Ukrainians used gas for heating and domestic, it would last a long time. Selling to Japan or UK for electric generation; not more than a couple of years..

Ukraine needs a plan how to make the fuel supply last: they need an ‘energy policy’. It is difficult to imagine anyone in charge in any country has heard of such a thing. They also need time and breathing space to implement it. Ukraine has been able to survive since the fall of the USSR by playing European and Russian insecurities against each other, by threatening the one side with political and economic alignment with the other so as to gain funds from both. It was the latest such maneuver that blew up so spectacularly in Yanukovych’s face. Poor Ukraine, it is too far from God and too close to Russia, too close to the European Union, the IMF and the European Central Bank. Any funds from the West will arrive with strings like spiders’ threads that the Ukrainians will find difficult- or impossible to unravel. Ukraine’s interim prime minister is the country’s ex-central banker. It relies on the handful of tycoons remaining in the country for political leverage. Every Ukrainian knows the proceeds of every Russian loan ends up in the pockets of oligarchs, the country’s assets are held as collateral, they ultimately fall to Gazprom and Russia or to European companies. In the meantime the world holds its breath …

Between a Rock and a Squishy Place

Off the keyboard of James Howard Kunstler

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Originally Published on Clusterfuck Nation  December 2, 2013

German Mark

 

The rock is reality. The squishy place is the illusion that pervasive racketeering is an okay replacement for an economy. The essence of racketeering is the use of dishonest schemes to get money, often (but not always) employing coercion to make it work. Some rackets can function on the sheer cluelessness of the victim(s).

     Is it fair to suppose that money management is at the heart of the sort of advanced, complex economy that developed early in the 20th century? I think so. Money is the lifeblood of trade and of investment in productive activities that support trade. Of course, in order for money to have meaning, to function in such transactional relations, the people must be convinced that it legitimately represents its face value. Otherwise, money must be labeled “money” — that is, a medium of exchange suspected of false value. An economy that uses “money” — especially an economy of rackets — is an economy in a lot of trouble, and that is where ours is in December 2013.

     The trouble reached escape velocity in the fall of 2008 when a particular brand of racket among the Wall Street kit-bag of rackets got badly out-of-hand, namely the business of selling securitized bundled mortgages and their “innovative” derivative “products” to dupes unaware that they were booby-trapped for failure which would, perversely, hugely reward the seller of such trash paper. These were, in the immortal words of Senator Carl Levin (D-Mich), the “really shitty deal[s]” propagated by the likes of the Goldman Sachs crypto-bank — so-called collateralized debt obligations — pawned off on credulous pension fund managers and other “marks” around the world greedy for “yield.”

     It turned out that all the large banks trafficking in such booby-trapped contracts ended up choking on them when “the music stopped” — that is, when the derivative “swaps” payoffs at the heart of this particular racket began to fail, sending up a general alarm that all such “products” were primed to blow up the entire “banking” system. By the way, the quotation marks I so liberally resort to are necessary to denote that in such a matrix of rackets things are not what they appear to be but only what they pretend to be.

     The failure of Bear Stearns followed by the implosion of Lehman Brothers and the near-death experience of AIG alerted “civilians” outside Wall Street that the banks were linked in a web of fraud and insolvency and had to be “rescued” in order for the rest of America to keep its “way of life” going. The rescue remedy proved to be several new layers of fraud that have now matured into institutionalized rackets. The best known are the Siamese twins of “Quantitative Easing” and zero interest rate policy (ZIRP). The lesser-known racket was the 2009 rule change by the Financial Accounting Standards Board that allowed banks to make up whatever numbers they felt like in reporting the value of their holdings (“assets”).

      Hence, these dishonest, regularized operations can be labeled a hostage racket with coercion at their core. The coercion comes in the form of the threat that any let-up in the stream of QE “money” enjoyed by the banks in the form of carry-trade “loans” and “primary dealer” premium cream-offs will send the economy back to the stone age. Overlooked in this equation is the ongoing destruction of ordinary citizens (a.k.a. the “middle class”) who have already lost their grip on the emblematic “way of life” Wall Street is working so tirelessly to defend. Politicians are, of course, deeply implicated and indeed directly involved in all these rackets, since these hired handmaidens make and execute the laws protecting Wall Street’s looting operations.

