Gold

RE & Steve Collapse Update 2

youtube-Logo-4gc2reddit-logoOff the cameras and microphones of RE & Steve from Virginia

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Published on The Doomstead Diner on April 27, 2016

weekend-update

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In our latest installment of the Collapse Update Report, Steve and me cover Energy Industry Bankruptcies, Mass Shootings & Suicides and trying to resolve monetary and fiscal problems utilizing Gold as Money.

Audio Only:

mp3 Download available on Diner Soundcloud

 

Commodity Complex Crash Commences

 Deflation-problemgc2reddit-logoOff the keyboard of Michael Snyder

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Published on the The Economic Collapse on December 8, 2015

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Discuss this article at the Economics Table inside the Diner

The Global Commodity Crash Tells Us That A Major Deflationary Financial Crisis Is Imminent

If we really are plunging into a deflationary global financial crisis, we would expect to see commodity prices crash hard.  That happened just before the great stock market crash of 2008, and that is precisely what is happening once again right now.  On Thursday, the Bloomberg Commodity Index closed at 79.1544.  The last time that it closed this low was 16 years ago.  Not even during the worst moments of the last recession did it ever get so low.  Overall, the Bloomberg Commodity Index is down more than 28 percent over the past 12 months, and it has plummeted by more than half since mid-2011.  As a result of this stunning commodity collapse, extremely large mining companies such as Anglo American are imploding, giant commodity trading firms such as Glencore and Trafigura are in full-blown crisis mode, and huge portions of the global financial system are in danger of utterly collapsing.

In recent days, I have been trying to stress that many of the exact same patterns that we witnessed just prior to the great stock market crash of 2008 are happening once again.  This includes the staggering crash of commodity prices that we are currently witnessing, and even CNN acknowledges that there are parallels to what we experienced seven years ago…

The last time raw materials like copper and oil were this cheap, an economic depression loomed just around the corner.

It’s no secret that commodities in general have had a horrendous 2015. A nasty combination of overflowing supply and soft demand has wreaked havoc on the industry.

But prices for everything from crude oil to industrial metals like aluminum, steel, copper, platinum, and palladium have collapsed even further in recent days.

As I mentioned above, this crash in prices is hitting mining companies really hard.  Just this week, the fifth largest mining company in the entire world announced a massive restructuring and will be laying off tens of thousands of workers…

In the latest example of just how bad things have gotten, Anglo American–the world’s fifth largest miner–just kitchen sink-ed it, announcing a sweeping restructuring, a massive round of layoffs, and a dividend cut. The company will reduce its assets by some 60% while headcount will be cut by a whopping 85,000 or, nearly two-thirds. 

Overall, the U.S. has lost approximately 123,000 good paying jobs from the mining sector since the end of 2014.  And if commodity prices stay low, this sector is going to continue to bleed good paying jobs.

Meanwhile, investors have been dumping the debt of any companies that have anything to do with commodities.  This has significantly contributed to the emerging junk bond crisis that I discussed in my last article.  As I write this, a high yield bond ETF known as JNK has fallen all the way down to 34.31, which is the lowest that it has been since the last recession.  For much more on the junk bond implosion, I would encourage you to read an article that Wolf Richter just put out entitled “Bond King Gets Antsy as Junk Bonds, Which Lead Stocks, Spiral to Heck“.

So why are commodity prices falling so rapidly?

Many analysts are pointing to the economic slowdown in China as the primary reason.  For years, the Chinese economy voraciously gobbled up commodities from sources all over the planet, but now things are changing.  The Chinese economy is really, really slowing down, and some recently released numbers give us some clues as to the true extent of that slowdown…

-Chinese exports fell 6.8 percent in November on a year over year basis after being down 6.9 percent on a year over year basis in October.

-Chinese imports were down 8.7 percent in November on a year over year basis.

-Chinese manufacturing activity has been contracting for nine months in a row.

-Last week, the China Containerized Freight Index plummeted to 718.58 – the lowest level ever recorded.

And of course it isn’t just China.  Goldman Sachs says that the seventh largest economy on the entire planet, Brazil, has plunged into a “depression“.  And as I pointed out the other day, of the 93 largest stock market indexes in the entire world, an astonishing 47 of them (more than half) are down at least 10 percent year to date.

Even though stocks slid in the U.S. this week, the major indexes still seem somewhat stable.  But this is a bit of an illusion.  Yes, the biggest names on Wall Street are still flying high for the moment, but shares of a multitude of smaller and mid-size firms have been plummeting.  At this point, nearly 70 percent of all U.S. stocks are already below their 200 day moving averages.  This is yet another thing that we would expect to see just before the bottom falls out for stocks.

Everything that I have been writing about this week (see here and here) is perfectly consistent with all of my warnings from earlier this year.

We are plunging into a deflationary financial crisis in textbook fashion.  And if the Federal Reserve actually does decide to go ahead with an interest rate hike next week that is just going to make things even worse.

But most people are not patient enough to watch a process play out.  Most people that write about “the coming economic collapse” hype it up like it is going to be some sort of big Hollywood blockbuster that is going to happen over a week or a month and then be over.  That is definitely not the way that I see things.

To me, “the economic collapse” is something that has been happening for decades, that is still in the process of happening right now, and that will continue to happen as we move forward into the future.  The long-term trends that are ripping our economy to shreds continue to intensify, and our leaders are not doing anything to fix our underlying fundamental problems.

And the financial crisis that I warned would start during 2015 and accelerate in 2016 has already begun.  More than half of all major global stock market indexes are down by at least 10 percent year to date, and some of them have plummeted by more than 30 or 40 percent.  Trillions of dollars of wealth has been wiped out around the globe, and this is just the beginning.

All of the numbers tell us the same thing.

Big trouble is ahead.

My job is to inform you of these things.  What you choose to do with this information is up to you.

Survey: Ordering Preps for Collapse – Results: Fate of Countries in Collapse

survey-says-2gc2Off the keyboard of RE

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Published on the Doomstead Diner on Septemeber 30, 2015

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Discuss this article at the Survey Table inside the Diner

TAKE THE ORDERING PREPS FOR COLLAPSE SURVEY HERE

Our new Collapse Survey TM for this week is on how you should order up your preps for Collapse.

There is a lot of dispute on this topic, particularly with folks who think Gold & Silver are important Collapse Preps to have.  Theory there is that the PMs will hold their value when the fiat money collapses. So do you want to convert your current paper or digibit money into Gold if you have some savings?  How much of your pile should be held in Gold? 

Alternatively, you have many folks looking at a Mad Max scenario unfolding, so they are more partial to Steel & Lead as an investment.  AKA, Guns and Ammo.

Then you have the Back to the Land folks who feel the best investment is to buy your own piece of property and start growing your own veggies.  Except, once your Goobermint is outta biz, who exactly enforces you Property Rights to that patch of land?  If you are a Libertarian or Anarchist who wants to see Goobermint disappear, than what gives you the right to own a piece of property?

In the survey, you get $10,000 to spend on whatever preps you like, distributed out however you like.  If you're going to buy land with that, it's probably going to take at least half of it right there.

Anyhow, you can express some of your opinions on these topics in this Survey.

survey-saysNow. on to the results from last week's survey, the Fate of Countries in Collapse! 🙂

Although I did include questions to rank many countries and/or regions as to their fate in collapse, mainly the survey was focused on the "Big 3", the FSoA, Russia and China.

There s a constant debate ongoing in the Collapse Blogosphere as to which of these countries will fare the best as collapse marches onward, and there is a lot of ideological spin that goes along with that analysis also.

So, here I tried to strip some of that out and just get a hard and fast global viewpoint on which will be best and worst as time goes by.

Below here are the results from this survey.

For most dead people in gross numbers, the Winner is

  1 2 3 4 5 6 7 8 Standard Deviation Responses Weighted Average
China 19
(31.15%)
15
(24.59%)
7
(11.48%)
5
(8.2%)
2
(3.28%)
7
(11.48%)
2
(3.28%)
1
(1.64%)
5.9 61 3.18 / 11
India 12
(19.67%)
11
(18.03%)
10
(16.39%)
6
(9.84%)
7
(11.48%)
5
(8.2%)
2
(3.28%)
2
(3.28%)
3.8 61 3.97 / 11
Middle East-North Africa 3
(4.92%)
7
(11.48%)
13
(21.31%)
10
(16.39%)
5
(8.2%)
7
(11.48%)
10
(16.39%)
2
(3.28%)
3.96 61 4.74 / 11
Japan 4
(6.56%)
10
(16.39%)
2
(3.28%)
8
(13.11%)
8
(13.11%)
8
(13.11%)
6
(9.84%)
5
(8.2%)
2.81 61 5.38 / 11
USA-Canada 10
(16.39%)
3
(4.92%)
4
(6.56%)
8
(13.11%)
5
(8.2%)
3
(4.92%)
4
(6.56%)
6
(9.84%)
2.31 61 5.8 / 11
Sub-Saharan Africa 4
(6.56%)
8
(13.11%)
7
(11.48%)
4
(6.56%)
9
(14.75%)
0
(0%)
4
(6.56%)
9
(14.75%)
2.54 61 5.95 / 11
Europe 2
(3.28%)
3
(4.92%)
4
(6.56%)
6
(9.84%)
8
(13.11%)
11
(18.03%)
8
(13.11%)
8
(13.11%)
3.37 61 6.08 / 11
Southeast Asia 3
(4.92%)
3
(4.92%)
5
(8.2%)
5
(8.2%)
7
(11.48%)
7
(11.48%)
7
(11.48%)
3
(4.92%)
2.84 61 6.49 / 11
Russia 3
(4.92%)
1
(1.64%)
7
(11.48%)
4
(6.56%)
4
(6.56%)
3
(4.92%)
9
(14.75%)
11
(18.03%)
2.78 61 6.89 / 11
Central-South America 0
(0%)
0
(0%)
2
(3.28%)
2
(3.28%)
4
(6.56%)
8
(13.11%)
8
(13.11%)
9
(14.75%)
4.48 61 7.9 / 11
Australia-New Zealand 1
(1.64%)
0
(0%)
0
(0%)
3
(4.92%)
2
(3.28%)
2
(3.28%)
1
(1.64%)
5
(8.2%)
10.7 61 9.62 / 11

China!

India #2.

Since these are the two most populous countries on the planet currently, this makes perfect sense.  The Kollapsniks TM got this one right! 🙂

Now going by percentage of the current population:

  1 2 3 4 5 6 7 8 Standard Deviation Responses Weighted Average
Middle East-North Africa 14
(22.95%)
9
(14.75%)
4
(6.56%)
6
(9.84%)
3
(4.92%)
6
(9.84%)
15
(24.59%)
1
(1.64%)
4.92 61 4.28 / 11
China 7
(11.48%)
16
(26.23%)
7
(11.48%)
3
(4.92%)
10
(16.39%)
7
(11.48%)
0
(0%)
3
(4.92%)
4.31 61 4.41 / 11
India 3
(4.92%)
13
(21.31%)
6
(9.84%)
5
(8.2%)
13
(21.31%)
5
(8.2%)
5
(8.2%)
5
(8.2%)
3.85 61 4.87 / 11
Japan 6
(9.84%)
7
(11.48%)
6
(9.84%)
16
(26.23%)
5
(8.2%)
4
(6.56%)
4
(6.56%)
4
(6.56%)
3.65 61 4.9 / 11
USA-Canada 16
(26.23%)
3
(4.92%)
5
(8.2%)
3
(4.92%)
4
(6.56%)
6
(9.84%)
6
(9.84%)
5
(8.2%)
3.87 61 5.07 / 11
Europe 6
(9.84%)
2
(3.28%)
6
(9.84%)
6
(9.84%)
5
(8.2%)
14
(22.95%)
3
(4.92%)
8
(13.11%)
3.29 61 5.77 / 11
Sub-Saharan Africa 4
(6.56%)
7
(11.48%)
6
(9.84%)
6
(9.84%)
5
(8.2%)
1
(1.64%)
5
(8.2%)
20
(32.79%)
4.96 61 5.87 / 11
Russia 2
(3.28%)
3
(4.92%)
14
(22.95%)
2
(3.28%)
3
(4.92%)
4
(6.56%)
10
(16.39%)
6
(9.84%)
3.53 61 6.3 / 11
Southeast Asia 1
(1.64%)
0
(0%)
2
(3.28%)
11
(18.03%)
7
(11.48%)
3
(4.92%)
8
(13.11%)
5
(8.2%)
5.09 61 7.15 / 11
Central-South America 0
(0%)
1
(1.64%)
2
(3.28%)
1
(1.64%)
4
(6.56%)
9
(14.75%)
5
(8.2%)
4
(6.56%)
6.16 61 7.92 / 11
Australia-New Zealand 2
(3.28%)
0
(0%)
3
(4.92%)
2
(3.28%)
2
(3.28%)
2
(3.28%)
0
(0%)
0
(0%)
11.62 61 9.48 / 11

In this case, MENA got the nod for most dead people by percentage of population, which I also would generally agree with considering so much of it is already DESERT.  However, I would have ranked both Japan and sub-Saharan Africa higher.

Now the "Big 3" questions, comparing the fate of the FSoA, China & Russia in the post-collapse world:

Which one does best?

  USA China Russia Standard Deviation Responses
All Data 19
(31.15%)
11
(18.03%)
31
(50.82%)
8.22 61

The Ruskies win this one hands down.  Most Kollapsniks believe that since Mother Russia has already experienced collapse, they're more resilient.  Also, they like the people/land ration and the resources.

Here's Text Responses:

Strict. Authoritarian. Tight control. Strong military. Organizational capability and enforcement.
Our words are backed by working nuclear weapons.
Technology, temperate lands with a relatively large amount of resources, mid-large population, science.
abundance of natural resouces, people/land ratio
 

Where would most Kollapsniks prefer to be living post-collapse?

  USA China Russia Standard Deviation Responses
All Data 47
(77.05%)
2
(3.28%)
12
(19.67%)
19.29 61

Despite most Kollapsniks believing Mother Russia will do better, they still would rather be here in the good old FSoA.  This also is not surprising given the demographic of Kollapsniks is about 50% Amerikan and most folks want to stay where they are comfortable, know the language and fit in culturally.

Here's text responses on this one:

As a country, the United States may still be able to hold things together. Even if not, the social and cultural landscape is most familiar.
I speak English
The other two have a funny history when it comes to instability and killing people.

Finally, which country is likely to experience Political Upheaval and Revolution first?

  USA China Russia Standard Deviation Responses
All Data 26
(42.62%)
27
(44.26%)
8
(13.11%)
8.73 61

This is almost a dead even race between China and the FSoA, with Mother Russia coming in a distant 3rd.  Not sure why Kollapsniks think the Ruskie Goobermint is so stable though.

For myself, I will take a Middle Ground here (not available on the Survey) and stay in Alaska, but have it Repoed by Mother Russia. 🙂

OK, now get to it and take the new Ordering Preps for Collapse survey!

Survey: Fate of Countries in Collapse – Results: Currency Collapse

survey-says-2gc2smOff the keyboard of RE

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Published on the Doomstead Diner on September 22, 2015

toast2

Discuss the Results at the Survey Table inside the Diner

TAKE THE FATE OF COUNTRIES SURVEY HERE

One of the longest running arguments on the Diner is how various different countries will fare as collapse progresses forward.

http://www.philipcaruso-story.com/wp-content/uploads/2015/02/Where-To-Live.jpgMost often, this pits the FSoA against China, and the Diner has some China Bulls and some China Bears.  I am a notorious China Bear gong back to my days on the Peak Oil Forum, where at the time because China was such a hot investment opportunity with double-digit growth rates it was common wisdom the Chinese would out-compete the FSoA Empire to lead the world in the second half of the 21st Century.  It was there I first added my Tag Line to analysis posts on China, "The Chinese are TOAST". 😀

Now in reality here, as time goes by EVERY industrialized nation is toast, in the sense every one is dependent on the systems that are driven by copious quantities of fossil fuel energy.  Once that energy can no longer be accessed or afforded, life as we know it now wll come to a halt.

However, this is unlikely to happen all at once, and it is unlikely to play itself out exactly the same way in different countries, different regions and even from town to town.

In this survey we look at the large nation states individually and regionally for the smaller ones, to find out the opinions of the Kollapsniks TM on which ones are the best positioned as collapse gathers speed, and which ones will fare the worst.

Besides China and the FSoA, the other one of the "Big Three" countries often discussed in comparing on this topic is Russia.  Russia is often cited as more resilient by virtue of the fact they already went through one collapse when the USSR collapsed, plus the fact they have a decent amount of fossil fuel energy still left in the ground.  However, they have numerous problems as well, wars ongoing to their south, the Ukrainian situation and enormous financial and currency turbulence.

Take the survey, and let us know who you think will do best and which ones worst as collapse gets fully underway.

TAKE THE FATE OF COUNTRIES SURVEY HERE

Results: Currency Collapse & Debt Implosion Survey

http://joeforamerica.wpengine.netdna-cdn.com/wp-content/uploads/2013/04/survey-says.jpgOK, now onto the results from last week's Collapse Survey TM, Currency Collapse & Debt Implosion.

First question to look at is which of the current major currencies is likely to collapse first, and which has the potential to hold up the longest.

This is obviously important if you want to try to "preserve wealth", you certainly don't want to be holding the currency that collapses first! Duh. Roll Eyes

On the other hand, you have the problem of the utility of a currency in your neighborhood.

For instance, say the Norwegian Krone holds its value while the FSoA Dollar crashes.  Even if you have some Krone stashed in a Norwegian or Swiss Bank account, or even actually have some of their Notes in your basement safe along with your stash of Gold Coins, is Walmart going to take your Krone for a purchase of a bag of rice in Peoria, IL?  Not very likely.  You might stand a better chance in Europe, particularly Scandinavian countries if you have Krone, but here in the FSoA they are unlikely to do you a whole lot of good.  Only if you want to do currency trading during the spin down is this worthwhile to consider, and first off you need to be pretty flush to do that kind of trading, and second it's a fool's game these days with manipulated markets.  Even back in the day when I messed with currency trading it was nuts.  You have to leverage to beat the band to make any money this way.  You can get SWAMPED in a big move overnight.  Then the margin calls hit, and your next trip is out the window of the 49th floor.

Leaving aside the question of whether holding foreign currencies might benefit you personally, on the nation state level it's important to consider because he whose Currency crashes first, Collapses first.  So who is it gonna be?