     The catch to all this, lately, lies in the cognitive dissonance between the symptomatic euphoria of record stock market indexes versus the conviction of a few hardcore skeptical observers that the rackets are now so reckless and impudent as to be beyond any hope of control and on a trajectory to bring about hardships orders of magnitude above anything imagined in 2008.

     So-called “health care” is also a hostage racket, since sick people are hardly in a position to bargain for anything, but it is only a sub-system of the larger matrix of rackets that have made this such an unusually dishonest society. My guess is that ObamaCare is sure to make it worse, and pretty quickly too, since the rules for ObamaCare were written by the hireling lobbyists of the industries that benefit from the racketeering.

     The big mystery in all this remains: where are the people with some institutional power who might stand up and denounce all this perfidy? What has made us such a culture of cowards and cravens that the best we can do is produce a couple of comedians who speak truth to power in the form of jokes. Most of this is not that funny.

      By the way, one reason for the vulgar orgy of “consumerism” that, in recent years, has turned the Thanksgiving holiday into a sort of grotesque sporting event, is to mount a crude demonstration that our “money” is a viable medium of exchange. The dumbest people in the land are induced to swarm through the merchandise warehouse stores and fight to exchange their “money” for hard goods offered at false “bargains.” I wonder how much of it is a dress rehearsal for what happens in a hyper-inflation?

 

 

***

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.

 

Podcast- Nicole Foss (Stoneleigh) of The Automatic Earth on Currency Issues: Part 1

Off the microphones of Nicole Foss, RE & Monsta

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Aired on the Doomstead Diner on August 28, 2013

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How will the monetary system implode on itself?  Will Inflation, Hyper-Inflation or Deflation rule the day as the system seizes up?  What will occur with Asset Values and Derivatives?  Who has the strongest claims to underlying wealth remaining in the system?  Can Gold & Silver substitute for a failing Fiat Monetary System?  How will the Just In Time Shipping paradigm react to dislocations in the Credit Markets?  Will Financial Contagion overtake the Supply Chains?

These and other questions are discussed in the latest Diner Podcast with Nicole Foss, Stoneleigh of The Automatic Earth.  Nicole is a former Editor of The Oil Drum Canada, and was a Research Fellow at the Oxford Institute for Energy Studies, where she specialized in nuclear safety in Eastern Europe and the Former Soviet Union, and conducted research into electricity policy at the EU level.

The second part of the Podcast with Nicole will focus on Energy Issues, and will be available for listening on the Diner next week.  In this podcast, Nuclear Energy will be discussed as well as Renewable Energy issues.

In addition, in the next few weeks, the Diner will begin Vidcasts featuring multiple Bloggers, Researchers and Authors discussing and debating the various topics of Collapse Dynamics.  The first of these Vidcasts will be focused on the upcoming Occupy Monsanto demonstrations scheduled for September 17, 2013.  However, if the War in Syria escalates over the next couple of weeks, this may provide additional discussion material.

I discuss the Upcoming Diner Vidcasts in the next Episode of I Spy Doom.  You get a nice little tour of the Last Great Frontier of Alaska from the Passenger Seat of my Ford Explorer SUV in this one also.  LOL.

RE

Bad Economic Signs 2012

Off the keyboard of Brandon Smith

Published originally on Alt-Market  on Wednesday, 18 July 2012 02:21 by Brandon Smith

Discuss this article at the Epicurean Delights Smorgasboard in the Diner

In January of this year, I wrote an analytic financial piece entitled ‘Baltic Dry Index Signals Renewed Market Collapse’:

http://www.alt-market.com/articles/540-baltic-dry-index-signals-renewed-market-collapse

In that article I discussed the record breaking low hit by the BDI and its implications for the global economy; namely, that it signaled a steep decline in true demand around the world for raw materials used in the manufacture of consumer goods, and that similar declines in the BDI’s past have almost always prophesized a crisis event in financial markets.  The mainstream media attempted to write off the implosion of the BDI as a fluke, tied to the “overproductions of cargo ships”, instead of a warning sign of deteriorating demand.  Of course, the past 6 months have proven that assertion to be entirely false.

Manufacturing has tumbled in the U.S., the EU, and Asia simultaneously as orders drop back to the dismal levels last seen in 2008-2009 after the credit crisis first took hold:

http://www.reuters.com/article/2012/06/01/us-global-economy-idUSBRE85008R20120601

http://articles.latimes.com/2012/jul/03/news/us-manufacturing-down-20120703

http://www.themanufacturer.com/articles/uk-production-falls-to-three-year-low-as-europe-crisis-worsens/

http://www.tokyotimes.com/2012/weak-demand-in-china-and-europe-hurts-japanese-exports/

Despite the astonishing amount of manipulation that goes into our fiscal system by major banks, there are still a few fundamental rules to economics that never change.  The bottom line?  Demand around the world is derailing, hinting at a broad spectrum disintegration of public buying power.  Where demand goes, so goes the economy.

As I have pointed out in the past when explaining the importance of the BDI, crashes in the index are usually made visible on mainstreet around 8 months to a year after the event.  That is to say, the economies of multiple nations move into a widely felt crisis event around 8 to 12 months after the BDI crashes. 

There is a strange delayed reaction between the initial exposure of weakness in the financial system and the public’s realization of the truth, sort of like Wile E. Coyote dashing off a cliff in the cartoons only to continue running in mid-air above the abyss below.  It is a testament to the fact that beyond the math, there is an undeniable power of psychology in our economy.  The investment world naively believes it can fly, even with the weight of endless debt around its ankles, and for a very short time, that pure delirious oblivious belief sustains the markets.  Eventually, though, gravity always triumphs over fantasy…

In May, I also discussed the impending disaster in the EU in light of elections which would obviously lead to a clash (or engineered clash) between proponents of austerity and proponents of endless stimulus spending.  I suggested that this clash would trigger a possible remodeling or complete breakdown of the European Union in the near future:

http://www.alt-market.com/articles/765-economic-alert-if-youre-not-worried-yetyou-should-be

Today, I do not think that it would be outlandish to suggest (even to the casual market observer) that the EU has indeed been fractured, though the establishment still strives to maintain the façade. 

Spain and Italy have both requested bailouts from the ECB, finally exposing a problem which alternative analysts have been warning about for years.  While the mainstream media has been bicycle-kicking the long dead horse of Greece, the much more detrimental problems of the rest of the EU have been completely ignored.  Only now are investors beginning to understand that there is no such thing as a “Greek Contagion”; the whole of Europe has been quietly suffering through a debt malaise that surpasses the Greek issue.  Still, central banks pushed the idea that Greece was the gangrenous toe of the EU, claiming it had to be cured or amputated, or the infection would invade the entire body.  The truth is, Europe has been host to a systemic disease from the very beginning.  Greece is just a side-note. 

The UK has openly admitted that it has “returned” to recession.  Mass credit downgrades have been issued by S&P and Moody’s in primary EU economies, including France and Spain.  Italy’s credit rating has been cut only two notches above junk status and its bond sales have turned to Jell-O.  Spain has declared austerity cuts which include the confiscation of employee pension funds.  Does this sound like an economic body near “recovery”, as was the rhetoric spouted by the MSM a year ago, or, does it sound like the EU has gone off the deep end?

In the meantime, China continues to court their global trading partners with bilateral trade agreements designed to remove the dollar as the world reserve currency, and recent events appear to be hastening this process.  With American and European demand faltering, Chinese manufacturers are threatened with an even more severe export breakdown than they saw back in 2008, and so, it is only a matter of time before the BRIC and ASEAN economic blocs fully solidify their trade partnerships outside of the West, and away from the dollar. 

The year of 2012 has proven to be the most startling as far as financial news has been concerned.  Vastly more startling to me than 2008.  In 2008, the illusion of bank coherence and government action was carefully molded for the consumption of the masses.  The intimate connections between government and corporate fraud were glossed over with expert care.  There was an active and methodical effort to make us believe that the problems of 2008 were peripheral, and that the system at its foundation was sound.  This time around, the corruption has become utterly blatant and disturbingly nonchalant.  There is no attempt on the part of central and corporate banking interests anymore to hide the fact that the entire edifice is a cheap magic trick.  In fact, they now parade their distortions as if they are “helping” the country, instead of destroying it. 

When criminals are no longer concerned with hiding their crimes, it is time for the rest of us to start worrying.  That is to say, the current behavior of the establishment leads me to believe that a new phase in the crisis is about to arise.