I found the results of this particular question to be absolutely astounding.  Here's the results:

  1 2 3 4 5 6 7 8 Standard Deviation Responses Weighted Average
Chinese Renminby/Yuan 10
(9.8%)
23
(22.55%)
8
(7.84%)
17
(16.67%)
10
(9.8%)
8
(7.84%)
8
(7.84%)
1
(0.98%)
5.92 102 4.81 / 12
European Euro 9
(8.82%)
13
(12.75%)
15
(14.71%)
19
(18.63%)
10
(9.8%)
11
(10.78%)
5
(4.9%)
5
(4.9%)
5.24 102 4.88 / 12
Japanese Yen 15
(14.71%)
8
(7.84%)
13
(12.75%)
12
(11.76%)
11
(10.78%)
10
(9.8%)
8
(7.84%)
15
(14.71%)
4.92 102 4.98 / 12
Russian Ruble 7
(6.86%)
16
(15.69%)
21
(20.59%)
13
(12.75%)
8
(7.84%)
13
(12.75%)
2
(1.96%)
2
(1.96%)
5.91 102 4.99 / 12
Brasil Real 29
(28.43%)
14
(13.73%)
6
(5.88%)
3
(2.94%)
7
(6.86%)
5
(4.9%)
3
(2.94%)
4
(3.92%)
7.53 102 5.29 / 12
British Sterling/Pound 0
(0%)
3
(2.94%)
7
(6.86%)
10
(9.8%)
21
(20.59%)
6
(5.88%)
11
(10.78%)
16
(15.69%)
5.74 102 6.78 / 12
US Dollar 27
(26.47%)
7
(6.86%)
5
(4.9%)
1
(0.98%)
1
(0.98%)
3
(2.94%)
1
(0.98%)
2
(1.96%)
10.02 102 7.1 / 12
India Rupee 3
(2.94%)
13
(12.75%)
10
(9.8%)
4
(3.92%)
6
(5.88%)
8
(7.84%)
7
(6.86%)
6
(5.88%)
4.59 102 7.29 / 12
Canadian Loonie 0
(0%)
3
(2.94%)
4
(3.92%)
9
(8.82%)
2
(1.96%)
9
(8.82%)
16
(15.69%)
14
(13.73%)
6.69 102 7.66 / 12
Australian Dollar 1
(0.98%)
0
(0%)
5
(4.9%)
7
(6.86%)
8
(7.84%)
7
(6.86%)
11
(10.78%)
11
(10.78%)
7.49 102 7.84 / 12
Norwegian Krone 0
(0%)
2
(1.96%)
6
(5.88%)
2
(1.96%)
8
(7.84%)
5
(4.9%)
22
(21.57%)
17
(16.67%)
6.17 102 7.93 / 12
Swiss Franc 1
(0.98%)
0
(0%)
2
(1.96%)
5
(4.9%)
10
(9.8%)
17
(16.67%)
8
(7.84%)
9
(8.82%)
6.63 102 8.43 / 12

IMHO, this ordering is INSANE.  Apparently Kollapsniks TM think that the Chinese Renminby will collapse BEFORE the Euro and Yen!  WTF?  Not only that, the Indian Rupee will outlast the FSoA Dollar! hahahahahahahaha.

Which currency outlasts them ALL (according to Kollapsniks)?  The Swissie!  A currency issued by a tiny nation of 8M people with a GDP of $685B (2013 data) is going to outlast the Dollar and Renminby?  WTF?  There are more people living in NY Shity than all of Switzerland!

When the Euro goes down, the Swissie goes with it.  The SNB has HUGE exposure to Euro denominated debt, they have been buying it up to keep the exchange rate from going through the roof.  It's simply nuts to think this currency can outlast those of the Big 3.

My order for currency collapse?

Brasil Real
India Rupee
Russian Ruble
Japanese Yen
European Euro
British Sterling/Pound
Norwegian Krone
Swiss Franc
Australian Dollar
Canadian Loonie
Chinese Renminby/Yuan
US Dollar

Brasil is already on the serious ropes, and so is India.  Weak economies and too much poverty.  Russia should be strong, but they are a target for the Western Illuminati Banksters, so they will be under constant currency attack.  Yen & Euro go next, and then subsidiary currencies like Sterling, the Swissie and Krone go after them.  The Oz Dollar and Hoser Loonie keep value because of how closely they are connected to the FSoA Dollar.

One caveat to this is that once the cascade begins, it may be impossible to tell which one collapsed first.  Once a major like say the Japanese Yen collapses, this will cause so much havoc in the Interbank lending market that everything else will lock up in pico-seconds.

IMHO, the Final Battle for All the Currency Marbles is between the Chinese Renminby and the FSoA Dollar.  I think the Dollar wins this battle, because so much debt is denominated in dollars. Too many .01%ers have their wealth wrapped up in Dollars or Dollar denominated assets to let that one collapse.  We'll see on that one.

OK, now onto Q2, which is whether Gold & Silver will replace Fiat Currencies once they collapse?

Survey-Gold

  Yes No Standard Deviation Responses
All Data 34
(33.01%)
69
(66.99%)
17.5 103

Overwhelmingly by a 2/3rds majority, most Kollapsniks TM do not think Gold and Silver will replace Fiat once it crashes.

I tend to agree with that one, the PMs are too centralized and too few people have access to them for them to be workable as a currency medium.  There also is no clear idea on how these could be distributed out, or how letters of credit would be issued or anything else.  They might function as a Barter item, but as a currency that many use, it seems unlikely.

If Gold & Silver are NOT likely, what is likely once this Currency Regime fails? icon_scratch That was the subject for Q3.  Here's the results for that one:

  1 2 3 4 5 Standard Deviation Responses Weighted Average
TPTB will institute a New World Currency, the SDR or something similar 37
(39.36%)
11
(11.7%)
19
(20.21%)
13
(13.83%)
14
(14.89%)
9.47 94 2.53 / 5
LETS (Local Exchange Trading System) Money will be issued in many locales 23
(24.47%)
21
(22.34%)
19
(20.21%)
26
(27.66%)
5
(5.32%)
7.28 94 2.67 / 5
Paper Money will be issued based on Gold and Silver held in a Central Bank 11
(11.7%)
19
(20.21%)
29
(30.85%)
22
(23.4%)
13
(13.83%)
6.46 94 3.07 / 5
Gold & Silver Coins will be used as Currency 7
(7.45%)
32
(34.04%)
18
(19.15%)
20
(21.28%)
17
(18.09%)
7.98 94 3.09 / 5
No money will work and Trade will be all Barter 16
(17.02%)
11
(11.7%)
9
(9.57%)
13
(13.83%)
45
(47.87%)
13.3 94 3.64 / 5

A large plurality (almost 40%) of Kollapsniks TM think that TPTB will be able to institute a new centralized currency regime from the BIS (Bank for International Settlements, Basel, Switzerland, Central Bank of Central Banks, Home Base for the Illuminati). This is a particularly favored idea by Conspiracy Theorists, but it is not one I hold as most likely.  The likely candidate are SDRs, aka Special Drawing Rights, a concoction the BIS already has in place for internal use based on some potpourri of currencies and commodities and who knows what else they threw in that basket..

I am not in that camp.  Perhaps they will try this, but to get every country in the world to cede their monetary sovereignty over to the BIS would be near impossible IMHO.  It's like the Euro on Steroids.  It really does nothing other than re-denominate debt, and it sure doesn't put any new resource back in the ground.   To me, this is a non-starter.  Not to say it won't be attempted though.  It's a last gasp effort for the Illuminati to maintain hegemony over the economic system.

LETS systems of Local Currencies come in at #2, and this I feel is most likely to occur.  Regional breakup of the One to the Many TM will at least at the beginning require each region to develop their own local currency.  Potlatch at this stage of the spin down seems unlikely.

Far as Centrally held Gold being a basis for a currency, to me this is also a non-starter.  If you have a Central Bank holding gold in the Basement Safe, after a crisis of banking confidence like this, who would not go to the bank and DEMAND their "Gold Backed Note" to actually be redeemable in said Gold?  Once the gold is redeemed, what does the Bank have as an Asset?  At this point, the Gold you redeem for the note the Bank printed on it is just a barter item.

Will all trade eventually go all Barter?  It's already on its way there in some places, but that will take some time in the core countries I imagine.   Cannot be sure on this though, a rapid collapse could make barter the only functioning economic system in your neighborhood for a while.  Good idea to have barterable goods in your preps. Alcohol and Cigarettes are traditional barter items, I suggest also Tampons, Pampers, Condoms, Ammo, & Shoes as good choices of barter goods that last a long time.  Shoes in particular, have you noticed how many of the pictures of refugees show them to be barefoot?  Once trade with China halts, shoes are going to be hard to come by.  Right now though, you can buy a nice pair of sneakers at Wally World for $15 on sale.

Finally in this survey, how long before the Dollar finally dies completely and you can't use it to buy food at the major food retailers?  This could be either because the Dollar has hyperinflated to worthlessness or the shelves are empty.  Here's the results for this one:

  2016 2018 2020 2025 2030 The Dollar will keep working for the forseeable future Standard Deviation Responses
All Data 10
(9.71%)
16
(15.53%)
16
(15.53%)
22
(21.36%)
14
(13.59%)
25
(24.27%)
4.98 103

You have a pretty nice Bell Curve here, except for the 25% or so of people who thnk the Dollar will keep working past 2030.  The 2025 date seems about right to me, although again a major banking crisis and lockup could change that in an instant.

All in all, this was one of our most interesting surveys to date.

 

Navigating the Blockchain: Drones, Droids and BitCoins

Off the keyboard of Albert Bates

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Published on Peak Surfer on July 5, 2015

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Discuss this article at the Geopolitics Table inside the Diner

 

A robot may not injure a human being or, through inaction, allow a human being to come to harm. A robot must obey orders given it by human beings except where such orders would conflict with the First Law. A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.


— Isaac Asimov, Runaround (1942)Barack Obama may be remembered for many things — becoming the first Hawaiian President of the United States, withdrawing allied forces from epic military disaster in the Muslim World, dismantling market moral hazard, and reopening Cuba to the mob — but his most lasting legacy may be still to come.

There is a revolution quietly taking shape in Air Force joystick cubicles near Las Vegas, in the Horn of Africa, the Tribal Territories of Pakistan, the DMZ of Korea, and in secret sites in Tel Aviv and Kiev. Autonomous Robot drones are evolving capability to select and execute targets of opportunity.   

The word robot comes from the Czech word robota meaning forced labor, and is generally attributed to a 1924 play by Karel Capek. The idea that men will build machines that may all too easily destroy their creators runs back through Mary Shelley’s Frankenstein and Greek mythology. We have a deeply engrained wariness of anything that might knock us out of our place as top-predator in the food chain. And yet, we ignore these death machines we are building, seeing nothing more threatening than a good movie script. 

The median response from Artificial Intelligence programmers when asked when AI-droids will have better processing power than humans is 2030. Put another way, the coming generations of flying robots that kill their human prey from 10,000 feet up will be smarter than people in about 15 years, barring total collapse of petroleum civilization, or maybe even because of it.

Removing Asimov's three laws from the kernel of killer robot CPUs is a death wish. Actually, Asimov wrote four laws. The fourth or zeroth law that outranked the others:

0. A robot may not harm humanity, or, by inaction, allow humanity to come to harm.


Blockchain

 
 In the midst of the 2008 financial meltdown, the open source protocol for a public asset ledger called the blockchain was put forward. The core of this invention was the idea of decentralized consensus on a large scale, an app version of Occupy, if you will.

From the blockchain emerged BitCoin. BitCoin was modeled on the gold standard for valuing transportable wealth – there was a finite supply but it could be "mined" to enlarge what was available for transactions by users. New gold went to miners who solved mathematical problems. The Cyberpunk community extolled its virtues:

"Psychopathic tendencies as the side effect of extreme individuality can be brought into balance within a new social contract, enforced by Satoshi’s perfect market with its equilibrium of supply and demand. Characteristics that are often considered negative in society such as risk taking, calculated selfish acts and profit motives can now be channeled to serve a larger shared vision of a more free society.

 

***
 

"Instead of arms races and financial wars, with bitcoin the competition for solving a mathematical problem helps to achieve a global level security infrastructure. This new flow of currency has the potential to end financial apartheid and begin serving the unbanked and underbanked that have been excluded from the current financial system. It can free those who are restrained by rent-seekers and subjugated to financial colonization. Out of the torrents emerging through the massive hashing power, the torus of a new heart grows and with every beat expands our collective goodwill to flow throughout the entire network."


— Nozomi Hayase, Taming the Beast  

Anytime someone comes on to us like a Snake Oil salesman, we check to make sure we still have our wallet, even if that wallet is now an app on our wristwatch.

Actually, this exuberance is immediately suspect in the case of bitcoin because "free" coins will gravitate towards whomever has the most computing power, leaving a 99 percent of lesser power users to purchase from the 1 percent who get theirs for "free." This is not a paradigm shift, it merely shifts the elite class (temporarily) from banksters to any hackers with supercomputer access and an ability to pay the electric bill.

The top coin miners have a Red Queen problem. In the Queen’s race in Alice in Wonderland, everyone runs faster and faster and no-one gets ahead. In coin mining, more and more computing power is required to solve the mathematical problems. The software underpinning the network reacts to successful miners by elevating difficulty, so hackers add even more computing power, and so on. 

As this cycle speeds, it takes more datacenter CPU heat, and more cooling electricity, to mine a bitcoin. The computational power of the bitcoin mining network surpassed the world's top 500 supercomputers in 2013. On average, for every megawatt of electricity spent mining bitcoins, 0.65 tons (1300lbs) of CO2 are released into the atmosphere. Dave Carlson, founder of Megabigpower, a mining datacentre in Washington state, figures he spends 240 kWh and releases 312 lbs of CO2 for each coin he mines. Worldwide, bitcoin mining generates about 25 tons CO2 per hour, or 219,000 tons per year. This is not virtual CO2. This is real CO2.

Can the blockchain prevent HSBC’s illegal money laundering for Mexican drug cartels? No. It makes it easier. Nigeria is already becoming a blockchain haven for Citibank, with ambitions to colonize all of payments space. If it seems oddly ironic to speak of Nigeria as a colonial power, just remember how quick its entrepreneurs were to colonize and monetize spam.

Does Citibank have any compunction about employing the fastest available processing power to (a) game bitcoin mining; (b) replace devalued bitcoins with its own CitiCoin; and (c) unleash predatory trading algorithms from the blockchain that operate at warp speed or even employ quantum mechanics to execute trades before they are even imagined by the trading partners? 

The Cyberpunk response is that blockchain transparency will flush the bandit algorithms. But one man's bandit is another's freedom fighter, layering, spoofing, and generating wash trades. The sheriff (SEC, FIRA, FBI, or a State or US Attorney) is outgunned and doesn't usually want to do anything that might jeopardize his/her pension, or the party in power. 

In his White House War Room, The Commander-in-Chief is assured that if we don't do this first, our rivals will. And so we drift, towards unparalleled catastrophe.

Above, circling the heavens, are autonomous killer drones that keep getting smarter by the year. In a world where all things connected to the Internet are hackable, so too are they.

Forecast 2015 — Life in the Breakdown Lane

From the keyboard of James Howard Kunstler
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"Order Out of Chaos" by Anthony Freda

“Order Out of Chaos” by Anthony Freda

Originally Published on Clusterfuck Nation January 4, 2015
All images by Anthony Freda

“Don’t look back — something might be gaining on you,” Satchel Paige famously warned. For connoisseurs of civilizational collapse, 2014 was merely annoying, a continued pile-up of over-investments in complexity with mounting diminishing returns, metastasizing fragility, and no satisfying resolution. So we enter 2015 with greater tensions than ever before and therefore the likelihood that the inevitable breakdown will release more destructive energy and be that much harder to recover from.

I don’t know how anyone can trust the statistical bullshit emanating from our government reporting agencies, or the legacy news organizations that report them. Yet the meme has remained firmly fixed in the popular imagination: the US economy has recovered! GDP grows 5 percent in Q3! Manufacturing renaissance! Energy independence! Cleanest shirt in the laundry basket! Best-looking house in a bad neighborhood…!

¡No hay problema!

This is simply the power of wishful thinking on display. No one — with the exception of a few “doomer” cranks — wants to believe that industrial civilization is in trouble deep. The staggering credulity this represents would be a fascinating case study in itself if there were not so many other things that demand our attention right now. Let’s just write this phenomenon off as the diminishing returns of career log-rolling in politics, finance, media, and academia. All the professional “thought-leaders” pitch in to support the “hologram” of eternal progress that issues their paychecks and bonuses. This culture of pervasive racketeering that we’ve engineered has made us obtuse. The particular brand of stupidity on display also points to another signal vanity of our time: the conviction that if you measure things enough, you can control them.

I’m of the view that the measurers only pretend to measure and can only pretend to control things, especially in the most fragile of the systems that we depend on for running all the other systems of techno-industrial economic life: finance. The pretense has endured a lot longer than many of us had expected. The legerdemain employed by banking officials and their handmaidens was greatly augmented by the sheer wish that fragility (i.e. risk) had been successfully and permanently banished from the universe. That “magic” at least sustained a universal faith in currencies until the middle of last year when so many monies went south — except the dollar, levitating on blowback of the deflationary wind flattening everything else.

All this unreality in money and markets should be expected in the conditions just preceding systemic collapse of an entire trans-national industrial civilization, just as one should expect societies to construct their most grandiose monuments to themselves shortly before collapse. The Mayans R us. One year, they were cavorting bloodthirstily atop their garish painted pyramids and a generation later the jungle was stealing back over the temple steps and the population was a tenth of its former size. The same thing is going to happen to us, except there will be a hell of a lot more worthless, toxic debris left on the landscape.

Of course, even that is a more long-term projection than the exercise at hand calls for, viz., the forecast for measly little 2015. So without further throat-clearing, permit me to break it down for you:

Finance and Banking

As 2014 closed out, that kit-bag of frauds, swindles, Ponzis, grifts, bait-and-switches, and three-card-monte scams is looking at least as wobbly as it did in 2007 when Wall Street was busy manufacturing booby-trapped MBSs and CDOs. Except we know the true aggregate risk at stake has only grown larger and more hazardous due to all the strenuous efforts by authorities since the panic of 2008 to evade any natural process for clearing mal-investment and debt gone bad. A lot of that stank was simply shoveled into the Federal Reserve’s basement, where it sits to this day, composting steamily. As to be expected (and averred to in my previous books and blogs) financial repression, market intervention, and statistical distortion will produce ever more financial perversity. That is the hazard in decoupling truth from reality. Imposed dishonesty will always express itself in unexpected ways. Who expected the price of oil to fall by nearly half in a few months? (More on that below.)

These days, perversity expresses itself in a morbidly obese dollar gorging on junk while bulimic currencies elsewhere projectile-vomit their value away as the economies attached to them die of malnutrition. Perhaps this comes as a surprise to central bankers standing at their control panels like recording engineers at the soundboard, tweaking all the dials and slides expecting to achieve a perfect repressive inflation rate of 2-plus percent so they can melt away the onerous debt of sovereign balance sheets and Too Big To Fail banks — incidentally squeezing the citizenry of purchasing power in small annual increments that add up, after a while, to worthless money. They did manage to extend the inflation of stock market indexes another year, which the public is supposed to interpret as “prosperity.” Half a trillion dollars in stock buybacks of S & P companies were executed in 2014, much of it done with money, i.e. “leverage,” borrowed at zero interest. Stock buybacks boost share prices, of course, but they don’t represent any real increased value in a given company. They’re just snakes eating their own tails.

The belief that the world’s “reserve” currency is an implacable force, and that central bankers are omnipotent has made this trade appear to be an irresistible trend — Don’t fight the Fed! Since it’s a matrix of fraud based on thin air money detached from real productive activity, it is certain to blow up. And since 2015 is seven years past the last blowup, it can happen any time. All it requires is some small slippage somewhere, that one equivalent extra grain of sand or snowflake to bring the accumulate mass of false value down in a financial earthquake or avalanche. That obese dollar has been gorging on the equivalent of cheez kurls and Little Debbie Snack cakes, so it only grows more diseased as it gains weight. Sentient observers cannot fail to notice the advancing sickness.