Three recent events in particular (on top of all that has already happened this year) should be noted by those who wish to gauge the acceleration of financial hazard around the world:

Multiple Central Banks Issuing Policy Changes Simultaneously

Only a week ago, the supposedly independent and sovereign central banks of China, the UK, and the EU made multilateral policy changes including cutting interest rates to zero and reinstituting stimulus measure all within the SAME HOUR of each other:

http://www.reuters.com/article/2012/07/05/us-centralbanks-action-idUSBRE8640RN20120705

This is a disturbing and open admission by central banks that they not only dominate the economic structure of their host countries, but they do so in a coordinated fashion.  In the past, central bankers have made a point to at least pretend that they do not work in tandem with each other and are not centralized around a global methodology or hierarchy.  Today, they do not seem to mind if the public is aware of how they really operate.

Some might argue that central banks of individual nations have cooperated in the past, and that this is nothing new.  Partly true.  Central banks have enacted policy initiatives in tandem with each other before, but usually only after absurd levels fanfare and summits galore.  The pageantry of G8’s and G20’s and Davos and any number of other global meetings were a fulcrum point which central banks used to buy political capital with sovereign populations.   They had planned to institute these multilateral economic actions anyway, but the pageantry and theater came first.  Today, private central banks are taking joint action without ANY public meetings, even fake meetings.       

I feel that this is the start of an expedited trend towards full centralization of sovereign economies, and that soon, central banks will act as if single broad spectrum global monetary policy measures and global economic governance are legal and “commonplace”. 

Trade Volume Collapsing

The S&P has now generated the worst market volume in over a decade.  Small market investors are fleeing in droves away from stocks, leaving only the big players to dominate the field:

http://www.bloomberg.com/news/2012-07-02/volatility-surging-in-s-p-500-with-volume-lowest-in-decade-1-.html

This extreme lack of volume will facilitate a return to volatility, and we are about to see the same kind of massive stock spikes and drops that we tasted three years ago.  I would like to point out that the Fed, almost religiously, waits until stock markets go into cardiac arrest before announcing new stimulus measures and quantitative easing.  They delay until the investment world begs for printing, and then, they give it to them, with a smile. 

The Libor (London Interbank Offered Rate) Scandal

Like the bankruptcy of Lehman Bros. that heralded the credit crisis, the Libor Scandal has the potential to rock the pillars of the banking world like nothing I have ever seen before.  The average person needs to understand three things about Libor:

1) The manipulation of loans and credit swaps through the Libor interest rate mechanism has allowed big banks to hide the true extend of their incredible debts since the 2008 derivatives implosion.  Some mainstream economists are actually calling this a “good thing”, because, according to them, the lie of Libor fooled investors into supporting the markets where they may not have otherwise if they had known the truth.  They say the lie “averted Armageddon”.  Frankly, this is idiotic.  Libor has saved nothing, and the lack of transparency and honesty from corporate banks has only postponed an inevitable calamity which will be even worse now because it was allowed to continue on for years longer than it should have.       

2) Barclays and other institutions have claimed that they “had to use Libor fraud”.  Why?  Because every other major bank used it!  Their argument is that they had to lie in order to remain competitive.  Even if you buy this rationalization, you have to acknowledge the deeper problem here:  Barclays is essentially pointing out that EVERY major bank uses Libor to hide the fact that they are in dire straights.  In 2012, the system has openly confessed its own insolvency.  You do not need a fortune telling gypsy to predict a major collapse for you; the banks have just told us exactly what is about to happen.

3) Finally, regulators and central banks on both sides of the ocean, from the U.S. to the UK, from the Federal Reserve to the Bank Of England, relent that they KNEW about the Libor fraud being conducted by numerous banks as early as 2008, but kept their mouths shut.  This shows not only that central banks have been complicit in financial criminal activities, but governments have played along as well.  This fits right in with what I have stated for years: 

The economic collapse could not possibly be a “random” event.  Its culmination requires the collusion of so many corporate and government entities that it would be foolish to call it anything other than conspiracy. 

So, what comes next?  According to the path which I predicted back in January, the economy is near a climax event.  Perhaps an announcement of QE3 leading to ugly dollar devaluation, perhaps another bankruptcy by a “too big to fail” conglomerate leading to a firestorm in stocks, or perhaps even the exit of certain countries from the EU.  Maybe all of this and more.  The point is, keep your eyes fixed on the financial sector as we move into fall and winter.  There is a bleak harvest on the horizon…

 

You can contact Brandon Smith atbrandon@alt-market.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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Manufacturing Money

Off the keyboard of RE

Discuss this article at the Economics Table of the Diner

Recent data brought to light by Zero Hedge shows a significant Credit Contraction in the Shadow Banking sector of the money supply.  In his recent Banking Bits & Pieces article on Economic Undertow, Steve from Virginia once again hammers down on the fact that Central Banks don’t really “Print Money”, rather what they do is make loans against some kind of “collateral”.

From Steve:

‘Money printing’ is inaccurate and false: central banks cannot create new money, they are balance sheet constrained. They cannot lend without collateral. They cannot lend above the ‘face price’ of the collateral, which is almost always another loan. What central banks do is shuffle the custody of loans between agents, moving up or down the yield curve in the process. The central bank can offer credit as long as there is ‘good’ collateral offered by the private sector lenders. Without the good collateral — exhausted resources are not useful — the banks cannot lend.

Steve is for the most part of course correct here. The Central Banks do not really create money, it is in fact created in the Private Sector first by Commercial Banks in making Loans to the Biz Community for projects/ideas deemed Worthy enough to hopefully eventually pay off these loans complete with the Interest Charge attached to them.  At least that is how it works in the world of Small to Medium Size Biz, not so true in the Grand World of Conduit Biz.

Conduits are Biznesses like the Railroads, the Electric Grid and the Telecommunications Network.  In order to build such large scale Conduits, Credit has to be extended on a MASSIVE scale, and only a few people are ever deemed “Credit Worthy” enough to get those kinds of loans.  The way they get them is through issuance of Bonds, all underwritten by TBTF Banks the very same people are in control of.  As a result, these folks have a virtually unlimited supply of “Capital” to work with to build or create any sort of Network/Conduit they would like to build.

Since the Age of Coal at least, all of these Conduits have been extremely Energy consumptive, and as Steve also often points out, are never truly “productive”, but always subsidized by the further issuance of Credit.  In order for people to buy the services that say the Electric Grid or the Telephone network provide, still MORE loans are issued out, more ” Money” created.  This money then flows back inward toward the Central Conduit structure, but it really never is enough to pay off all the costs involved and the Interest Charges on the originating loans to build said infrastructure.  Thus eventually, all such things as Railroads and the Electric Grid get dumped into the Public Sector as the costs of maintaining them and paying off their debts exceed the cost of the revenue they bring in.  By this time of course, those who built them to begin with have extracted as much personal wealth as possible from the venture, and protected themselves from the BK of the company as a whole through the legal construct of the Corporation.  His Railroad goes Belly Up, but JP Morgan walks away a few Mega Bucks richer afterward.

In order to keep the whole game rolling along, further loans have to be issued in order for people to continue to buy the Services they have become accustomed to of easy Transportation, easy Communications and Lights that go on at the Flick of a Switch.  The Debt Overhang of course becomes ever larger all the time and evermore of this debt gets shifted to the Public Sector which essentially has become DEPENDENT on all these sytems along the way.

See, once Railroads are BUILT, nobody wants to go back to Teamsters and Wagon Trains pulling Freight,  once Electric Lights are available, nobody wants to go back to Gas Lights or No Lights.  Once the Internet is built, nobody wants to go back to the Telegraph. PROGRESS!

Problem here is of course, all that Progress carried with it endless and ever increasing debt load and energy requirements to maintain. All possible to do as long as the system as a whole was growing and the energy to maintain it all came cheap.  Combine increasing cost of accessing energy along with a debt load shovelled onto the Public dime over decades and in fact a couple of Centuries if you go right back to the Railroads, and eventually here you run up against the situation that those in charge of Credit Creation STOP issuing it to just about everybody, except the occassional Bubble Company like Facepalm.  Unlike the Railroads though, that Conduit is so patently STUPID it didn’t last 5 minutes in open trade.

So what is likely to occur here with imploding Credit availability at even the HIGHEST levels of the Supranational Corporations and the Nation-States?  Sandor, one of the regular Commenters on EU and a Lurking Diner made the following analysis of the situation:

Sandor wrote:

In response to dolph and many others that insist inflation will prevail by pointing to the past, be aware that current conditions do not resemble those of Germany 1929 or the Holy Roman Empire or even Zimbabwe. This kind of reductionist thinking is a symptom of a desire for easy answers aka ‘perceptual flattening’. What Steve is pointing out in this post is that deflation is happening in the shadow banking system, to an extent which is significant and difficult for the central planning authorities to combat. Most money is created by commercial banks through extension of credit. If loans cannot be effectively serviced in aggregate, debt-deflation will happen.