Meanwhile, the US is stupidly waging currency war against other nations that can only blow back by incurring the animosity of every trading partner we have on the only planet available to live on. In 2015, I expect Russia to enlist China’s aid in undermining the dollar’s reserve status. Both countries have weaponry in the form of cash reserves and gold in their vaults. They also have the computer hacking expertise to start seriously messing with US markets — as much Fed technicians and TBTF bank algos do — bringing on mysterious flash crashes, derivatives “accidents,” and other abnormal events that will leave even the Goldman Sachs MIT graduates scratching their heads. Such hacking may accomplish what years of arrant market interventions by US technicians failed to produce: a deadly loss of faith on all the institutions that govern money and markets. Then the US will be the cleanest shirt in a laundry basket that is on fire.

The dollar these days represents two kinds of capital. The first is the stuff that the US has built and invested in since, say, the end of World War Two: a wasteland of aging and decrepitating suburban sprawl, that is, the infrastructure of a living arrangement with no future, the greatest entropic sink in human history. It extends to whole cities and their subsystems, e.g. the hell-hole of Las Vegas with Hoover dam and the dwindling reservoir of Lake Mead. Before mid-century, Las Vegas will be as desolate as Egypt’s Valley of the Kings. Try to imagine the money that went into building all that stupid shit in the desert. In another decade, across America, the housing subdivisions and commercial highway strips filled with tilt-up box stores, muffler shops and burger dispensaries will retain less value than the pyramids of Palenque had for the Mayans after their society rolled over and died. The so-called real economy is a New Age serfdom of burger fryers and janitors, indentured to that entropic sink. Below them is a widening slough of methedrine, child abuse, and tattoo art on its way to becoming Soylent Green. To put it bluntly, the dollar is entropy’s algo bitch.

The second kind of capital the dollar represents is the imaginary value based on sheer lying, making shit up, and borrowing from a future that has no chance of being paid back. This is the capital ginned up on “American exceptionalism” and “energy independence,” fairy tale memes functioning as collateral for the aforementioned malinvestments that add up to “The American way of life.” This capital has no substance, since it is just made up of intellectual and emotional dishonesty. This is the kind of constructed narrative that addicts and other functional cripples resort to to justify their behavior, and the fragility of it will sooner or later lead to the well-known condition of “hitting bottom.” That is the event horizon where the remnants of America enter what I call the World Made By Hand. It will be the greatest socio-economic shift since the fall of Rome, only much swifter.

Oil

AnthonyFredaTinManTTIt really deserves a sub-category of its own because it is the primary resource of our techno-industrial society and its troubles lie behind much of the present disturbances of our times. Despite the triumphal agitprop of the past few years, peak oil is for real. It just manifests more strangely than most people thought, namely, the simpleminded idea that it would only show up as ever-rising prices. No, I made point in The Long Emergency (2005) — and other commentators did too — that peak oil would manifest as volatility. And so since the actual moment of peak conventional crude around 2005, we’ve seen pretty wild oscillations in the price of oil. This is due to the harsh reality that the price people and enterprises can afford to pay for increasingly harder-to-get oil is less than the price that makes it possible to get it. This sets up a yo-yo-ing instability in economic performance that exacerbates even normal wave patterns in the business cycle (which are, in turn, aggravated by banks and governments’ interventions such as ZIRP to suppress those cycles). Below $70-a-barrel the producers go broke; above $70-a-barrel the customers go broke. So the price wobbles up and down as financial Ponzis like shale oil are introduced onto the scene in the hope that debt finagling and mineral rights leasing scams can substitute for physics and geological reality. One trouble with this is that each violent oscillation generates more economic and financial destruction. Activities like motoring, aviation, manufacturing, and retail are badly affected and the entire financial system is made more fragile by worsening increments. Most importantly, the cost structure of the oil industry itself gets battered to a degree that fewer companies can survive to produce the remaining oil.

The big story for 2014 was the crash of oil prices. It is yet being celebrated in other blogger’s 2015 forecasts as a boon to America. Wait until they find out that almost all of the “good jobs” added in recent years were associated with the shale drilling industry that is now being put out of business by low oil prices. Wait until they find out how the failure of junk bond financing thunders through the bond markets and the savage wilderness of derivatives — and ultimately into their ruined pension funds. Wait until they discover that it was but a symptom of the compressive deflationary depression now gripping the entire techno-industrialized world.

Here are my financial forecast particulars for 2015:

  • Early in 2015 the ECB proposes a lame QE program and is laughed out of the room. European markets tank.
  • Greek elections in January produce a government that stands up to the EU and ECB and causes a fatal slippage of faith in the ability of that project to continue.
  • Second half of 2015, the rest of the world gangs up and counter-attacks the US dollar.
  • Bond markets in Europe implode in first half and the contagion spreads to the US as fear and distrust rises about viability of US safe haven status.
  • Derivatives associated with currencies, interest rates, and junk bonds trigger a bloodbath in credit default swaps (CDS) and the appearance of countless black holes through which debt and “wealth” disappear forever.
  • US stock markets continue to bid upward in the first half of 2015, crater in Q3 as faith in paper and pixels erodes. DJA and S & P fall 30 to 40 percent in the initial crash, then further into 2016.
  • Gold and silver slide in the first half, then take off as debt and equity markets craters, faith in abstract instruments evaporates, faith in central bank omnipotence dissolves, and citizens all over the world desperately seek safety from currency war.
  • Goldman Sachs, Citicorp, Morgan Stanley, Bank of America, DeutscheBank, SocGen, all succumb to insolvency. American government and Federal Reserve officials don’t dare attempt to rescue them again.
  • By the end of 2015, central banks everywhere stand in general discredit. In the US, the Federal Reserve’s mandate is publically debated and revised back to its original mission as lender of last resort. It is forbidden to engage in further interventions and a new less-secretive mechanism is drawn up for regulating basic interest rates.
  • Oil prices creep back into the $65 – $70 range by May 2015. It is not enough to halt the destruction in the shale, tar sand, and deepwater sectors. As contraction in the failing global economy accelerates, oil sinks back to the $40 range in October…
  • …unless mischief in the Middle East (in particular, the Islamic State messing with Saudi Arabia) leads to gross and perhaps fatally permanent disruption in world oil markets — and then all bets are off for both the continuity of advanced economies and for peace between nations.

Geopolitics

freedon firghter fredaThe signal event of 2015 will be the disintegration of Tom Friedman’s global economy, the trade and banking relations we have known for about a quarter century, especially the frictionless flow of goods and capital between East and West. The tactical blunders of the USA and its Euro-partners drive the so-called emerging markets, led by China’s Shanghai Cooperation Organization, into a skein of work-arounds to undermine and avoid the US dollar trade. They don’t exactly replace the dollar as the world’s reserve currency but the workarounds lead to a period of worldwide currency turmoil that can only be resolved by monies being at least partially backed by gold. Both China and Russia will continue to work to convert their dollar reserves into Gold whenever possible. Meanwhile, America and Great Britain’s campaign to discredit and devalue gold will only permit their rivals to acquire more at a cheaper price.

The rest of the world is sick of America’s interventionist shenanigans and its moronic exported culture of burgers, Grand Theft Auto, and twerking Jezebels. They are aided by America’s own obdurate foolishness and poor strategic choices, for instance the blowback from the Ukraine misadventure of 2014. Who in the White House, Pentagon, or State Department thought it was a great idea to undermine the fragile stability of Ukraine? Is there any question that Ukraine was ever not in Russia’s sphere of influence? Or that Russia would allow it to be dragooned into NATO and used as a forward base for American firepower? Dmitry Orlov’s explanation for all this is the most cogent on the web:

What the Anglo-imperialists were paying for in corrupting Ukraine’s politics was a ring-side seat at a fight between Ukraine and Russia. And what they got instead is a two-legged stool at a bar-room brawl between Eastern and Western Ukraine.

Read the whole darn thing; it’s not long.

We succeeded in turning a marginally-bankrupt, marginally-independent nation into a complete basketcase that is going Dark Age as I write — no money, no work, no fuel, no heat, no food, no prospects. Having completely botched the operation, and misplayed the game against Russia’s Putin — and Russia’s legitimate interest in a stable next-door neighbor — the US will now abandon Ukraine. It will be forgotten as surely as the US-sponsored Ukrainian air force’s role in the crash of Malaysian Airlines Flight 17 — the incriminating details of which were buried by the Dutch investigating officials. Eventually, the Russians will have to care for the dying Ukraine. They will not be enthusiastic about it. They will do little and do it slowly.

Likewise our economic sanctions campaign against Russia (including the attack on the ruble) is now blowing back on the Eurozone’s export economy. Russia has survived much worse than Western sanctions in recent history. Russia will survive by turning east to Asia. This is already happening and is well publicized. What it means for Europe sooner than later is the loss of their access to imported oil and gas from Russia. Meanwhile, the North Sea fields and the Dutch Groningen gas field are dying. Good luck staying warm, Europe.

The blowback of Europe’s foolish partnership with the US campaign to punish Russia can only discredit the ruling parties and boost new right-wing parties such as France’s National Front and Britain’s UK Independence Party, both deeply nationalistic, anti Euro Union, and anti endless immigration.

The Islamic State was another legacy of blowback from American foreign adventurism. It was spawned out of the remnants of Al Qaeda in poor, broken Iraq and its conquests in 2014 ranged clear across northern Syria to several major cities in Iraq (Faluja, Tikrit, Mosul) right up to the suburbs of Baghdad. They made a lot of money off of captured oil wells and ransoming western hostages, and they shocked Western decency with their YouTube decapitations of hostages that the US and UK refused to ransom. The US’s response now is to bomb their installations and bivouacs. That can only drive them, literally, underground. IS will thrive on Western punishment. It has vast potential to recruit the population of idle, under-employed young men all across North Africa and the Middle East, and beyond to Europe and the band of Islamic society that stretches below Russia across mid-Asia. The catch is, if and when they come to actually rule most of these territories, they will be running economies reduced to Dark Age levels.

As I write, King Abdullah of Saudi Arabia has just entered the hospital. At 91, he is closer to the end of his story than the middle. Meanwhile, the tanking of crude oil prices has critically impaired an Arabian economy that depends on oil sales for more than 80 percent of its operating revenue. Much of that revenue goes to a national welfare system that pays just about everybody to not work. There will be a lot less money to go around now and a lot of grievance over it. The population of the Arabian Peninsula is so far beyond critical overshoot that the situation can only get ugly, especially since a large part of that excessive population consists of testosterone-jacked young men under 30 with nothing to occupy their hours but chitchat over tea and religious mummery. Consider also that when King Abdullah goes, there is liable to be a deeply destabilizing fight for the throne among the hordes of princes and competing clans — despite whomever Abdullah has named as his successor. You may be sure the Islamic State will be standing by to add fuel to those fires. That, in and of itself, could bring on a fast end of the oil age. Bear in mind, too, that the eastern side of Saudi Arabia, where most of the oil infrastructure is, contains a majority Shi’ite population. In a conflict between Sunni IS and Iran-backed Arabian Shia, a lot of stuff could just get blown up. At the least, itr could badly interrupt 30 percent of the world’s oil supply.

China is obviously struggling to prevent a financial freefall brought on by 20-plus years of extravagant debt creation and a lot mal-investment in the service of a very late entry into the techno-industrial frolic. It can’t be denied that they made a good show of it in a very short time, but they got in at the blow-off stage. Now conditions are changing unfavorably. The global economy that made China the world’s workshop is unwinding in a vortex of currency war, trade friction, territorial dispute, ethnic ill-will, and the disturbances that attend the great background problem of peak cheap oil.

The Chinese will work sedulously to try for a soft landing in the great economic contraction that looms. Chinese banking being non-transparent, overly subject to blundering central control, and deeply corrupt, may not bode well for that project. However, China has many cushions to fall back on short-term in the form of foreign money reserves and stockpiles of raw materials. But sooner or later they have to reckon with their dependence on continued oil imports. That is clearly the basis of China’s current flirtation with Russia — but with Russia arguably past its own oil production peak, that’s not a long-term strategy. China has cranked up the world’s mightiest production line of photovoltaic hardware, but solar won’t replace oil the way things currently run, and whatever they rig up may not last more than one generation if there’s no supporting platform of an oil economy for the manufacture of solar replacement parts.

Japan’s suicidal experiment with hyper-turbo ZIRP and QE is not accomplishing much except exacerbating global currency carry trades and driving down the nation’s standard of living. It may succeed in destroying the Yen and what remains of its economy in 2015. Fukushima remains unresolved and Japan’s energy future looks plain dismal. They have no energy resources of their own whatsoever. Any serious mischief in the Middle East oil fields will finish them off. The nation has been on the fast track to become the first post-industrial neo-medieval society. They could be fortunate to land back there and set up their shop while there are still residual riches in the world to work with. They might also go cuckoo and start a war with China for control over the oil fields of the South China sea. It is hard to see any other outcome from such a conflict other than China kicking Japan’s ass.

Geopolitical forecast particulars for 2015

  • Russia toughs out sanctions imposed by the USA; European partners drop their sanctions as self-evidently counter-productive. Russia threatens to post-pone debt repayments to Western banks. The ruble stabilizes.
  • Russia endures Islamic terrorist attacks and responds very harshly, embarrassing the wimpy West.
  • Baghdad Falls to Islamic State forces. Years of American endeavor are lost just like that. The IS attempts to use Iraqi oil reserves to fund its operations. It has a hard time keeping the infrastructure in repair. The USA refrains from bombing Iraqi oil installations, a decision viewed as weakness by IS.
  • The Islamic State makes inroads across North Africa. Libya, Egypt, Algeria, Tunisia, Morocco are all susceptible.
  • Formerly marginal political parties win big across Europe, forcing nations to rethink wide-open immigration policies. Neo-liberalism sinks into deep Weimar-style discredit. Open ethnic warfare breaks out in France, Britain, the Netherlands, Sweden.
  • European economies continue to sink for the simple reason that the growth era of techno-industrialism is over, along with affordable oil, and no amount of debt production will bring it back. All the machinations of the EU and the ECB are dedicated to overcoming this implacable reality, and thus will only lead to deeper and more intractable problems.
  • Beginning with the late January elections, which Alexis Tsipras’s Syriza party wins, Greece plays hardball with the EU for debt restructuring that amounts really to forgiveness of utterly unpayable €322 billion ($398 billion). If the EU calls Greece’s bluff and kicks them out, a European banking meltdown is almost certain. If Greece stays, then other hopelessly indebted nations of the EU declare they want the same deal. Pretty much a rock and hard place. Impossible to call except to say the situation promises mucho turmoil in 2015. ¡Hay problema!
  • Ebola contagion persists and rips across sub-Saharan Africa. Other nations are forced to pass severe travel restrictions to-and-from Africa.
  • Nigeria descends into bloody political turmoil as its oil industry falls apart in response to low prices. UN intervention accomplishes nothing. In wartime conditions, Ebola gains a foothold in Lagos, one of the world’s most overpopulated slum cities.
  • Pakistan and Afghanistan both continue to melt down into ungovernability. India is forced to take over administration of Pakistan and remove nukes. America continues to pretend that its mission in Afghanistan has some purpose, but it only remains a black hole of military expenditure and becomes a rancorous issue in the run-up to the 2016 Presidential election.

The USA Homefront 2015

shootout dream fredaFor one who has been a close observer of the US socio-political-economic scene since the Kennedy era, the nation has gotten itself into a pretty sorry state. The pervasive racketeering that poisons American life from the money-in-politics farce, to the shameless, chiseling medical-pharma cabal, to the SNAP-card and disability rights empire of grift, to the college loan swindle, to the disgusting security state apparatus, to the corporate tyranny of local life and economies, to the delusional techno-narcissism of the media, to the despotic and puerile gender preoccupations of academia — all of it adds up to a society that cares as little for the present as it does for the future. And that’s aside from the pathetic digital device addiction of the generation coming up, and the sheer sordid behavior of the tattooed, drug-saturated, pornified masses of adults now forever foreclosed from a purposeful existence or a decent standard of living.

Even physically America is a sorry-ass spectacle: between our decrepitating cities, abandoned Main Streets, gruesome strip-mall highways, repellent and monotonous suburbs, dreary industrial ruins, profaned countryside, and desecrated coastline, there is little left to actually love about This land is Your Land. We’ve made so many collective bad choices about how we live that one can’t help feeling we are simply a wicked people who deserve to be punished.

Whole classes already are, of course. What used to be a working class with aspirations has devolved to the forlorn savagery averred to above. Our thought-leaders are devoid of thought. Our hopes and dreams are absurd sci-fi fantasies prompting us toward robot-assisted suicide. Our political stratagems of recent years accomplish nothing except making more trouble for ourselves while inciting the enmity of people elsewhere.

Barack Obama’s signal failure — aside from letting the banks get away with murder and omitting to counter the Supreme Court’s Citizens United decision — has been his total evasion of measures that would prepare the nation for the vast changes in social and economic imperative that will attend the transition out of the techno-industrial era when he is out of office. These include supporting local small scale agriculture (rather than giant corporate agri-biz); promoting and supporting the reconstruction of local economic networks (Main Street business); eliminating multitudinous federal regulations that prevent individuals and small enterprises from operating; closing the hundreds of superfluous US military bases around the world; giving federal support to rebuild the US passenger rail system; promoting walkable communities — especially the re-activation of existing small towns and cities — instead of mindless obeisance to the suburban “home-building” industry (and its step-child in the commercial highway strip development racket) — and truly reforming medical care without the connivance of the insurance racketeers.

Obama and his party can be faulted for fostering the myth that every young person needs a college degree — leading a whole generation into debt penury for no good purpose, while depriving society of a long list of vocational roles and livelihoods based on providing genuine service or value. We will be a nation of unemployed gender studies graduates instead of plumbers, electricians, organic farmers, arborists, carpenters, machinists, nurses and paramedics, small business owners, et cetera.

This enormous bundles of myths and misplaced expectations for yesterday’s tomorrow prevents the collective national imagination from summoning a revised American Dream based on repairing the massive destruction of recent decades.

The political mood has not been murkier in my longish lifetime. Both major parties edge toward extinction as the Whigs did in the mid-1850s. The citizenry not sunk in drugs and depravity — that is, people who still read the news in some form and would like to care about their country — deserve a new faction or party that can at least express their discontent with the current situation. They will surely not get this in the generally supposed coming contest between Hillary Clinton and Jeb Bush. I hope they will be so insulted by this dynastic grab that more than one new party will form and make a big stank about it. The Tea Party was a good start in that spirit, but it tripped on its internal contradictions and its association with Dixieland-style religious fundamentalist idiocy and cracker war-mongering.

All that redounds on the current state of the Republican Party, a gang of venal ignoramuses pimping for lost causes. Despite having won the 2014 midterms, and capturing both houses of congress and governorships, they seem increasingly out-of-touch with the realities of economic contraction, peak oil, and climate irregularities. The old magic of stirring up the animals on social issues of abortion, bedroom activities, and allegiance to Jesus fail to move the old base, which is becoming economically quite desperate. That base also becomes conscious of how they have been hornswoggled into voting against their own interests for years in the sense that author Thomas Frank so aptly described in What’s the Matter With Kansas.