The current policy of monetary LTRO/QE/Twister is basically a giant rollover/duration extension. They are not printing money. They are extending and amplifying duration risk, aka ‘buying time’. Peak credit is tied into peak EROEI. Inflation is no longer a given outcome at an energy extraction ceiling, even if that is the tendency of humans throughout the brief period of modern societies. Predicting the demise of the USD and all fiat currencies is quite fashionable on the fringe blogs, but there does not appear to be enough gold and silver alternatives to go around. Fiat currencies are flawed, but are far more practical than lugging around metal everywhere or bartering for everything. There are further steps that will probably be taken in order to combat the specter of ‘deflation’ including outright USD devaluation (debt restructuring), negative nominal interest rates and/or demurrage currency. These may appear ‘inflationary’ on the surface but are rather symptoms of fighting deflation. They are new monetary medicines to ‘stimulate’ a preference for goods/services over cash in a flagging patient that is already resistant to all the old drugs. Do 80 year old men need Viagara? Is there a point in the life cycle of a nation where it’s OK to consume less?

I suppose the debate comes down to what happens when the doctors reach the end of their rope and all the experimental drugs have been tried. The ‘West’ are at/near quasi-deflation now, and the extreme resistance to it makes it appear that inflation is going to be unleashed in a deluge any day now. But there are relative price limits of energy and food at which the global economy can function at present rates of demand. These limits, and the limits of present technology on the rates of resource extraction effectively govern how much ‘inflation’ will actually happen. Inflation happens when demand expands because more people have an income that supports more consumption and the servicing of debt. These conditions are on life support in the US/Europe/Japan, on the edge of rolling over into negative.

Whether or not and for how long the USD and US/German Bonds are a good (deflation) bet is a policy timing issue. It is important to clarify the discussion going forward to note that this question and the inflation/deflation question are related yet technically distinct. The world has seen a massive and unprecedented inflation/credit expansion from 1947-2008. It’s an open question whether ultra long-term debt restructuring will give rise to massive inflation. When it’s coming from very high levels of aggregate demand like Japan, Europe, US/Canada, it seems unlikely, short of currency devaluation, which amounts to a haircut for the creditors and would only serve as a temporary spur to wages and prices. And while initially nominally inflationary, such a move would only serve to choke off credit further, a deflationary outcome in a monetary system based on debt and interest. Given the instability of human psychology, the political cult that ‘something is better than nothing’, and the precarious balance of resource distribution networks, it seems likely that we will revisit both extremes in the next 12 years.

 

Again, for the most part I agree with Sandor’s analysis.  On the Central Banking level, the CBs are exchanging “Cash for Trash“, accepting a lot of worthless Collateral in exchange for fresh injections of Cash.  This provides some liquidity to the TBTF Banks, but they aren’t any more Flush than they were before, and they still have no Credit-Worthy Borrowers to lend to for the most part.  So the Money distribution to the society pretty much stops at this very high Wholesale level.  Overall this creates deflationary pressure through the system, and it is showing up mostly inside the Shadow Banking system.  There is still speculation ongoing in the Commodities markets by the Prop Desks of the TBTF Banks and some Price Inflation there as a result, however medium-long term that cannot hold up as Money Distribution to the End Konsumer continues to be restricted.  Restricted how?  By AUSTERITY measures of various sorts, which include all sorts of things like Public Payroll cuts, reduced Pensions and Private Sector Bankruptcies.

Gold Bug Wet Dream

I also agree with Sandor that the current dynamic will lead to more experiments with money creation, including Demurrage and Currency Devaluation, but at least as far as the latter one is concerned you have to ask “Devaluation with respect to WHAT?”  All the major currencies are valued with respect to Each Other, with the Dollar providing the Benchmark Measure as World Reserve Currency.  The only thing the Dollar really can devalue against is the Oil it serves as a proxy for, and that is going to happen organically regardless.  It might also devalue against Gold if Gold is sought after as a “Safe Haven”, but poor distribution of Gold and Limited Quantities of it make it an unlikely future Currency.  So you STILL have Deflationary pressure here regardless of Devaluation and regardless of transition to PMs.  None of these techniques makes any more money Circulate in the real economy, which continues to be starved for Cash.