Race relations turned very sour in 2014 with more highly publicized killings of young black men in ambiguous circumstances. The chief martyr of the year, Michael Brown of Ferguson, Mo., was a poor candidate for sainthood, and did not help advance the credibility of claims that police brutality rather than the misbehavior of young men is behind a lot of strife abroad in the land. One gets the feeling that black race hustlers are in the driver’s seat recklessly pushing African Americans toward open warfare with everybody else. My view of the situation is not popular with Progressives, viz: that black separatism and its offshoots in “diversity” politics and multi-culturalism tragically promote an antagonistic, alienated, oppositional black politics at the expense of a common culture for blacks and whites with common values and common standards of behavior. It has gotten so bad that reasonable people can sadly conclude that the long civil rights project has ended in failure. We are treading on dangerous ground here, with foolishly outmoded ideas about what to expect from each other, and of course all this begs the questions: What now? What next?

Domestic Forecast Particulars for 2015 

  • Markets tanking in Q3 destroy the illusion of “recovery.” It becomes obvious that the story was a lie and the public mood grows much more surly.
  • 2014 proves to be the year of peak shale oil. After the shakeout of 2015 due to low oil prices, production never returns to previous levels. The fairy tales of “energy independence” and “Saudi America” fall apart, deeply demoralizing a gulled public and adding yet another layer of discredit to the people in charge of things.
  • Different kinds of political revolt break out around the country among varied groups, left, right, and center. Some of it revolves around life-and-death struggles for the souls of the floundering major parties. Some of it is organized violence against the government and especially against the US security state apparatus, including overly militarized local police forces.
  • Low-grade racial warfare erupts across the US. Flash mobs, knock-out games, lootings, and hammer attack type outrages generate counter-attacks. By summertime the conflict heats up. Firefights become routine and casualties mount. President Obama proves to be tragically ineffectual in restoring peace.
  • Anti-immigration sentiment in Europe spreads to the US as falling oil prices produce political disorder in Mexico prompting tens of thousands to try to flee north.
  • Bank of America is the first of the Too Big To Fails to enter the event horizon of failure. Obama can’t get congress to go along with a bailout. By Thanksgiving, there is turmoil among the banks as they scramble to cover losses. A public furor over using taxpayer money to cover derivatives losses leads to an unprecedented concerted action by states to attempt “nullification” campaigns.
  • Citibank applies for a bail-in of account holders. Dithering, frightened federal authorities are too slow to respond, permitting a run on deposits.
  • Hillary is loudly booed and hectored at campaign stops as “a tool of Wall Street.” Her coffers overflow with TBTF bank contributions. She bows out of the presidential contest as the public mood toward her sours. But not before she generates a lot of resentful opposition and alienates many Democratic Party voters who are also furious over the eight-years of Obama’s “hope” and “change” hand-jive. Elizabeth Warren is dragooned to replace her — dubbed the “Un-Hillary” — rescuing the party from a near-death experience. She openly feuds with party bosses, who plot against her, and undermine her campaign.
  • Senator Rand Paul agitates to abolish the Federal Reserve. His senate colleagues are shamed into considering legislative reform of the Fed’s mandate. Debate on the issue is the only thing the Republican dominated congress and senate accomplish in 2015. Paul decides to challenge Jeb Bush for the 2016 nomination. This blows the Republican party apart.
  • At Christmas 2015, the DJA sits at 13,500, the S & P is at 1200. Gold is at 1750, silver at 42.

Good luck everybody. Gird your loins and fasten your seat belts.

 

 

***

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.

If Wishes Were Loaves and Fishes

From the keyboard of James Howard Kunstler
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goldputin
Originally Published on Clusterfuck Nation December 22, 2014

Janet Yellen and her Federal Reserve board of augurers might as well have spilled a bucket of goat entrails down the steps of the mysterious Eccles Building as they parsed, sliced, and diced the ramifications in altering their prior declaration of “a considerable period” (that is, before raising interest rates), vis-à-vis the simpler new imperative, “patience,” with its moral overburden of public censure aimed at those too eager for clarity — that is to say, the assurance that the Fed will not pull the plug on their life-support drip of funny money for the racketeering operation that banking has become.

The vapid pronouncement of “patience” provoked delirium in the markets, with record advances to new oxygen-thin heights. Behind all this ceremonial hugger-mugger lurks the dark suspicion that the Federal Reserve has no idea what’s actually going on, and no idea what it’s doing. And in the absence of any such ideas, Ms. Yellen and her collegial eminences have engineered a very elaborate rationale for doing nothing.

The truth is, they have already done enough. They have succeeded via their dial-tweaking interventions in destroying the agency of markets so that nobody can tell the difference anymore between prices and wishes. Coincidentally, it is that most wishful time of the year, especially among the professional money managers polishing their clients’ portfolios as the carols are sung and the champagne corks pop. Ms. Yellen should have put on a Santa Claus suit when she ventured out to meet the media last week.

Not even very far in the background, there is wreckage everywhere as events spin out of the pretense of control. Surely something is up in the Mordor of derivatives, that unregulated shadowland of counterparty subterfuge where promises are made with no possibility or intention of ever being kept. You can’t have currencies crashing in more than a handful of significant countries, and interest rates ululating, without a lot of slippage among the swaps. My guess is that a lot of things have busted wide open there, and we just don’t know about it yet, like fissures working deep below the surface around a caldera.

This Federal Reserve is running on the final fumes of its credibility. Counsel “patience” as it might, other institutions and the people running them may run out of patience with it and start running for cover. When currencies catch fire, even a run on the bank becomes an exercise in futility. The rot is spreading from the margins to the center. In a world of oxidizing paper obligations, the paper dollar is hardly a fortress but more like a stack of empty foil-wrapped boxes displayed in the concourse of a shopping mall scheduled for closure as soon as the holiday is concluded. Maybe some wise-ass kid will just torch it. The security guard is still awaiting his previous paycheck and is out drinking by the dumpster.

It will be at least a couple of months before the Fed dares to start “printing” again and a lot can happen before it does. If and when it does resume QE — and it will be sorely tempted — all its credibility will finally be lost. What an opportunity for another country, say a country with an already foundering currency, to dare introduce money partially backed by gold. Could happen. That hypothetical nation may be one with, say, substantial oil reserves, something that even an economically depressed global industrial economy desperately needs. That hypothetical nation may be one that is very weary of being jerked around by the USA, with our augerers and vizeers, and haircuts-in-search-of-brains.

Merry Christmas everyone and, this dwindling year, be especially careful what you wish for.

 

 

***

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.

Suicide by Deflation

Off the keyboard of John Ward

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Published on The Slog on December 16, 2014

dogtailpt

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CRASH2: Neoliberalism, murderer of inflation, commits suicide by deflation.

How devious geopolitics and dead-end globalism combined to eat the world economy

You have to hand it to the neoliberal fraternity – perhaps I should say patriarchy – there’s never been a belief system in history capable of breaking all its own rules one by one, and still trying to tell us it’s the best socio-economic development system on the planet.

The world’s Milt-milkers have variously demanded to be nationalised, expected to be saved, opposed any and all reform, used austerity as a form of stimulation, tried Zirp as a means of increasing spending power in a recession, produced endless monopolies of media, banking and energy, used the biggest Government market interventions of all time, and then produced the slump to end all global slumps.

I’ve read most of Friedman’s stuff, and leaving aside for a second its narrow academic inability to take real people into account, I really don’t remember any of the above features being present in his work. However, one thing he did like was the idea of conquering chronic inflation; so whatever else one wants to throw at the neolibs, this you have to grant them: they have indeed wiped out inflation.

Imagine my surprise, therefore, when around five years ago 0% inflation suddenly became a spawn of the Devil. Yes – believe it or not, and frankly it’s an unavoidable conclusion – those who used Milton Friedman as their guiding light for so many years have even decided that this tenet of the Messiah’s gospel is also a false witness. (Or to use the other excuse, “Milt would never have recommended doing this”).

What we have today – and the virus is spreading fast – is deflation. So today I’d like to ignore all the other drivel that MF spewed out over three decades of abject failure in the real world, and focus single-minded on that.

Why did inflation suddenly swap places with deflation as the Great Global Bogeyman?

The answer is threeofold: politicians spending beyond their means, greedy bankers trading with each other beyond human understanding, and bourse-demanded growth insisting on consumer credit.

Succinctly, exposure to dangerous level of debt.

In an inflationary world, debt gets smaller in real terms all the time. So banking and politics have one thing that binds them together above any other: to avoid a deflationary world where debt gets bigger in real terms.

The globalist world today runs, grows, produces, swaps, and demands debt. Whereas real, entrepreneurial capitalism takes calculated risk to produce positive growth, mercantilist monopolism requires unfeasible debt just to function.

So where there is debt, there must not be deflation. And that’s why, after 2008, deflation went, with one mighty bound, from Goal of the Good to Spawn of the Devil. That’s largely why we had QE to erode currency value, Zirp to make repair easier – and specifically now, gold suppression to make it cheaper for sovereign central banks to repair past insanity in their dealings with neoliberal politicians and bonus-obsessed merchant bankers.

But the mixture of geopolitical ego and systemically flawed economic theory is a heady brew, Cynthia. Mercantilism on a global scale replaces war as the new dimension of diplomacy, and fossil-energy monopolism creates an obsession with access to it. So before you know where you are, devious tactics and greedy strategies create a maelstrom in which the urgent overtakes the important.

The circle of contradiction this involves is getting tighter with every week.

The price of oil must fall, the euro must fall, borrowing costs must fall, the Ruble must fall, gold’s value must fall. Even wages and commodity prices must fall. The result of all this is the terrible trio – falling demand, falling costs, and falling prices – followed by the tragic twosome – rising welfare costs and rising taxes.

On and on it goes. For raised taxes reduce demand still further, rising welfare costs increase debt further, and so deficits get bigger and borrowing costs get higher. This is why Osborne is in a corner, and Abenomics veers all over the place while getting nowhere.

When the Ruble falls, however, only higher rates will prop it up. When neoliberal austerity and growing wealth inequality kill economic recovery, borrowing yields spike…and another dimension now sits alongside deflation to raise the real level of debt.

I’ve been saying for three years that you cannot have a world in which everyone wants Zirp all the time: not only does that too reduce the spending power of the wealthiest age demographic, in a world where nations have competing geopolitical, social and economic priorities, it is a preposterous idea built on the hubris of distorted Alpha minds.

The bottom line is this: everything energy monopolism forces sovereigns to do geopolitically negates everything that sovereign banks need to do fiscally and financially.

Reagan and Thatcher championed the neoliberal economics of the smaller State as the way to defeat inflation. Having murdered inflation, the monopolous greed that underlies such economics has created its own murderer – deflation.

There is no way out of the cul-de-sac now, nowhere else to turn, nothing else to try. We are heading unstoppably for the sort of confluential collapse that changes everything. And the ignorant, unthinking nature of this endgame is summed up by a tweet I page-captured this morning:

repubnutGod bless America.

Golden Showers

logopodcastOff the microphone of RE

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Aired on the Doomstead Diner on December 11, 2014

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Snippet:

 

my_precious…One of the more interesting and somewhat comical manifestations of the ongoing banking collapse, manifested mostly in the crashing currency value of the Yen and Euro but visible elsewhere in skyrocketing Stock prices is the attempt by various countries like Germany, Switzerland and Belgium to “Repatriate” Gold they have stored overseas in the Basement Safe of Da NY Fed and the BoE primarily. Well, it is supposed to be there anyhow…

Why do they want to repatriate said stacks of Gold? Obviously, because nobody TRUSTS anybody anymore, so everybody wants their own hands on their Precious, Gollum style.

Of course, very little of this stuff is actually moving around from one safe to another, various excuses are made for this, but of course the main reason is that there are multiple claims to every Gold Bar in existence, many times over here. It is “leased” out, which is the most preposterous idea you can imagine, HTF does Renting a Gold Bar improve your financial situation? Besides that, there is an enormous amount of “Paper Gold” traded every day, which has no corresponding Gold bar attached to it, it is just a bet on what the current and future price of Gold might be.

To demonstrate how ridiculous this whole deal is though, let us do a Thought Experiment and imagine what occurs even IF all this Gold actually still is in the Basement Safes of Da Fed and the BoE, AND all the countries requesting return of their Precious actually get it back!…

http://www.quickmeme.com/img/de/de7b0d100f2bbdfcb3686fb5c4e35ddb3a1657a43f8c190eff9d1ee0e721a2e9.jpghttp://www.quickmeme.com/img/d1/d131e378f41f1d548fd565cc09cca5c3e60b9d35b3dc82d1465f2494152cc4d3.jpg

For the rest, LISTEN TO THE RANT!!!

Note: For Non-Native speakers of English and folks who prefer to read rather than listen, you can find the Full Transcript of this Rant HERE

The Tide Goes Out…

Off the keyboard of RE

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Published on the Doomstead Diner on November 30, 2014

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There are numerous morons out in the MSM rejoicing at the falling price of gas at the pump, comparing it to a “stimulus” package which will free up gobs of money for consumers to spend on other stuff.  Still more imbeciles claim this is a Price War gimmick by the House of Saud to put frackers in the FSoA outta biz and spank Vlad the Impaler for being a bad guy.

None of this of course is true, as I covered in yesterday’s Rant, Oil Price Crash!!!  The folks who write this stuff are either complete imbeciles (true in many cases) or they are paid to spin the newz the way the oligarchs who own the media want it spun (true in all cases).  There also is the problem of completely FALSE and wrong headed economic theories that Ph.D. Economistas pitch out, themselves also pawns of the oligarchy in charge.

http://www.spearswms.com/Uploads/article_images/articledir_70/35317/1_fullsize.jpgYou have two sides to this part of the action battling it out daily on the pages of Blogs like Zero Hedge, the ever reviled there, “Keynesians” who favor blowing money out of Bazookas and “Austrians” who favor stacking Gold Bars in the basement safe.  Neither side has a clue here, because money isn’t the problem, resource depletion is the problem.

http://resources0.news.com.au/images/2011/04/19/1226041/269440-gold-prices.jpgIn their constructs, “Capital” is Money.  So if you need more Capital far as the Keynesians are concerned, you just issue more Money, which turns up as Debt on somebody’s balance sheet, generally you the Taxpayer.  Far as the Austrians are concerned, if you just back all your money with Gold, it will provide all the Capital you need to have a smooth running economy.

Neither of these viewpoints is correct, because Money of ANY sort is not Capital, resources and most specifically Energy resource in our energy intensive society is the Capital here.  The money just serves as a proxy for this, a numerical accounting system through which people buy and sell things and distribute out the surplus of your society.  When your society runs out of surplus, the money starts losing its value.  Even Gold loses its value, as evidenced by the also now dropping like a stone price of Gold.

Which brings us to the fairly hilarious Repatriation schemes for Gold various countries are undertaking here, notably the Swiss who are holding a referendum this week, but numerous other countries are also trying to stack Gold Bars in the basement safe of their respective Central Banks.

In the case of the Swiss, they want to make it a law that the bank can’t sell the gold, which of course makes it meaningless as an asset.  A corollary to this would be nobody could redeem the money the bank issues for any of the Gold, because if they did that everyone would want to trade their notes for the Gold and then there would be no Gold left in the safe to back the currency with!

 photo robber_barons_500.jpg

The underlying problem here is that all the money that has been issued out since the beginning of the Age of Oil is debt notes on Oil.  No coincidence here that the same folks like the Rockefellers and Rothschilds run the banking system AND own all the energy and mineral resources on earth.  They are just a very big Company Store, they issue out the Scrip with which you can then buy the Oil.  They don’t give it away of course, they Loan it to somebody, Oligarchs in some cases, directly to your Goobermint in others but it still is a loan, and the way you get access to that money is by getting a job of some type working for the Oligarchy or working for Da Goobermint.  Numerous self-employed people also glom onto this economy of course, your Dentist gets hold of the money by drilling your teeth, you got hold of the money from your job as a Teacher or working as an IT designer, but originally the money was borrowed into existence either by Da Goobermint or an Oligarch.

Anyhow you now have all this money in existence supposedly representing assets, but the assets aren’t assets anymore or in the case of Oil simply is not there to extract up at a price most folks can afford to buy.  So little by little at first the economy starts collapsing, and for a while it stays disguised and most of the problems occur in the peripheral nations to the credit system, so as an Amerikan or Brit you might not notice it, unless of course your job has already gone south too.

At a certain point however, all the accumulating problems add up, and finally something breaks, and what broke was the price of Oil.  Much like the Tsunami at the top of the page here, the receding price of Oil is like the receeding Tide before the Tsunami rolls in.  The Tsunami here will be a wave of Defaults and Bankruptcies that eventually will engulf even the largest Nation-States like Russia, but will of course start smaller than that with Independent Drillers heavily leveraged who will face margin calls.

cover_Drilling-Deeper_300w (2)How much further the price will drop before we start to see major shutins remains to be seen, however this is now not in the “Most Likely Case” that David Hughes projected in his report “Drilling Deeper“, but rather a WORST CASE scenario.  Tomorrow here on the Diner we will have an Interview with David we did back a few weeks ago when Oil was at $80, down then from $90.  Now down to around $69/barrel and looking like it will drop into the $50s.

Now, these folks can continue issuing out Credit theoretically in perpetuity, but they can’t make that credit redeemable in anything they still have left, namely enough Oil to power an industrial civilization with 7B people wandering around it.  They also don’t recognize that most all of the Assets that the loans were made on themselves are going worthless.  The Gold Mine that Rio Tinto (a Rothschild owned company) owns is not an asset when it costs more in energy to extract the Gold than anyone will pay for the Gold.  The Car Factory is not an Asset when people can’t afford to buy the carz that come off the production line of that factory.  Securitized bundles of McMansion Mortgages are not an asset when people can’t afford to buy carz to zip back and forth from them every day.  And so on here.

No monetary games, no change of money over to gold changes the already done deal fact of life that the investments made through the Age of Oil are all MALINVESTMENTS which cannot be sustained without gobs of cheap energy flowing out of the ground every day, and those days are gone FOREVER.

What takes time is the recognition of the losses, along with the Geopolitical and Economic shifting around of the pain, generally shifting the worst problems onto the weakest nations first here.  However, it is not as many pundits believe a question of who will come out of this as a “Winner”, with China and Russia Bulls rejoicing at the end of Anglo-Amerikan Empire and forseeeing a new Ascendancy in the East, but rather just a question of who will be the LAST LOSER in the game and circle down the toilet the last.

In a few decades at the most, the last planes will have stopped flying and the last cars will have stopped driving, and Industrial living will begin to fade out of the memories of whoever is left walking the earth at that time.  For now though, we can only sit and wonder at the foolishness of it all and wait for the Tsunami to roll in.

Signs and Wonders

From the keyboard of James Howard Kunstler
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20141103_pot
Originally Published on Clusterfuck Nation November 3, 2014

Holy smokes,” Janet Yellen must have barked last week when Japan stepped up to plug the liquidity hole left by the US Federal Reserve’s final taper trot to the zero finish line of Quantitative Easing 3. The gallant samurai Haruhiko Kuroda of Japan’s central bank announced that his grateful nation had accepted the gift of inflation from the generous American people, which will allow the island nation to fall on its wakizashi and exit the dream-world of industrial modernity it has struggled through for a scant 200 years.

Money-printing turns out to be the grift that keeps on giving. The US stock markets retraced all their October jitter lines, and bonds plumped up nicely in anticipation of hot so-called “money” wending its digital way from other lands to American banks. Euroland, too, accepted some gift inflation as its currency weakened. The world seems to have forgotten for a long moment that all this was rather the opposite of what America’s central bank has been purported to seek lo these several years of QE heroics — namely, a little domestic inflation of its own to simulate if not stimulate the holy grail of economic growth. Of course all that has gotten is the Potemkin stock market, a fragile, one-dimensional edifice concealing the post-industrial slum that the on-the-ground economy has become behind it.