Demurrage Currency and non-debt Money like Greenbacks could put some money back into circulation, but the Distribution Mechanism for them remains a bit Mysterious at this point.  In Lincoln’s time, Greenbacks mainly got issued to pay for the War Effort.  Hiring Soldiers, paying Arms Dealers, that sort of thing.  Without a vast ramping Up of the Military effort here, who would Da Goobermint issue Greenbacks to, and for what?

The system at the moment regardless of the Currency chosen still depends first on the Wholesale Level Money Distributors of the TBTF Banks, and then below them the smaller Commercial Banks which distribute money in the form of Loans to many Biznesses.  Here in the FSofA, there really is no alternative Money Distribution system to this.  Only if Da Goobermint undertakes a Massive Make-Work project might they do Retail Distribution of Money on the kind of scale required here, and generally speaking the only such Make-Work project Da Goobermint will undertake in such a situation is WAR.   A successful War Effort holds the promise that you can extract some Profit from those you defeat in the war if you are successful with it.  In the case of WWII, the post-War extraction method was to create a bunch of Debtor Client States to the Industrial Monopoly held mostly at the time in Anglo-Amerikan and Kraut hands, all through the same Banking Interests and families that made the original Bretton Woods Agreements.  They got a 70 year long Wealth extraction scheme going with that one in the aftermath of WWII.

What remains quite unclear resultant from the current Spin Down is exactly what type of Wealth extraction scheme might be undertaken to try to pay off the costs of the next Global War for Dominance of the Monetary System?  Even Slave Labor cannot pay its own way, much less pay off outstanding debts of the losers of the next Global War, which in reality will be EVERYBODY.  Rebuilding all the stuff which gets destroyed THIS TIME with a Marshall Plan just won’t happen, the Cheap Energy to do that with just not is there anymore to do it with ALREADY, and in the aftermath of such a Global War a good deal less will be available.  Much energy will be Konsumed just to fight the War, and beyond that much if not most of the infrastructure required to extract such energy will have been DESTROYED.

The Georgia Guidestones

It’s a Morton’s Fork no matter how you cut it here, nobody can Win, everybody will Lose no matter what.  The best you can hope for is to Cut Your Losses.  Global Thermonuclear War including the exchange of MIRV equipped ICBMs betwen the major powers which have them is the worst scenario for a rapid destruction, and one can only HOPE that is not undertaken.  Next down the list would be a Global Extermination campaign undertaken by the Illuminati to eliminate a significant portion of the population through Biological Warfare/Pestilence Propagation.  A Georgia Guidestones type scenario.  Further down the List of Bad Outcomes is Global Warfare which though not Thermonuclear everywhere, still so destroys the current infrastructure that we get a Rapid Devolution to Mad Max.  Down the list after that one are Global and Independent Civil Wars virtually in all Nation–States, which set Brother Against Brother, and likely end up in the type of Multiple-Orkin Man scenario I see as a high probability outcome.  Note that this is FOURTH down the list of Bad Outcomes.

Over on the OTHER SIDE of the the Bell Curve of Probabilities are the GOOD outcomes like a vast new Energy Source is accessed, or En Masse the Societies all over the Globe move quickly toward developing Sustainable Systems which will replace the ones failing now as we speak through “Conservation by Other Means“, a term coined by Steve on Economic Undertow.  This basically represents the Economic Triage of entire Societies off the Oil Jones as they are cut off from the Life Blood of Credit with which to buy said Oil.  Lowest on my list of Probabilities is that Jesus Christ will descend from Heaven to General the War Effort of Good vs. Evil here, or that Aliens will emerge from Underground Cities to Duke it Out either with each other or J6P.

Outcome Number 4 appears to me to sit in the Central Portion of the Bell Curve as the Highest Probability Outcome.

Large societies become Highly Dependent on Money Manufacturing to run the various complex systems that evolve.  In the past, that included large trading networks run by folks like the Babylonians and the Romans as well, all based on the Ag Production of those societies and Conquest of ever larger portions of the surface of the Earth, eliminating competing Hunter-Gatherers along the way.  When these systems failed, said societies got overrun by “Barbarians”, basically the “Uncivilized” portion of the population of the Earth still extant out there at the time.  The transition to Industrialization took even the basic Ag Society and rendered that one Uneconomic, since of course an Industrialized Farm could produce so much food so much cheaper than the non-Industrialized one.  The further systems created to run said society all are even MORE dependent on functioning MONEY than the Ag Society was.  In such an Ag based society, even after the failure of the Monetary System, it was possible to revert to Barter for a while until things calmed down, with fairly restricted losses to total population, on the Biblical Percentages of around 25% of Total Population taken out by the Four Horsemen of the Apocalypse.