Then, as if cued by some Satanic invocation, who marched onstage but the old Maestro himself, Alan Greenspan, Fed chief from 1987 to 2007, who had seen many a sign and wonder himself during that hectic tenure, and he just flat-out called QE a flop. He stuck a cherry on top by adding that the current Fed couldn’t possibly end its ZIRP policy, either. All of which rather left America’s central bank in a black box wrapped in an enigma, shrouded by a conundrum, off-gassing hydrogen sulfide like a roadkill ‘possum. Incidentally, Greenspan told everybody to go out and buy gold — which naturally sent the price of gold spiraling down through its previous bottom into the uncharted territory of worthlessness. Gold is now the most unloved substance in the history of trade, made even uglier by the overtures of Mr. Greenspan. Personally, I think the more violently gold devalues for the moment, the more extreme the reaction will be when the first glimpses of reality pierce the twilight’s last gleaming of official US market intervention shenanigans.

All this goes on, by the way, because an essential problem remains: the world cannot pay back its accumulated debt and the money maestros of world finance don’t dare even try to unwind it in an orderly manner, fearing they will open up an international monetary sucking chest wound of deflationary doom. And this does nothing to brighten the prospect that evermore new debt can ever be repaid. All that remains are various three card monte maneuvers, hot potato games, and musical chair tournaments using the last kinetic rocket thrusts of global credulity to pretend that contraction is not already here, walking amongst us, like the ancient Harvestman of yore, swinging his scythe.

Of course, few doubt the reality of Ebola. And ISIS (or whatever it’s called) also works its ghastly hoodoo in the gummiest region of the world, and they both share an interesting feature these days: reporters are discouraged from going into either hot zone where the threat is that they will bleed out through all the orifices from Ebola or have their heads hacked off on video by ISIS. So we are not getting the best information out of Ebola West Africa and those parts of the Middle East where ISIS is at large. The situation is apt to be rather worse than we are being told. The financial markets shrugged off both these threats by the time Halloween rolled around, but I wouldn’t be so confident that story is over for either of these two ugly influences. If the world had a face, it would have fragility written all over it.

 

***

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.

INVESTORS: FIVE REASONS WHY MONEY MUST DIE

Off the keyboard of John Ward

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Published on The Slog on January 13, 2014

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econcartCROPThe distance from now to the inevitable is, by definition, finite

Tell me, have you ever read 2000-2013 The Corporate Issuance Global Frenzy: what role for US Quantitative Easing? by Marco LoDuca of the European Central Bank et al?

G’wan…bet you haven’t. I have, and now my brain hurts. Simplistic is bad, but simple is good. Impenetrable is worthy, but clarity and vision are worth more.

Four years ago, I asked two questions about the arrival of QE and Zirp into our linguistic lexicon. One, what will you do if QE doesn’t work? And two, why will Zirp help recovery, when the biggest single demographic group with the lowest overheads needs Zirp + 4% to keep spending?

They were both naive questions – I know that now. When the first two bouts of QE didn’t work, I took out Bear Notes, on the wild and crazy assumption that Ben and Merv must change tack. They didn’t, and I saw a third of my investment capital  wiped out. And of course, without Zirp most of Wall Street would’ve gone bankrupt, followed in fairly short order by the US Government and the United Kingdom. I did a quick sum and worked out that if rates were at 4% for 3 years, for example, by 2015 $2.30 in every $5 would be going on just managing US Sovereign interest.

Anyway, 2014 has dawned, and here we are with the same crazy people saying “one more heave” for both stimulation and austerity at the same time. Here we are with Greece, Spain and Italy on the edge of default – and debt bonds from these countries flying off the shelf. Here we are with Zirp having saved nobody really, and the tapering of QE about to start a little bit and if anything goes wrong well, it won’t hahahahaha. And above all, here we are talking about interest rates as if these Masters of the Universe could forbid them to rise, ever.

In that context, 2000-2013 The Corporate Issuance Global Frenzy: what role for US Quantitative Easing? by Marco LoDuca of the European Central Bank et al doesn’t exactly hum with relevance. There are many who will be glad about this, but my point is based on reality rather than long equations: there is no point in doing learned studies based on the logic of madness unless you are a CBT counsellor or psychiatrist.

This is where we are, actually, now, on Planet Earth:

1. The Americans, Brits, Eurozoners. Japanese and Chinese are all emitting drivel, spin and desperately clutched, atypical statistics to tell us the recovery is under way. It isn’t. QE has failed, and the response of the authorities is now that of managing crack addict withdrawal rather than getting a better policy.

2. Printing money to purchase poo simply gives the central banks a very big and wide poo-based balance sheet, while starting out on the fast lane to inflation.

3. Interest rates must and will rise, because market pressures on gold, commodities, bonds and a hundred other formerly good investment areas have gone, and the smart money knows that the Bourses have had their day in the sun: it’s about to start drizzling.

4. When they rise, money will have to be printed to manage debt owed by the debtor countries. This will result in the fast-lane inflation vehicle sprouting James Bond wings and zooming up into hyperinflation. Don’t even think about what that will do to the markets.

5. Neoliberal economics demands consumption 24/7/365. Sadly, they also demand a 30% reduction in mass consumer spending power. And guess what – inflation will merely exacerbate that. This is a circle that simply cannot be squared. It’s the flaw in the theory, the ghost in the machine, the Mammoth in the downstairs lavatory.

Those five factors demand a crash. They don’t point to it, or suggest it, or even persuasively propose it: they demand it. Flatlining consumption will meet tentatively tapered easing, skid into a bond balloon, and bounce over the central reservation where it will hit rising debt costs towing hyperinflation. In the raging inferno that follows, the stock market will be burned to a crisp.

I have no idea any more how long the boys in the the bubble can keep up the denial. Japan’s road looks pretty short to me, and Germany’s austerity shtick will hit the buffers once the directionalising debt money pulls out of ClubMed. The bank bailin surrealism will not get past the first French bank that tries it on, and that in turn will make France’s real situation obvious. Britain’s Chancellor George Osborne has a carpet-bag like a tardis: I’m constantly amazed by the consistently superficial credibility of the cons he pulls off. And in theory, until the tipping point, the States could keep pumping smoke into the Hall of Mirrors almost indefinitely.

But in time, “almost” will be passed, and then Janet Yellen will be heading like Speedy Gonzales for the downstairs loo. In there she’ll find a hairy mammoth saying “I was here first”.

Enjoy the week.

Ides of December

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on December 31, 2013

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The future is always obscure to us. We see it after it emerges in the past … any troubles the future bears become apparent only long after it is possible to do something about them.

This is the time of year when there is a blizzard of predictions. Most of these turn out to be wrong:

(Posted last year) “One thing to keep in mind, the world’s central banks are fully committed already. If/when there is a deleveraging event, there is little more that the central banks can do other than lend from their discount windows. Administrative interest rates are nearly zero in the US, Japan, the EU and in UK. They cannot be lowered further. Also, Japan, US, EU and UK central banks are now credit providers for both governments and large sectors of their respective economies. The (small) incentives the private sector had to lend have disappeared. It also means that promissory notes/IOUs for loans made in the past — which are the collateral for the central banks’ loans — are in diminishing supply. The central banks can lend additional amounts to governments and the private sector, but the positive shock of such lending is diminished and the danger of central banks making unsecured loans increases.

Unsecured lending by the central bank is a danger because leverage is the reason why the commercial lenders have failed in the first place. When the central banks take on all the private sector unsecured loans or they offer their own loans in excess of collateral they become super-sized, insolvent commercial lenders. The consequence is no effective lenders of last resort. Depositors look to remove funds from banking system which in turn accelerates system insolvency. Nobody wants to be caught where the only effective collateral is deposits (currency) and where claims against currency exceed it.”

This isn’t a prediction but an observation. It is always true …

Will central banks be tested in 2013? Maybe not but that certainly does not mean clear sailing.

Not quite a prediction but central banks were indeed tested in 2013. They had little choice but to retreat as their open-market operations reached the limits of usefulness or offered diminished returns.

– In 2013, look for the ongoing bank/deposit runs underway in Europe to accelerate and for Spain and Greece to default (Greece is already in Selective Default according to the Standard and Poors rating agency). The depositor runs indicate that central bank has been making unsecured loans and that system is insolvent rather than individual banks.

Only partially correct. There was a great ‘silent run’ out of the euro system toward US stock market. Ditto runs out of Japan and China.

– In a shocker, look for the French government to seek an IMF-EU bailout.

Incorrect … France was able to continue to borrow from the private sector and avoid bankruptcy proceedings.

– France’s automobile- and banking sectors will collapse in 2013.

Incorrect. These French industries are under tremendous strain.

– EU fuel consumption will decline sharply in 2013. Regardless of the price for fuel in Europe, it will be too high.
Screen Shot 2013-12-31 at 9.36.44 AM
This is certainly correct and will be reflected in the next year’s BP Statistical Review (Mazama Science).

– German auto production and sales will also decline … perhaps not as sharply as makers in other western European countries … as Chinese and US car buyers vanish.

Not quite correct. Americans stepped up and bought more cars and trucks, so did the Chinese. This offset tepid sales in the EU.

– Look for auto sales, registrations and production to decline in western Europe while Eastern European manufacturers will continue to hold steady or decline more slowly than their western counterparts. The eastern European manufacturers have a wage advantage over the counterparts and a local market that has not been completely saturated. Furthermore, these manufacturers are not dependent upon sales to China (Germany) or the US (Japan) or to southern European countries such as Spain and Greece … as are the car makers in France and Italy.

Not quite correct. Europeans did not buy as many cars as the ‘recovery’ in Europe has been confined to the well-off and finance markets. However, access to China and US markets was a life saver for automakers during 2013.

– As long as the European Central Bank lends there will be no pressure for any country to leave the euro-zone and (re)introduce their own currency. However, if any one country abandons the euro, all of them will be effectively gone as Germany will be the second country out the door. Europe’s liabilities are currently the shared burden of the ‘EU’ but will be effectively lodged against Germany if the EU cracks … Germany is one of the few countries in Europe with any money. The Germans will not invest it in European ‘solidarity’ that no longer exists.

Correct. The ECB continued to lend although credit multipliers have collapsed across Europe creating both a liquidity trap and dire, delfationary conditions in the countries across the South.

– Look for the politics in Europe to become more conflicted as the governments endeavor to restart chimeric ‘sustainable’ growth and fail miserably. The economic problems on the Continent can only be solved by stringent conservation, not attempts to waste more resources, faster. Europe cannot afford the resources.

Correct. Notable is the increase of neo-Nazi parties across Europe, generally blaming immigrants and non-nationals for economic problems.

– Angela Merkel will easily win her re-election bid as the main opposition party is unable to find a candidate who can pass the sniff test. Merkel will remain in charge even if the Eurozone falters and Germany exits.

Correct.

– Segments of the populations of Spain, France, Greece, UK and in many eastern European countries will descend further into poverty, with food- and fuel shortages and homelessness.

Correct. The segment of EU society that has not suffered is the ‘investor class’.

– Look for more weather ‘events’ in 2013 including more severe drought and flooding. The pressure on governments to ‘do something’ about climate change will increase … Europe, China and India will respond by burning more coal …

Correct. This has been the year of ‘super-smogs’ in China and India as well as destructive cyclones in India and Philippines. The establishment response has been denial … and burning more coal.

– Look for higher prices for grains due to bad weather. Humans have to buy and drive cars to keep economies alive. Humans have to buy and eat food to keep themselves alive: the marginal human will choose paying for food at any price … versus paying for expensive/useless cars.

It is hard to say whether this prediction is true or false. Bad weather affected consumers more than it did producers world-wide = less pressure on food prices.

– The US government will propose a minuscule carbon tax of $10 per ton along with a ‘cap and trade’ system that rewards energy speculators and big polluters.

Incorrect. The US government lied about energy and climate and did nothing else but subsidize the fossil fuel industry and give credence to climate change deniers.

– Look for at least two wide-area gasoline/fuel shortages occurring in the US as preludes to permanent shortages occurring in 2014. The prices needed to bring fuels to market are becoming unaffordable by rapidly impoverished Americans.

Also incorrect. Creeping poverty eliminating fuel consumers has kept US prices in check. So has the ‘Incredible fuel supply glut caused by fracking’ … What kept upward pressure on fuel prices was US purchases of goods from China and India with Wall Street credit; this in turn subsidized fuel waste in these countries.

– Look for fuel prices on spot and futures markets to generally decline (as customers continue to go broke).

Generally correct.

– Look for Japan’s Shinzo Abe government to fail over its pro-nuclear power policies. The nuclear industry is completely discredited in Japan, ‘Shinzo Abe 2.0′ will be a failure like the first version.

Incorrect. Abe hasn’t failed yet but the cracks are visible.

– Look for Japan to have a funding crisis next year: such a crisis has been predicted for the past twenty years but 2013 will be the year when the prediction becomes reality. The Bank of Japan will be unable to fund the government plus the country’s massive debts by itself. That the establishment cannot imagine a change from the current state of affairs indicates a change is imminent. The difference between next year and the past is Japan’s declining electronics industry and tepid car sales. The outcome is an decreasing foreign trade surplus, which has been the means by which Japan has financed itself.

Correct to some degree. Japan is being funded by its central bank-as-conduit for the private sector in the place of overseas customers. Japan is going broke, it just isn’t there yet.
Japan mfg 122312
Figure 1: from the OECD, noting the secular decline in both the Japan auto industry and manufacturing in general. A business can borrow against its own account(s) such as credit lines or consumer credit (if an individual). A business can borrow against the accounts of its customers (when they borrow to buy the business’ products), against the accounts of the state (by direct credit subsidy, a tax benefit or by way of currency issue) and against the accounts of overseas customers (by way of foreign exchange). Japan has been able to borrow from foreign customers and undercut competitors: now the customers are broke or going.

Still correct.

– In light of the foregoing, Japan will do everything within its power to depreciate the yen to support its flagging car- and electronics industries’ exports: the Bank of Japan will lend without restraint.

Correct.

– The other major economic powers will attempt to depreciate their own currencies by offering more central bank loans. The biggest issue for 2013 is how long can the economies function when sole provision of credit is by central banks … and when there are no real lender(s) of last resort?

Correct. Attempts have been made but all have failed as the cost of money is outside the reach of central bankers, being set at the world’s gas pumps by millions of motorists buying fuel with money every single day.

– For this reason, gold prices will hold up relative to other commodities which will will tend to follow the price of crude oil.

Incorrect. Gold has been the sole collectible asset that behaves as an agricultural commodity.

– US Congress will not agree to tax increases by January 1, the sequestration process will take effect the following day. Thousands of Federal government employees are set to be furloughed as the Congress struggles to resolve related debt ceiling/revenue issues in a politically palatable way.

Correct, although sequestration has turned out to have only marginal effect on government spending.

– The US debt ceiling will be reached at the end of January (approximately) and the tedious discussion will take place regarding increasing US debt and by how much. The Congress will ultimately cobble together a can-kicking ‘solution’ that lifts the government’s debt ceiling while leaving the US debt burden largely unaltered. The debt is an unproductive claim against economic output … the debt can only be serviced by more borrowing. The US public sector deficit finances the private sector’s surplus. The US cannot increase output to effect the debt as increases are borrowed, the alternative to borrowing is default … the US economy is trapped.

Correct.

– Look for the Chinese economy to continue to unravel as its overseas customers find it difficult to borrow.

Correct. China faces a credit crunch in 2014.

– Look for more repressive measures in China as its downturn effects workers in cities rather than farmers losing property rights. There will be more riots and work stoppages followed by crackdowns.

Incorrect. The biggest problem in China in 2013 turned out to be air- and water pollution.

– There will be more business bankruptcies in China and capital flight as Chinese tycoons take whatever dollars they can find and run.

Correct about bankruptcies and correct about capital flight out of China.

– The Syrian government of Bashar al-Assad will fail with US-supported militant jihadis gaining ascendency. This in turn will give a reason for the US to intervene and destabilize the country further.

Incorrect. The war in Syria appears to be winding down as combatants run out of human- and other resources needed to continue.

– Look for Salafist consolidation in Egypt. That Salafi- and Shiite extremism are the only coherent, ongoing anti-modern enterprises reflects a world-wide failure of imagination.

Incorrect. Egypt has returned to military dictatorship and the Salafists have been crushed.

– As US military involvement decreases in Afghanistan, look for compensating increased involvement in Somalia, Yemen, Uganda, Kenya, Mali, Democratic Republic of Congo, Nigeria, southern Africa, Venezuela, Honduras, Bolivia and elsewhere.

Correct.

– Look for more diplomatic- and military crises in South China Sea between China, Vietnam, the Philippines and India; between China and Japan over the Sea of Japan; between Iran and the West in the Persian Gulf; between Russia, Norway and Canada over the Arctic Ocean. All of these disputes — plus US military operations in Africa — concern petroleum and mineral resource claims.

Correct. Look for more aggression in 2014 in these areas as well as in Central Asian republics and in Africa.

– Argentina will default in 2013.

Incorrect. Argentina did not default … but it will in 2014!

– Canada will have a banking crisis as the worth of real estate in areas of the country outside of Vancouver, BC, will plummet. The government will be forced to bail out its major banks.

Incorrect. Economic Undertow continually underestimates the ability of the establishment to prop up the status quo.

– Australia will likewise have a banking crisis due to declining real estate prices and an over-leveraged banking system.

Incorrect, see above.

– US real estate prices are now in a short-term quasi-bubble peak and will decline over the course of 2013.

Incorrect. The real estate ‘bubble’ is still inflating across the US. Higher interest rates and the absence of a shadow banking network are making short work of it.

– US natural gas prices will increase due to declining output in shale plays. The cause will be less drilling activity and declining prices for gas liquids and stock prices of gas drillers (New York Times):

“… while the gas rush has benefited most Americans, it’s been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.”

 

Correct. There is a shake-out underway in the ‘gas patch’ as drillers switch to oil- and other liquids plays. Gas is uneconomical at current prices.

– The recent increase of US oil output will level off. This will be ‘a big shock’ to the public which has been promised increased production and lower prices. There will be declines in conventional oil fields to offset gains from tight-oil deposits. Any gains in high-priced export market will be more than offset by losses in domestic markets as customers cannot meet the higher world price.

This is hard to tell as good data is not available. The establishment will do whatever it can to avoid the truth about our energy situation.

– Russian petroleum production will continue to decline: keep in mind, the arc of Vladimir Putin’s political career has paralleled the output of Russian oil fields.

It is hard to say whether this is correct or not. Any changes in Russian Federation output are very small.

– Kurdistan will make a deal with arch-enemy Turkey to ship its oil and turn away from dealings with the Shiite Iraqi government. The Iraqi government lacks the military horsepower to have its way with the Kurds, the decline of petroleum revenue will weaken the Iraqi government further.

Correct.

– Israel will not attack Iran in 2013. The country cannot afford a major war because the Israeli’s sponsor America cannot afford one. At the same time, any significant petroleum shortage will be blamed on Middle Eastern suppliers, if a war is necessary to provide cover for politicians in Washington, one will be started.