Revelation 6:8 And I looked, and behold a pale horse: and his name that sat on him was Death, and Hell followed with him. And power was given unto them over the fourth part of the earth, to kill with sword, and with hunger, and with death, and with the beasts of the earth.

The Industrial Society is not so Gifted with the relatively quick transition back to a Barter Economy that the basic Ag Society. is.  What is truly “productive” Work has become extremely Abstract in the Industrial Economy.  MOST of the population in the IE works in jobs that only are marginally important to survival at best, and almost all of those jobs are dependent on vast Energy consumption as well.  Taking a society OFF of the Oil Jones is not much different than going Cold Turkey off of Heroin.  It can’t be done without a whole lot of PAIN, and even after experiencing said Pain there is no guarantee you will survive the transition.

For the most Powerful Nation States, none of them will go “Quietly into this Good Night“.  All will struggle to maintain some sort of functioning Monetary System, Greenbacks are possible, Demurrage is possible, SDRs issued by the BIS are possible, Hell even Gold is possible here as the Deep Panic really sets in.  In my estimation, none of them can work, in the end because of a Fundamental Principle Nature always Obeys in our Frame of Reference, which is that you CANNOT MAKE SOMETHING FROM NOTHING.  Whatever the Money is, it must represent Resources which are actually  THERE.  If the resources relative to the total population base are NOT THERE, no money of any sort can represent them.

There is still Oil out there, and there is still a lot of good arable land as well.  However without vast changes in methodology, what is left of the resource base cannot match the population base.  I am well aware of other means and methods for Food production, Peter here on the Diner details how Hydroponics can be used for copious food production in the absence of Fossil Fuels.  Diner A. Gelbert in his article in the Waste Based Economy series also detailed possibilities for energy production that might be pursued, but the fact is they are NOT being pursued and it is unlikely they will be in anywhere near sufficient time to pick up the slack from Lost Oil Energy production.  We had the CHANCE to stop this Runaway Train probably last time in the late 60s to early 70’s with the Back to the Land Movement, but that  was  undermined and coopted out of existence by  vast Debt Expansion.

The only possible result here now is massive CONTRACTION, and no Monetary Policy can stop that, because you CANNOT MAKE SOMETHING FROM NOTHING.

RE

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The Brainwashing of a Nation by Daniel Greenfield via Sultan Knish blog Image by ElisaRiva from Pixa [...]

Event Update For 2019-11-18http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-17http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-16http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-15http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-14http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

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Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

Waterboarding Flounder"Serious oxygen loss between 100 and 600-meter depths is expected to cover 59–80% of the ocean [...]

Of Warnings and their Ripple Effects"We need wooden ships, char-crete buildings, bamboo bicycles, moringa furniture, and hemp cloth [...]

"Restoring normal whale activity to the oceans would capture the CO2 equivalent of 2 billion tr [...]

Ukrainian Rhapsody"Our future will be more about artificial intelligence, cybersecurity, and non-state actors tha [...]

LeBron’s Chinese Troll Mobs"In the 36 hours after James’ delete, a troll mob with bot support sent a flame tsunami at the [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

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

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

What seems to be connected is a problem with overheating wires because too much intermittent electri [...]

Using the California and Australian fires as teaching tools Taking a quick look at the denial among [...]

From WSJ: Blackouts Return to Northern California PG&E shuts off power to around 48,000 customer [...]

"And here’s the latest in global temperatures:" and the winner is... 2016! "Since 202 [...]

the hardest Sudoku are the best Sudoku... quite enjoyable with dark chocolate... now Ghirardelli 60% [...]

Living around 5300' elevation, the only flood we'll likely see is refugees. Although, that [...]

For those safe from the rising seas, the ocean acidification will fcuk you up instead [...]

Here's an article: https://www.reuters.com/article/us-imo-shipping-factbox/factbox-imo-2020-a-m [...]

What is the shift away from bunker fuels? [...]

Yeah, when the water heater goes out the day after you just put new tires on one of the cars, etc... [...]

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

The effect of urbanization on microclimatic conditions is known as “urban heat islands”. [...]

Forecasting extreme precipitations is one of the main priorities of hydrology in Latin America and t [...]

The objective of this work is the development of an automated and objective identification scheme of [...]