Correct. The US has begun rapprochement with Iran antagonizing the Saudis and Israelis.

– The steady unraveling of the … economy will continue. Both bonds and stocks in the US will be largely unchanged over the course of the year, largely due to ‘capital’ flight from Europe and the Far East. Given large-scale central bank lending, the credit spreads for European sovereigns and the UK will narrow somewhat. Japan credit costs will climb as the need for credit will be greater than what the Bank of Japan can provide by itself.

Largely correct: citizens around the world became poorer as they exhausted their meager supplies of credit. Meanwhile, the US- and other bourses reached new, all-time highs. This was a consequence of ‘closed-loop’ lending by finance institutions to themselves to support stock Ponzi schemes. Credit spreads did indeed narrow in the EU but did not change in Japan.

– A wildcard would be gunmen shooting up a police station in the US instead of a school. Government would be exposed as vulnerable, the militarization of the police would be demonstrated to be a failure. Putting police into fortresses as a reaction would make them even less effective, would further isolate government police power. There is a reason for militant attacks on police stations overseas: they work.

Incorrect. Gunmen attacked the vulnerable, there was no political action to speak of other than the rise of extremist hard-liners and neo-Nazis in Europe and elsewhere.

– 2013 will be the year of the Marginal Human: among other things, Mr. and Ms. Marginal will have less purchasing power.

Correct. The decline of purchasing power on the part of ordinary citizens has been notable, with the exception of credit-driven purchases of new cars by Baby Boomers.

Only a little more than half-right with some ambiguity due to incomplete data or activities not yet fully ripened. The undercurrent of unraveling is plain to see behind the scrim of media-sphere happy-talk and propagandistic ‘Good News’. Everywhere, the can is being kicked … there is the taint of desperation in the air.

Coming up next: predictions for 2014!

Chinese Debt Binge

Off the keyboard of Michael Snyder

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Published on Economic Collapse on November 26. 2013

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China Is On A Debt Binge And A Buying Spree Unlike Anything The World Has Ever Seen Before

When it comes to reckless money creation, it turns out that China is the king.  Over the past five years, Chinese bank assets have grown from about 9 trillion dollars to more than 24 trillion dollars.  This has been fueled by the greatest private debt binge that the world has ever seen.  According to a recent World Bank report, the level of private domestic debt in China has grown from about 9 trillion dollars in 2008 to more than 23 trillion dollars today.  In other words, in just five years the amount of money that has been loaned out by banks in China is roughly equivalent to the amount of debt that the U.S. government has accumulated since the end of the Reagan administration.  And Chinese bank assets now absolutely dwarf the assets of the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England combined.  You can see an amazing chart which shows this right here.  A lot of this “hot money” has been flowing out of China and into U.S. companies, U.S. stocks and U.S. real estate.  Unfortunately for China (and for the rest of us), there are lots of signs that the gigantic debt bubble in China is about to burst, and when that does happen the entire world is going to feel the pain.

It was Zero Hedge that initially broke this story.  Over the past several years, most of the focus has been on the reckless money printing that the Federal Reserve has been doing, but the truth is that China has been far more reckless

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!

 Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

I was curious to see what all of this debt creation was doing to the money supply in China.  So I looked it up, and I discovered that M2 in China has grown by about 1000% since 1999…

M2 Money Supply China

So what has China been doing with all of that money?

Well, they have been on a buying spree unlike anything the world has ever seen before.  For example, according to Reuters China has essentially bought the entire oil industry of Ecuador…

China’s aggressive quest for foreign oil has reached a new milestone, according to records reviewed by Reuters: near monopoly control of crude exports from an OPEC nation, Ecuador.

Last November, Marco Calvopiña, the general manager of Ecuador’s state oil company PetroEcuador, was dispatched to China to help secure $2 billion in financing for his government. Negotiations, which included committing to sell millions of barrels of Ecuador’s oil to Chinese state-run firms through 2020, dragged on for days.

And the Chinese have been doing lots of shopping in the United States as well.  The following is an excerpt from a recent CNBC article entitled “Chinese buying up California housing“…

At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, but the customers are largely Chinese.

“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”

Apparently a lot of these buyers have so much cash that they are willing to outbid anyone if they like the house…

The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount.

“The price doesn’t matter, 800,000, 1 million, 1.5. If they like it they will purchase it,” said Helen Zhang of Tarbell Realtors.

So when you hear that housing prices are “going up”, you might want to double check the numbers.  Much of this is being caused by foreign buyers that are gobbling up properties in certain “hot” markets.

We see this happening on the east coast as well.  In fact, a Chinese firm recently purchased one of the most important landmarks in New York City

Chinese conglomerate Fosun International Ltd. (0656.HK) will buy office building One Chase Manhattan Plaza for $725 million, adding to a growing list of property purchases by Chinese buyers in New York city.

The Hong Kong-listed firm said it will buy the property from JP Morgan Chase Bank, according to a release on the Hong Kong Stock Exchange website.

Chinese firms, in particular local developers, have looked overseas to diversify their property holdings as the economy at home slows. Chinese individuals also have been investing in property abroad amid tight policy measures in the mainland residential market.

Earlier this month, Chinese state-owned developer Greenland Holdings Group agreed to buy a 70% stake in an apartment project next to the Barclays Center in Brooklyn, N.Y., in what is the largest commercial-real-estate development in the U.S. to get direct backing from a Chinese firm.

And in a previous article, I discussed how the Chinese have just bought up the largest pork producer in the entire country…

Just think about what the Smithfield Foods acquisition alone will mean.  Smithfield Foods is the largest pork producer and processor in the world.  It has facilities in 26 U.S. states and it employs tens of thousands of Americans.  It directly owns 460 farms and has contracts with approximately 2,100 others.  But now a Chinese company has bought it for $4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America.

For many more examples of how the Chinese are gobbling up companies, real estate and natural resources all over the United States, please see my previous article entitled “Meet Your New Boss: Buying Large Employers Will Enable China To Dominate 1000s Of U.S. Communities“.

But more than anything else, the Chinese seem particularly interested in acquiring real money.

And by that, I mean gold and silver.

In recent years, the Chinese have been buying up thousands of tons of gold at very depressed prices.  Meanwhile, the western world has been unloading gold at a staggering pace.  By the time this is all over, the western world is going to end up bitterly regretting this massive transfer of real wealth.

Unfortunately for the Chinese, it appears that the unsustainable credit bubble that they have created is starting to burst.  According to Bloomberg, the amount of bad loans that the five largest banks in China wrote off during the first half of this year was three times larger than last year…

China’s biggest banks are already affected, tripling the amount of bad loans they wrote off in the first half of this year and cleaning up their books ahead of what may be a fresh wave of defaults. Industrial & Commercial Bank of China Ltd. and its four largest competitors expunged 22.1 billion yuan of debt that couldn’t be collected through June, up from 7.65 billion yuan a year earlier, regulatory filings show.

And Goldman Sachs is projecting that China may be facing 3 trillion dollars in credit losses as this bubble implodes…

Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”

Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.

The nation might face credit losses of as much as $3 trillion as defaults ensue from the expansion of the past four years, particularly by non-bank lenders such as trusts, exceeding that seen prior to other credit crises, Goldman Sachs Group Inc. estimated in August.

The Chinese are trying to get this debt spiral under control by tightening the money supply.  That may sound wise, but the truth is that it is going to create a substantial credit crunch and the entire globe will end up sharing in the pain…

Yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing’s relentless drive to tighten the monetary spigots in the world’s second-largest economy.

The higher yields on government debt have pushed up borrowing costs broadly, creating obstacles for companies and government agencies looking to tap bond markets. Several Chinese development banks, which have mandates to encourage growth through targeted investments, have had to either scale back borrowing plans or postpone bond sales.

This could ultimately be a much bigger story than whether or not the Fed decides to “taper” or not.

It has been the Chinese that have been the greatest source of fresh liquidity since the last financial crisis, and now it appears that source of liquidity is tightening up.

So as the flow of “hot money” out of China starts to slow down, what is that going to mean for the rest of the planet?

And when you consider this in conjunction with the fact that China has just announced that it is going to stop stockpiling U.S. dollars, it becomes clear that we have reached a major turning point in the financial world.

2014 is shaping up to be a very interesting year, and nobody is quite sure what is going to happen next.

No Way to Run a Railroad…

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on October 15, 2013

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A lot of confusion in the capital of the World’s Greatest Nation, more like what would be expected in Italy: House G.O.P. Backs Off Plan, Leaving Fiscal Talks in Limbo, (NY Times), House GOP scrambles for support on new funding plan, (WaPo), Competing Budget Plans Cloud Talks, (WSJ) … Default Usa, accordo lontano ma si spacca il fronte repubblicano, (La Repubblica).

Cliffhanger, anyone? It should be said that there is still time, the US is not likely to default; the managers are likely to come to some sort of accommodation, first.

Then again, time is running short … for the US government to get its act together and start governing. A few more days and the Treasury will either fail to make payments upon obligations to lenders or fail to make payments to its own dependent citizenry. What comes after that is hard to say; maybe the dreaded ‘taper’ in some (inadvertent) form. Keep in mind, Treasury securities are collateral for every sort of money/credit exchange, they are deemed to be ‘risk-free’, same as cash. The nation’s word is its bond … what if? Should the US default, risk-free must be redefined throughout finance and politics, (Feliz Salmon/Reuters):

If Treasury payments can’t be trusted entirely, then not only do all risk instruments need to be repriced, but so does the most basic counterparty risk of all. The US government, in one form or another, is a counterparty to every single financial player in the world. Its payments have to be certain, or else the whole house of cards risks collapsing — starting with the multi-trillion-dollar interest-rate derivatives market, and moving rapidly from there.

There you have it, the Freudian slip that reveals our greatest human endeavor to date is entertainment for bored children, a distraction. There is something to be said — and gained — from letting the entire mess collapse, if only to end its pointless and destructive wastefulness. At the same time, the card collapse would render much of the world citizens into paupers over a short time, this would be equally wasteful — and over the longer term, extremely dangerous. There are too many of us, we are too angry and filled with fear. The time is now for cooler heads to find the larger perspective … and kick that can one more time!

The US government has defaulted in the past, the effects have been generally beneficial for both business and the citizens. After the Revolution, the young country defaulted on its war debts, during the Civil War the US suspended convertibility and issued what amounted to scrip — which remained in circulation until 1971. In 1934, the government removed specie from circulation and eliminated ‘gold clauses’ in all contracts, in 1971 Richard Nixon famously closed the Treasury ‘gold window’ and ended the convertibility of dollars to gold in trade between nations. In some cases such as 1934, default bailed out the country’s ruined banks and jump-started a moribund economy. The Revolutionary War debts were ultimately paid with interest … after the US had restructured itself and ratified a new (somewhat excellent) Constitution. Both accelerated US trade both domestically and across the Atlantic.

Using scrip — demand notes — allowed the Union to end slavery and industrialize, then become a world economic power, something it could not have hoped to do as a pastoral state. Ironically, the US since 1900 using credit money has de-industrialized to the degree it has been able to shed its manufacturing work force; it has become a financial- or loan shark state, structurally little different today … from the Confederate South.

With the passage of time, US defaults, like everything else, offered diminished returns. Closing the gold window sparked OPEC’s ire leading to the oil embargo which took place two years later. The oil producers were disgruntled about not receiving gold in exchange for their precious petroleum; unlike other US trading partners they were in a position to do something about it. Not forever, the producers were forced to satisfy themselves with empty US promises of ‘prosperity’ because there were no feasible alternatives … only emptier promises by others, or to leave their petroleum in the ground and gain nothing.

In 1979, the US Treasury failed to make coupon payments on $120 million in Treasury Bills. The causes were a debt ceiling debate, much like today’s; a flood of investors seeking securities at the same time and a word-processing failure. Ultimately, the overdue payments were made with interest: the US was always and at all times solvent, it could always pay its bills. The default was expensive, however; there was a narrow increase in risk premium added to bonds over the next ten+ years that added up to billions of dollars. This was an interest penalty paid to banks by ordinary citizens: the taxpayers penalizing themselves.

To some degree, default is already starting to be ‘priced in’ at the short end of the borrowing spectrum. This is the same short end that the Fed has endeavored to suppress since 2008. The danger here is the Fed and other central banks lose control of the policy rate altogether. Even a small rise would amount to a cash loss in credit markets of many trillions of dollars, the cost to business of increased rates would be much higher. Businesses would be unable to afford credit and would fail, this would cause a recession that central banks would be unable to remedy because they could not lower rates. This in turn would eventually trigger deleveraging across finance, (WSJ);

If Congress doesn’t raise the debt limit before Oct. 17, the date when it is expected to reached, and the U.S. government feels it has no choice but to default, it will in effect “debase the currency” of the repo market, says Lou Crandall, an analyst at market research firm Wrightson ICAP LLC. And that will force dramatic changes in how institutions deal with their cash needs.

They’ll have to make costly and cumbersome changes to margin requirements, a process that if it gets out of hand could convert the temporary liquidity problem into a full-blown credit problem. We learned during the great panic of 2008, when repo transactions were also at the epicenter of the crisis, how a mushrooming “bank run” can occur when one lender imposes tougher collateral restrictions on its counterparties, which in turn impose the same on theirs. In this case, increased margins will be applied to a single asset class in a one-off, across-the-board manner. That might mitigate the risk of a “collateral spiral,” but it’s impossible to gauge all the possible spillover effects.

If credit concerns do arise among counterparties then we’re off to the races: fears about bank defaults, about cascading triggers in the credit default market, about money market funds potentially “breaking the buck.”

A big problem is absence of imagination on the part of the managers who are, a) engaged in a mud-fight with each other, b) pursuing their personal agendas at the expense of the citizens, and, c) locked into doctrinaire economic approaches.

What the Treasury cannot gain from tax receipts, ongoing sales and royalties and interest payment on assets it holds it must borrow. Right now, banks and finance offer (ledger) loans to the Treasury at very low rates. These are secured loans, the Treasury IOU is collateral.

The Treasury has borrowed already a very massive amount, this net amount is not required to shrink but it cannot grow, either. The Treasury can roll over existing loans as they mature, but they cannot increase their level of borrowing.

On the largest scale, the economy is divided into two; the private sector and the public sector. Consider both together to make up a national ledger that must zero out: what follows is not economics but simple bookkeeping on the order of balancing a checkbook. The private sector is made up of firms that have no choice but to earn profits (borrow) in order to remain in business. For the private sector to gain those profits some other sector must run a deficit. The private sector obviously cannot run a surplus and a deficit at the same time; business failures would exponentially increase relative to the rest until the entire sector was bankrupt. Instead, the public sector runs a perpetual deficit. By doing so it creates the necessary surplus within the private sector, that is: public sector deficit is private sector wealth.

The real limit to the size of the deficit is the perceived credibility of the system’s managers. There is no limit within a credit-money system to the public sector borrowing capacity. The public sector cannot ‘run out of money’ any more than a football team can run out of touchdowns. The public sector using its own currency can always pay its bills … and will do so until the managers decide they don’t want to anymore … because the bills are unpleasant or there is some illusory ideological- or political advantage to not doing so.

The alternative to this wealth-making process is the exponential private sector bankruptcy. Our current default theater illuminates the hazards associated with the public sector failing to run deficits … and of the foolish managers destroying what remains of their credibility.

This does not mean that the sectors aren’t over-extended. The problem is not the creation of credit as much as what is done with it after it’s created. Finance has generated hundreds of trillions of dollars worth of credit along with pumping a trillion barrels of crude oil out of the ground. What is there to show for this expenditure besides used cars and smog? Anything?

If the managers had any imagination there are many alternatives to default;

Right now, the private sector is eager to lend to the Treasury because doing so = free money. Not much but at the current rate of borrowing the free-money return adds up. The US needs to set up a money laundry.

– Taper, Baby, taper: Treasury ordinarily can issue IOUs at will — that is, borrow — but cannot do so now due to debt ceiling. However, the Fed and primary dealers hold plenty of Treasury paper in their inventories that can be offered as collateral for loans. The Fed can ‘pretend’ to be the Treasury and borrow from finance using some of its Treasuries as collateral. It can then label the proceeds as ‘interest’ and forward them to the Treasury Department. The Fed holds more than two-trillion dollars worth of Treasuries in its inventory that it can offer in a form of ‘inverse QE’ that would fund the government for almost two years.

This ‘inverse QE’ would be spent to the government’s workers, beneficiaries as well as back to the banks — as real interest. The Fed simply has to rename its lending as ‘interest payments to the Treasury’ there is nothing out of the ordinary about making these payments … and nothing Congress can do about it, either. After the crisis is over, the Treasury can issue new IOUs, unwind the trade and repay the Fed … or not. The Fed doesn’t really need the money*.

– Issue More Scrip: When the Congress and president finally decide to raise the debt ceiling, they should agree to allow the Treasury to issue more scrip, that is, create more US notes. The government has always been able to create currency at will to meet any obligation including the repayment of debts and interest. This makes the US government ‘default proof’. United States Notes or greenbacks were in circulation longer than any other kind of US currency; the original idea for ‘demand notes’ was offered by Edmund Dick Taylor as a means to finance Union efforts during the US Civil War, (Wikipedia):

A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the U.S. Having been current for over 100 years, they were issued for longer than any other form of U.S. paper money. They were known popularly as “greenbacks” in their heyday, a name inherited from the Demand Notes that they replaced in 1862. Often called Legal Tender Notes, they were called United States Notes by the First Legal Tender Act, which authorized them as a form of fiat currency. During the 1860s the so-called second obligation on the reverse of the notes stated:

This Note is Legal Tender for All Debts Public and Private Except Duties On Imports And Interest On The Public Debt; And Is Redeemable In Payment Of All Loans Made To The United States.

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

Congress would authorize the Treasury to issue $2 trillion in US notes, these would be used to extinguish the same amount of debt. Actual currency would not be necessary, only a ledger-entry repayment to retire ledger entry obligations. There would be no inflation or increase in ‘money’ by way of this process. this is because the money increase occurred at the time the original loan to the Treasury was made. Instead, the residue of bad loans carried forward on ledgers year after year would be wiped out.

Bankers would be unhappy with ledger repayments, they hold out for payments in blood in the form of circulating currency. This is the same way OPEC oil ministers complained about not gaining any gold in exchange for their crude. Like gold was after 1972 circulating money is in inadequate supply and unaffordable, the alternative to the banks is outfight repudiation. A ledger-entry repayment is better business for the banks than no repayment at all.

– Issue More Scrip 2.0: Any of the EU countries could do the same thing: the Italian Treasury could ledger into existence EUR 2 trillion and reliquify the entire EU by reducing the burden of bad (ledger) loans festering on Europe’s books.

– Cancel, Baby, cancel: The Treasury could simply cancel all intra-governmental debt, that is obligations between US agencies. Doing so would reduce the US government deficit by at least $2 trillion at zero cost (about half of intragovernmental debt is held by the Federal Reserve).

Of course, none of the above would solve either Europe’s or the United States’ energy shortages and capital-related business constraints. To actually address these issues would require stringent conservation. However, taking the above steps would buy sufficient time to put conservation strategies into effect.

There would be consequences to Fed’s ‘inverse QE’. Cash on the repo market does not fund the Treasury, it funds shadow banking. Without repo there would be an excess of cash but not for long, the demand for cash would grow as it would be the remaining risk-free security. The demand would mushroom, this would unwind overseas- and internal dollar carry trades, then dollar deflation and business contraction.

The carry unwind would shift dollar inflation overseas as dollar funds dry up and local currencies depreciate sharply. Witness India’s currency collapse along with that of the Brazilian real. The inflation was baked into the cake from the beginning of Bernanke’s accomodative policy … so was the carry trade which shuffled it toward assets overseas.

The investment represented by all those dollars occurred in emerging markets … US workers were left on the outside looking in. If those dollars had ‘stayed home’ wage-push stagflation might have indeed taken place here in the US, that in turn would have put an end to the easing program without ‘curing’ the economy; the recession that stares us in the face right now would have occurred already.

There is a panic about the dollar with many believing it will be substantially depreciated; this has been the panic about the other reserve currencies including sterling, the euro and yuan. Like the others, the current panic will end, in a few months the panic will be about another currency and other credit systems. All of this is symptomatic of the greater ills; capital destruction along with the inevitable reversal of the easing process set into motion by Ben Bernanke and other central bankers beginning in 2008. One way of the other this process will be undone … with or without a default.

Another process being undone is the dominion of private sector money over the governing process. The chaos underway in the US capital is the result of pampered tycoons using their political surrogates to advance their now-conflicting aims against each other, conflicted also against reality. The outcome is the management structures falling apart in disgrace. At the end of the day there is nothing to do but start again with a new political regime that excludes the billionaires’ money, one way or the other the money is gone. Doing business as we are now is no way to run a railroad.

* The danger of central banks making unsecured loans is offset by few in the markets recognizing that the central bank has made an unsecured loan.

** Please take the time to read Grant William’s take on this bit of nonsense right HERE!

Taper (Not)

Off the keyboard of James Howard Kunstler

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Published on Clusterfuck Nation August 2013

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Taper (Not)

     

Remember, the doleful, lonesome figure of Ben Bernanke stands (or slumps) at the top of a pyramid of obfuscation so high, broad, and massive that all the debt serfs in a history of the future will not avail to reconstruct its hypothecated contours. When the world picks itself up from the smoldering ruins of the financial landscape currently being rigged to blow, nobody will be able to explain how the modern world collateralized itself out of existence.

     What a set up. Bernanke gave the financial markets five months of the heebie-jeebies punctuated by a big fake-out and so the consensus finally perceives a giant green-light for resumed asset inflation. That’s why I like standing outside the consensus. Assets can inflate all they like on their way to the biggest train wreck of organized money ever recorded. Dow 20,000 is accelerating on a parallel track with the complete loss of confidence in paper representations of wealth. Enjoy your Facebook shares, or at least the digital ghost of them on your iPhone screen, while they’re fluorescing.

     It was perfectly obvious all spring and summer that the Federal Reserve could not neck down its purchases of US Treasury debt paper and bundled mortgage swindles without causing the equivalent of the 1942 Boston Coconut Grove nightclub fire in the financial markets. But not pretending to contemplate the “taper” would have entailed an admission that the so-called economy was on artificial life support juice. That would have suited neither the politicians and their political economists, who clung to their “recovery” story, nor the 1 percenters who were the direct beneficiaries of the wealth transfer activated by the life support liquidity juice injections.

     The net result is a return to the grand theme of pretend, with an increasingly dark outlook for the consequences, which will be the repudiation of what is officially called “money.” Meanwhile, congress now convenes to debate the question of extend, which can only add a frisson to the spectacle of pretend. The problem with these best laid plans of mouse-like creatures is that shit happens.

     Those distant rumbles of thunder are the audible traces of the destruction at the margins, certainly out of earshot of those at the very center. The margins is the place where nations, towns, institutions, families, and individual lives are ground down into a fine entropic powder of broken dreams. From the standpoint of the blogger-journalist, the story has been about how the destruction travels from the margins to the center. The center has been able to protect itself so far with one swindle after another, at the expense of the poor schnooks at the margins. The swindles are so abstruse and impenetrable that the schnooks don’t have a clue what is hitting them. At least so far.

     Faced with such a quandary, the schnooks may opt for political suicide, which is apparently the program of both major parties. Out of this sort of tragic muddle, Great Men emerge to galvanize the potential energy of the swindled multitudes. Recent models of this archetype are not so reassuring: Lenin, Hitler, Pol Pot, Ayatollah Khomeini. What history has in store for the USA is probably something that could only be cooked up on TV. One can hope that it turns out to be comedy, not something breaking bad.

          Of course the inverse of the idiotic American exceptionalism story lies beyond the fact that were not as special as we think. There is a whole vast world beyond the podium of Ben Bernanke and in that big world other mouse-like creatures are working sedulously to take advantage of our exceptional fecklessness. Distracted by everything from same-sex marriage to Monday Night Football, we don’t pay attention to the attrition. They’ve got our gold now, and despite the theory that gold has no more intrinsic value than $100 Federal Reserve notes, you can bet that before this is all over it will buy whatever food and fuel remains in the ground.

Tower of Babel: Fact or Fiction?

Off the keyboard of Stuck in NJ

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Published on The Burning Platform on September 20, 2013

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PROLOGUE

Along with The Arky Arky and the Great Flood, the Tower of Babel is one of the best known bible stories.

But it is famous beyond its ACTUAL content … a mere 236 words (in English). Yet, the story has come to mean much more than its actual words. For example, the idea that God is so afraid of tall brick structures that he has to create multiple languages to keep people from becoming too smart for their own good.

Most have at least a vague idea of what the story is about, or at least know the name “Babel”. But, let’s take a look at the entire brief text. I will follow-up with my usual outrageous observations.

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THE BIBLICAL TEXT — GENESIS 11:1-9
“And the whole earth was of one language, and of one speech. And it came to pass, as they journeyed from the east, that they found a plain in the land of Shinar; and they dwelt there. And they said one to another, Go to, let us make brick, and burn them thoroughly. And they had brick for stone, and slime had they for morter. And they said, Go to, let us build us a city and a tower, whose top may reach unto heaven; and let us make us a name, lest we be scattered abroad upon the face of the whole earth. And the LORD came down to see the city and the tower, which the children of men built. And the LORD said, Behold, the people is one, and they have all one language; and this they begin to do: and now nothing will be restrained from them, which they have imagined to do. Go to, let us go down, and there confound their language, that they may not understand one another’s speech. So the LORD scattered them abroad from thence upon the face of all the earth: and they left off to build the city. Therefore is the name of it called Babel; because the LORD did there confound the language of all the earth: and from thence did the LORD scatter them abroad upon the face of all the earth.”

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BACKGROUND

The Babel story is a great example why a literal interpretation of many OT stories makes no sense whatsoever. A literal interpretation makes a mockery of science, tortures logic, and detracts from the author’s actual spiritual meaning (if any) he intended to impart.

Genesis is a narrative dealing with “beginnings,” as its title indicates. It records the beginning of the universe, plant life, animal life, and even mankind. Hence, one is tempted to apply a literal interpretation that the primary lesson of the Babel passage is the record of how human beings began to speak different languages. This is incorrect, as you will soon see.

That being said, “Babel” may very well be a story of beginnings. The city “Babel,” is the same exact term used of “Babylon” elsewhere in the Bible. Indeed, the Tower was built in Mesopotamia, not Israel. So, more than just a possible explanation for the confusion of languages, it may also function as the etymology of “Babylon” …. the very same Babylonian empire that would wreak tremendous havoc on Israel in sixth century B.C.E. … and the very same Babylon called a “Whore” in Revelation, representing all that is evil, and ultimately destroyed.

Before I get into specifics, it is worth mentioning the origin of the word “Babel”. Strong’s Concordance says the word means “confusion”. That may be true regarding the meaning, but that’s not its etymology. In Hebrew “el” is a name for God … any God, actually. In Ezekiel — “I am el (God), in the seat of elōhîm (Gods). The Hebrews called God El-shaddai (God almighty), ImmanuEL (God with us), and dozens of other “el-” names. The Miriam Webster dictionary gives the following etymology — “Middle English, from Hebrew Bābhel, from Akkadian bāb-ilu, gate”. So, what is Babel? Literally, the Gate of God. So, is it the city that’s called Babel because that’s where God “came down” … as the text says? Or, was the actual tower the people were constructing the “gate of God” … their attempt to “reach to heaven”, or more likely, their attempt to provide a means for God to come down? The text is not clear. So, we’ll leave as interesting speculation.

THE MYTH OF A UNIVERSAL LANGUAGE

And the whole earth was of one language, and of one speech.”

A literal interpretation presents problems right from the get go. That’s because there has NEVER been One Universal Language spoken by all humanity. However, I don’t wish to debate philology. A fine overview of the origin of languages is here; — http://en.wikipedia.org/wiki/Origin_of_language

Rather, I am much more interested in the status of human language AT THE TIME referred to by the text. Scholars diverge wildly regarding the possible date the Tower of Babel could have been built – anywhere from 3500BC – 2500BC. So, let’s take the earliest possible date (3500BC) and briefly examine the archaeological evidence.

I need only one example. Spirit Cave in Thailand is a stratified site showing human occupation from BEFORE 5000 B.C. We do not know what language they were speaking in what is now Thailand …. but we can be darn sure it was not Sumerian, or Hebrew. Also, an archaeological dig in Pakistan revealed trident-shaped writing on fragments of pottery dating even further back at 5,500 years BC. Pretty sure they weren’t speaking Sumerian or Hebrew either. There, I gave you two examples.

The fact of the matter is the writer of Genesis 11 was oblivious to the existence of the Far East, Australia, the Americas, and pretty much the rest of the world beyond a few hundred miles of his locale. . Had he been aware of these lands, the peoples, and their cultures … which existed AT THE SAME TIME as when The Tower was built …. then he would have had a much better understanding regarding the history of language, and he would NEVER have said “.. the whole earth was of one language, and of one speech”.

Furthermore … and quite significantly … the previous chapter in Genesis, Gen: 10, seems to completely contradict the Babel story. Gen 10 is known as the “Table of Nations”. It lists all the nations that derived from Noah’s sons (Shem, Ham and Japheth) after the flood; Hittites, Jebusites, Amorites, dozens of other “ites” and even including Egypt and …. Babylon. No one in their right mind would suggest that ancient Egypt and ancient Babylon spoke the same language. We have written texts from both areas to prove otherwise. So,now we have at least two languages. Of much, much greater significance is the fact that the Bible itself states that once dispersed …. these people spoke “after their tongues”! Let’s be clear about this; the Bible states people spoke in unique tongues BEFORE the construction of the Tower.

Either the author of Chapter 11 was being redundant at best (an unlikely repetition in Chapter 11 of what was just reviewed in Chapter 10), or much more likely, he didn’t know that God ALREADY dispersed the nations … each speaking after their own tongues. That’s quite a conundrum for literalists.

GOD GETS ALL PARANOID, ONCE AGAIN

“ And the Lord came down to see the city and the tower … Behold, the people is one, and they have all one language; and this they begin to do: and now nothing will be restrained from them, which they have imagined to do. Go to, let us go down,”

1)- God says, “let US go down”. Who is this “us”?? Some folks say it is a figure of speech; such as when a British Royal Queen refers to herself as “we”. Unfortunately, there was no British royalty back then … and the royalty that did exist simply didn’t talk that way. But most Christians say God was talking to Jesus in his pre-incarnate form .. cuz Jeebus existed before he was born. I don’t know how to debate time-travel fantasies, so I won’t. The more logical explanation is that the ancient Jews, before they developed monotheism, believed in multiple Gods. Even Abraham’s father worshipped multiple Gods, and almost certainly Abraham was raised by his own father to do likewise (until he didn’t). Many years later, perhaps decades, Rachel was caught hiding the “household idols” inside her camel’s saddle. Then after the Jews escaped Egpyt, one of their first acts was to construct and worship a Golden Calf. However Christians want to interpret this. The fact of the matter is that early Judaism adopted very many of the Gods they left behind, they believed in multiple Gods, amd monotheism actually took centuries to fully develop.

2)- Why does an omniscient, omnipotent God need to “come down” to see anything?? And, where exactly is he coming down from? Does he walk, or take a bus? Theologians call this anthropomorphism; “the attribution of human form or other characteristics to anything other than a human being, such as a God.”. These attributions must be made because no one has ever seen this OT God. Moses came closest, and even then, he only saw God’s “backside” … literally, “ass”. Who said there’s no humor in the Bible? “Anthropomorphism” is just a way of saying; “We make our Gods in MAN’S image.” Have you ever noticed that Western Gods behave just like humans? Especially the Greek and Roman Gods with all their fornication and backstabbing and jealousy and murder. And the OT God who laughs, cries, repents, has massive bouts of anger so much so that he has attempted to wipe out the human race, is often driven to jealous rage, and suffers from severe bouts of paranoid insecurity. We “anthropomorphize” deities because the more the Gods become like men, the easier it is for men to believe in the Gods.

3) Regarding paranoia in the Tower of Babel story —- why would an omnipotent God be so damn afraid of humans [supposedly] speaking one language? Why is he so afraid of humans building a structure that is, at best, about 300 feet high? Why didn’t he strike dead the builders of One World Trade Center who just completed a 1,776 foot skyscraper? Why is God afraid of technological progress? Does God REALLY believe that by having one language that “NOTHING” will be “impossible” for mankind? The implication being that puny finite mankind can (will) overthrow an all-powerful eternal God …. unless their language be confounded. Isn’t this idea just beyond silly, and indicative of massive paranoia?

And this isn’t the first time God exhibited his paranoia. He freaked out when Adam and Eve ate of the forbidden fruit …. fearing that mankind is “now like us”. (There’s that ‘us’ again.) Really?? Humans are now like God because they ate some fruit? Shortly thereafter God freaked out again … afraid that Adam and Eve might eat from a tree that would give them eternal life, so he had an angel with a flaming sword drive them out of the Garden to prevent that. Another time God was so freaked out over man’s wickedness that he sent a Great Flood to wipe out all but eight people from the face of the earth …. you know, because this all-powerful God was totally powerless to influence humanity. There are dozens more stories in the OT where God freaks out, and when God freaks out, humans die. A strange and paranoid God.

HOW DID GOD PULL THIS OFF?

Almost always in the reading of God’s miracles, they are almost always simply accepted at face value. The reasoning being that God is All-Powerful, and therefore He can do anything He wants. So, when the Bible states that the planet Earth stopped spinning, or the sun stood still, (so that Joshua could kill more Amorites), well, not one in a hundred Christian readers stops to ask themselves “how in the hell is that even possible without the earth exploding into space in a million fragments?” “More miracles” is the only possible response. But that answers absolutely nothing. Such cop-out explanations are akin to the Hindu idea that the elephant holds up the earth. Someone asks, “What holds up the elephant?” Answer: Another elephant. And so on, ad infinitum, ad absurdum.

So, exactly how did God pull this off? Did folks suddenly and immediately in the blink of an eye start speaking, for example, German? Were they suddenly able to pronounce “umlauts” and that crazy “ch” sound? Did they suddenly and immediately understand the nuances of the German language and realize that one can now end a sentence with a verb? Did they suddenly wear Lederhosen? Language is in the brain, of course, so did God have to “rewire” each and every person’s brain, from 5 year olds to 100 year olds? Key question; did they forget their original language … or were they bilingual, in which case, of course, the people would all STILL have a common language! Lol

WAS CONFOUNDING LANGUAGE A GOOD IDEA?

It doesn’t seem that confounding human language was all that brilliant. SAME language / culture unites … MULTICULTURALISM divides. It is significant to note that up to this point in biblical history, man had not fought against his fellow man other than in conflicts between individuals. There had been no mention of wars, no racial strife, no religious bigotry, no patriotic blood baths. Man had no reason to gang up and attack other groups of men. At that time, man was not at war with his fellow man and all men communicated freely in one tongue. It was this free communication which God knew he must put an end to if he planned on keeping men enslaved. Brilliant!

IS GOD BIPOLAR?

I ask this because thousands of years later in the New Testament book of Acts (2:1-11), God has a totally different agenda. This agenda is the antithesis of Babel … ONE language. This is the narrative. Believers were all in one place and of one accord (just like in Babel). The story even uses the word “confounded”, but for a different reason. This time after having received the Holy Spirit, the apostles preach … and men of diverse languages hear the sermon IN THEIR OWN LANGUAGES. Back in Babel the plan was to separate people, and now in Acts we’re seeing the exact opposite; a great re-integration. Bad one time. Good the next time. I wish God would make up His mind.

It seems that God’s primary reason for “coming down” was not necessarily the Tower structure itself – that was merely the means to an end — but because the people of Babel wanted to “make a name for ourselves”. But, in the very next chapter it is God himself who makes Abraham’s name great. King David spends a good portion of his life making a name for himself (2 Sam 8:13) without any negative repercussions or divine reprisals. It can be really hard to figure out what God really believes / wants.

WHAT LESSON CAN WE LEARN FROM THE TOWER OF BABEL?

Are we really supposed to believe that the Builders of the tower were motivated by building a structure that could reach heaven? How stupid would that be? They built the thing on “the PLAINS of Shinar”. A FLAT plain. There were MOUNTAINS nearby which would have given them a few thousand feet head start. Lol Are we to believe that they thought they could build a structure higher than a mountain? If they really wanted to reach the heavens, wouldn’t they have built the tower on the nearest high mountain? Yes. So, there must have been a different motivation … one we will never know. However, I can speculate on what the writer of the Babel story intended.

We can all certainly agree that the end result in the Tower story is one of division (one of God’s specialties). Let’s take a very brief look at one other major example in how God divides. OK. So, God chooses one race to his people … creating Judaism in the process. God later sends a Messiah to create a second division of his people …. creating Christianity in the process. God then chooses another guy, Mohammed, to create a third division of his people …. creating Islam in the process. And don’t tell me it wasn’t God who did all this. You should know that for ALL three of these divisions, God used the angel Gabriel as the messenger. Of course, these divisions have resulted in the longest and bloodiest conflicts in human history … which continue to this very day.

So, what are we to make of all this?

The 16th century philosopher, Machiavelli, may be able to help understand what is going on. Machiavelli described how a third party could manipulate two other parties … and maintain control over them both. It works like this;

—– 1) The Ruler creates a division amongst the people.

—– 2) The Ruler does this by creating conditions which accentuate the differences between groups. This causes conflict, and so the groups fight amongst themselves rather than against the ruler.

—– 3) The Ruler hides that HE is the cause of the conflicts, going so far as to feign innocence.

—– 4) The Ruler then offers support to ALL parties involved, thus maintaining their loyalty and faith in him.

—– 5) The Ruler is now viewed as The Beneficial One – Machiavelli uses the term “concerned parent” — no matter how bad and evil The Ruler might be in reality. After all, ONLY The Ruler can help bring everyone back together. There is a steep cost, of course. Many will suffer. Few will benefit. But, no one will ever blame The Ruler … which is just the way he likes it.

Now, am I saying that God is some type of Machiavellian monster? No. But, I am saying that that’s how the writers of Scripture often portray Him. Some may not want to hear this, but I am 100% convinced that the various authors of Scripture had no clue whatsoever that they were writing Scripture. There was no voice from heaven thundering “Hezekiah! Grab a pen. Let’s write some Scripture!”. They had no clue that the words they penned would take hundreds, sometimes thousands, of years to be considered “The Word of God” … and even then, only by a fatally flawed procedure of humans voting. The Ancient Sages had even less of a clue as to how the world works, human psychology and all that, but that didn’t stop them from trying to explain it.

So they wrote stuff, lots of stuff … some of it eventually became God’s Word … based on their observations and very limited knowledge. I imagine some smart (at the time) guy trying to explain to the people how multiple languages came into being, so he fabricates a story that at one time all humanity spoke just one language (a blatant misconception). No one apparently knew better, so people believed it. They believed it for so long, that even when the truth of the matter was made know … people STILL believed it. That, my friends, is the power of propaganda, believing the temporary lie until it becomes permanent truth. So, people have a choice to make. For me, the Tower of Babel story is an interesting piece of ancient literature. Nothing more.

Clusterfuck Nation: “Commotion” by JH Kunstler

Off the keyboard of James Howard Kunstler

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Published on Clusterfuck Nation September 2013

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Commotion

September 16, 2013                                                                                                                                                 by James Howard Kunstler

    Now that Lawrence Summers has removed himself from consideration as Federal Reserve chairman, President Obama is free to launch him into Syria as the first human rehypothecation weapon of mass destruction, where he can sow enough confusion between Assad’s Alawites and the Qaeda opposition to collateralize both factions into contingent convertible capital instruments buried in the back pages of Goldman Sachs’s balance sheet so that the world will never hear of them again — and then the Toll Brothers can be brought in to develop Syria into a casino / assisted living complex that will bring hundreds of good jobs to US contractors in the region.

     No doubt the stock markets will fly like eagles today. Nobody knew what monkeyshines Mr. Summers might have pulled over at the Fed and it was making investors nervous, as well as the big banks who employed Mr. Summers occasionally as some kind of policy bagman. So a big sigh of relief blew over the Northeast Region of the nation like the gusts of autumn air that swept away a fetid hump of stale, wet tropical weather that ruined all the ladies’ party hair in the Hamptons this month.

     Now that Syria has been disposed of — that is, indefinitely consigned to failed state purgatory — the world can focus its remaining attention on the almighty taper. I’m with those who think we’ll get a taper test. That is, the Fed will cut back ten or fifteen percent on its treasury bond purchases to see what happens. What happens is perfectly predictable: interest rates shoot above 3 percent on the ten-year and holders of US paper all the world round fling them away like bales of smallpox blankets and… Houston, we’ve got a problem. After a month (or less) of havoc in the bond market, and the housing market, Mr. Bernanke will issue an advisory saying (in more words than these) “just kidding.” Then it will be back to business as usual, which is to say QE Forever, which might as well be saying “game over.”

     One must feel for poor Mr. Bernanke. He’s tried to run a long-distance foot-race against reality and now it’s breathing down his neck near finish line. The idea was to pump enough artificial “money” into the economy to give it the appearance of motion, but all he accomplished in the words of my recent podcast guest, Eric Zencey, was a commotion of money, and the commotion was pretty much limited to a few blocks of lower Manhattan, two ribbons of real estate running up the East Side and Central Park West, and a subsidiary disturbance out on the South Fork of Long Island. Everybody else in the country was left to stew in a tattoo-and-malt-liquor torpor at the SNAP Card application office.

      The Fed can only pretend to try to get out of this self-created hell-hole. The stock market is a proxy for the economy and a handful of giant banks are proxies for the American public, and all they’ve really got going is a hideous high-frequency churn of trades in conjectural debentures that pretend to represent something hidden in the caboose of a choo-choo train of wished-for value — and hardly anyone in the nation, including those with multiple graduate degrees in abstruse crypto-sciences, can even pretend to understand it all.

     When reality crosses the finish line ahead of poor, exhausted Mr. Bernanke, havoc must ensue. All the artificial props fall away and the so-called American economy is revealed for what it is: a surreal landscape of ruin with nothing left but salvage value. Very few people will get a living off of the salvage operations, and there will be fights and skirmishes everywhere by one gang or another for control of the pickings. The utility of money itself may be bygone, along with the legitimacy of anyone or anything claiming institutional authority. This is what comes of all attempts to get something for nothing.

     By the way, for those of you still watching the charts, notice that gold and silver may bob up and down week-by-week, but the price of oil remains stubbornly above $105-a-barrel no matter what happens. That is the only number you need to know to predict the fate of industrial economies.

Trying to Stay Sane in an Insane World- At World’s End

Off the keyboard of Jim Quinn

Published on The Burning Platform on September 10, 2013

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In the first three parts (Part 1, Part 2, Part 3) of this disheartening look back at a century of central banking, income taxing, military warring, energy depleting and political corrupting, I made a case for why we are in the midst of a financial, commercial, political, social and cultural collapse. In this final installment I’ll give my best estimate as to what happens next and it has a 100% probability of being wrong. There are so many variables involved that it is impossible to predict the exact path to our world’s end. Many people don’t want to hear about the intractable issues or the true reasons for our predicament. They want easy button solutions. They want someone or something to fix their problems. They pray for a technological miracle to save them from decades of irrational myopic decisions. As the domino-like collapse worsens, the feeble minded populace becomes more susceptible to the false promises of tyrants and psychopaths. There are a myriad of thugs, criminals, and autocrats in positions of power who are willing to exploit any means necessary to retain their wealth, power and control. The revelations of governmental malfeasance, un-Constitutional mass espionage of all citizens, and expansion of the Orwellian welfare/warfare surveillance state, from patriots like Julian Assange, Bradley Manning and Edward Snowden has proven beyond a doubt the corrupt establishment are zealously anxious to discard and stomp on the U.S. Constitution in their desire for authoritarian control over our society.

Anyone who denies we are in the midst of an ongoing Crisis that will lead to a collapse of the system as we know it is either a card carrying member of the corrupt establishment, dependent upon the oligarchs for their living, or just one of the willfully ignorant ostriches who choose to put their heads in the sand and hum the Star Spangled Banner as they choose obliviousness to awareness. Thinking is hard. Feeling and believing a storyline is easy.

 

A moral society must be inhabited by an informed, educated, aware populace and   governed by honorable leaders who oversee based upon the nation’s founding principles of liberty, freedom and limited government of, by and for the people. A moral society requires trust, honor, property rights, simple just laws, and the freedom to succeed or fail on your own merits. There is one major problem in creating a true moral society where liberty, freedom, trust, honor and free markets are cherished – human beings. We are a deeply flawed species who are prone to falling prey to the depravities of lust, gluttony, greed, sloth, wrath, envy and pride. Men have always been captivated by the false idols of dominion, power and wealth. The foibles of human nature haven’t changed over the course of history. This is why we have 80 to 100 year cycles driven by the same human strengths and shortcomings revealed throughout recorded history.

Empires rise and fall due to the humanness of their leaders and citizens. The great American Empire is no different. It was created a mere 224 years ago by courageous patriots who risked their wealth and their lives to create a Republic founded upon the principles of freedom, liberty, and the pursuit of happiness; took a dreadful wrong turn in 1913 with the creation of a privately held central bank to control its currency and introduction of an income tax; devolved into an empire after World War II, setting it on a course towards bankruptcy; sealed its fate in 1971 by unleashing power hungry psychopathic elitists to manipulate the monetary and fiscal policies of the nation to enrich themselves; and has now entered the final frenzied phase of pillaging, currency debasement, war mongering, and ransacking of civil liberties. Despite the frantic efforts of the financial elite, their politician puppets, and their media propaganda outlets, collapse of this aristocracy of the moneyed is a mathematical certainty. Faith in the system is rapidly diminishing, as the issuance of debt to create the appearance of growth has reached the point of diminishing returns.

 

Increase in Real GDP per Dollar of Incremental Debt

“At the root of America’s economic crisis lies a moral crisis: the decline of civic virtue among America’s political and economic elite. A society of markets, laws, and elections is not enough if the rich and powerful fail to behave with respect, honesty, and compassion toward the rest of society and toward the world.”Jeffrey Sachs

Five Stages of Collapse

The day of reckoning for a century of putting our faith in the wrong people with wrong ideas and evil intentions is upon us. Dmitry Orlov provides a blueprint for the collapse in his book The Five Stages of Collapse – Survivors’ Toolkit:

Stage 1: Financial Collapse. Faith in “business as usual” is lost. The future is no longer assumed to resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings wiped out and access to capital is lost.

Stage 2: Commercial Collapse. Faith that “the market shall provide” is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down and widespread shortages of survival necessities become the norm.

Stage 3: Political Collapse. Faith that “the government will take care of you” is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance.

Stage 4: Social Collapse. Faith that “your people will take care of you” is lost, as social institutions, be they charities or other groups that rush to fill the power vacuum, run out of resources or fail through internal conflict.

Stage 5: Cultural Collapse. Faith in the goodness of humanity is lost. People lose their capacity for “kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity.” Families disband and compete as individuals for scarce resources. The new motto becomes “May you die today so that I can die tomorrow.”

The collapse is occurring in fits and starts. The stages of collapse do not necessarily have to occur in order.  You can recognize various elements of the first three stages in the United States today. Stage 1 commenced in September 2008 when this Crisis period was catalyzed by the disintegration of the worldwide financial system caused by Wall Street intentionally creating the largest control fraud in world history, with easy money provided by Greenspan/Bernanke, fraudulent mortgage products, fake appraisals, bribing rating agencies to provide AAA ratings to derivatives filled with feces, and having their puppets in the media and political arena provide the propaganda to herd the sheep into the slaughterhouse.

The American people neglected their civic duty to elect leaders who would tell them the truth and represent current and future generations equally. They have neglected the increasing lawlessness of Wall Street, K Street and the corporate suite. The American people have lived in denial about their responsibility for their own financial well-being, willingly delegating it to a government of math challenged politicians who promised trillions more than they could ever deliver. The American people have delayed tackling the dire issues confronting our nation, including: $200 trillion of unfunded liabilities, the military industrial complex creating wars across the globe, militarization of our local police forces, domestic spying on every citizen, allowing mega-corporations and the financial elite to turn our nation from savings based production to debt based consumption, and allowing corporations, the military industrial complex, Wall Street, and shadowy billionaires to pick and control our elected officials. The civic fabric of the country is being torn at the points of extreme vulnerability.

“At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at “mistakes we made” will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning.”  – The Fourth Turning – Strauss & Howe – 1997

Our Brave New World controllers (bankers, politicians, corporate titans, media moguls, shadowy billionaires) were able to avert a full-fledged catastrophe in the fall of 2008 and spring of 2009 which would have put an end to their reign of destruction. To accept the rightful consequences of their foul actions was intolerable to these obscenely wealthy, despicable men. Their loathsome and vile solutions to a crisis they created have done nothing to relieve the pain and suffering of the average person, while further enriching them, as they continue to gorge on the dying carcass of a once thriving nation. Despite overwhelming public outrage, Congress did as they were instructed by their Wall Street masters and handed over $700 billion of taxpayer funds into Wall Street vaults, under the false threat of systematic collapse. The $800 billion of pork stimulus was injected directly into the veins of corporate campaign contributors. The $3 billion Cash for Clunkers scheme resulted in pumping taxpayer dollars into the government owned union car companies, while driving up the prices of used cars and hurting lower income folks.

Ben Bernanke has peddled the false paradigm of quantitative easing (code for printing money and airlifting it to Wall Street) as benefitting Main Street. Nothing could be further from the truth. He bought $1.3 trillion of toxic mortgage backed securities from his Wall Street owners. He has pumped a total of $2.8 trillion into the hands of Wall Street since September 2008, and is singlehandedly generating $5 billion of risk free profits for these deadbeats by paying them .25% on their reserves. Drug dealer Ben continues to pump $2.8 billion per day into the veins of Wall Street addicts and any hint of tapering the heroin causes the addicts to flail about. Ben should be so proud. He should hang a Mission Accomplished banner whenever he gives a speech. Bank profits reached an all-time record in the 2nd quarter, at $42.2 billion, with 80% of those profits going to the 2% Too Big To Trust Wall Street Mega-Goliath Banks. It’s enough to make a soon to retire, and take a Wall Street job, central banker smile.

“The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings. This can create the illusion of more capital just as the addition of water can create the illusion of more milk. But it is a policy of continuous inflation. It is obviously a process involving cumulative danger. The money rate will rise and a crisis will develop if the inflation is reversed, or merely brought to a halt, or even continued at a diminished rate. Cheap money policies, in short, eventually bring about far more violent oscillations in business  than those they are designed to remedy or prevent.” Henry Hazlitt – 1946

Any serious minded person knew Wall Street had too much power, too much control, and too much influence in 2008 when they crashed our economic system. When something is too big to fail because it will create systematic collapse, you make it smaller. Instead we have allowed our sociopathic rulers to allow these parasitic institutions to get even larger. Just 12 mega-banks control 70% of all the banking assets in the country, with 90% controlled by the top 86 banks. There are approximately 8,000 financial institutions in this country. Wall Street will be congratulating themselves with record compensation of $127 billion and record bonuses of $23 billion for a job well done. It is dangerous work making journal entries relieving loan loss reserves, committing foreclosure fraud, marking your assets to unicorn, making deposits at the Fed, and counting on the Bernanke Put to keep stocks rising. During a supposed recovery from 2009 to 2011, average real income per household grew pitifully by 1.7%, but all the gains accrued to Bernanke’s minions. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Therefore, the top 1% captured 121% of the income gains in the first two years of the recovery. This warped trend has only accelerated since 2011.

The median household income has fallen by $2,400 to $52,100 since the government proclaimed the end of the recession in 2009. Real wages for real people continue to fall. A record 23.1 million households (20% of all households) are receiving food stamps. After four years of “recovery” propaganda, we are left with 2.2 million less people employed (5 million less full time jobs) and 22 million more people on SNAP and SSDI. A record 90.5 million working age Americans are not working, with labor participation at a 35 year low. Ben’s money has not trickled down, but his inflation has fallen like a load of bricks on the heads of the middle class. Bernanke’s QE to infinity constitutes a transfer of purchasing power away from the middle class to the bankers, mega-corporations and .1%. This Cantillon effect means that newly created money is neither distributed evenly nor simultaneously among the population. Some users of money profit from rising prices, and others suffer from them. This results in a transfer of wealth (a hidden tax) from later receivers to earlier receivers of new money. This is why the largest banks and largest corporations are generating the highest profits in history, while the average person sinks further into debt as their real income declines and real living expenses (energy, food, clothing, healthcare, tuition) rise.

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Ben works for your owners. Real GDP (using the fake government inflation adjustment) since July 2009 is up by a wretched 5.6%. Revenue growth of the biggest corporations in the world is up by a pathetic 12%. One might wonder how corporate profits could be at record levels with such doleful economic performance. One needs to look no further than Ben’s balance sheet, which has increased by 174%. There appears to be a slight correlation between Ben’s money printing and the 162% increase in the S&P 500 index. With the top 1% owning 42.1% of all financial assets (top .1% own most of this) and the bottom 80% owning only 4.7% of all financial assets, one can clearly see who benefits from QE to infinity.

The key take away from what the ruling class has done since 2008 is they have only temporarily delayed the endgame. Their self-serving exploits have guaranteed that round two of the financial collapse will be epic in proportion and intensity. This Fourth Turning Crisis is ongoing. The linear thinkers who control the levers of power keep promising a return to normalcy and resumption of growth. This is an impossibility – mathematically & socially. Fourth Turnings do not end without the existing social order being swept away in a tsunami of turmoil, violence, suffering and war. Orlov’s stages of collapse will likely occur during the remaining fifteen years of this Crisis. We are deep into Stage 1 as our national Detroitification progresses towards bankruptcy, with an added impetus from our trillion dollar wars of choice in the Middle East. Commercial collapse has begun, as faith in the fantasy of free market capitalism is waning. The race to the bottom with currency debasement around the globe is reaching a tipping point, and the true eternal currencies of gold and silver are being hoarded and shipped from the West to the Far East.

Monetary Base (billions of USD)

When the financial collapse reaches its crescendo, the just in time supply chain, that keeps cheese doodles and cheese whiz on your grocery store shelves, Chinese produced iGadgets in your local Wal-Mart Supercenter, and gasoline flowing out of gas station hoses into your leased Cadillac Escalade, will break down rapidly. The strain of $110 oil is already evident. The fireworks will really get going when ATM machines run dry and the EBT cards stop functioning. Within a week riots and panic will engulf the country.

“At some point we are bound to hear, from across two oceans, the shocking words “Your money is no good here.” Fast forward to a week later: banks are closed, ATMs are out of cash, supermarket shelves are bare and gas stations are starting to run out of fuel. And then something happens: the government announces they have formed a crisis task force, and will nationalize, recapitalize and reopen banks, restoring confidence. The banks reopen, under heavy guard, and thousands of people get arrested for attempting to withdraw their savings. Banks close, riots begin. Next, the government decides that, to jump-start commerce, it will honor deposit guarantees and simply hand out cash. They print and arrange for the cash to be handed out. Now everyone has plenty of cash, but there is still no food in the supermarkets or gasoline at the gas stations because by now the international supply chains have broken down and the delivery pipelines are empty.”  Dmitry Orlov – The Five Stages of Collapse

We are witnessing the beginning stages of political collapse. The government and its leaders are being discredited on a daily basis. The mismanagement of fiscal policy, foreign policy and domestic policy, along with the revelations of the NSA conducting mass surveillance against all Americans has led critical thinking Americans to question the legitimacy of the politicians running the show on behalf of the bankers, corporations and arms dealers. The Gestapo like tactics used by the government in Boston was an early warning sign of what is to come. Government entitlement promises will vaporize, as they did in Detroit, with pension promises worth only ten cents on the dollar. Total social and cultural collapse could resemble the chaotic civil war scenarios playing out in Libya and Syria. The best case scenario would be for a collapse similar to the Soviet Union’s relatively peaceful disintegration into impotent republics. I don’t believe we’ll be this fortunate. The most powerful military empire in world history will not fade away. It will go out in a blaze of glory with a currency collapse, hyper-inflation, and war on a grand scale.

“History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.”The Fourth Turning – Strauss & Howe – 1997

In Whom Do You Trust?

“Use of money concentrates trust in a single central authority – the central bank – and, over extended periods of time, central banks always tend to misbehave. Eventually the “print” button on the central banker’s emergency console becomes stuck in the depressed position, flooding the world with worthless notes. People trust that money will remain a store of value, and once the trust is violated a gigantic black hole appears at the very center of society, sucking in peoples’ savings and aspirations along with their sense of self-worth. When those who have become psychologically dependent on money as a yardstick, to be applied to everything and everyone, suddenly find themselves in a world where money means nothing, it is as if they have gone blind; they see shapes but can no longer resolve them into objects. The result is anomie – a sense of unreality – accompanied by deep depression. Money is an addiction – substance-less and unreal, and sets itself up for a severe and lengthy withdrawal.” Dmitry Orlov – The Five Stages of Collapse

Our modern world revolves around wealth, the appearance of wealth, the false creation of wealth through the issuance of debt, and trust in the bankers and politicians pulling the levers behind the curtain. The entire world economic system is dependent on trusting central bankers whose only response to any crisis is to create more debt. The death knell is ringing loud and clear, but people around the globe are desperately clinging to their normalcy biases and praying to the gods of cognitive dissonance. It seems the only things that matter to our controllers are stock market levels, the continued flow of debt to the plebs, continued doling out of hush money to those on the dole, and of course an endless supply of brown skinned enemies to attack. With every country in the world attempting to the same solution of debasing their currencies, we are rapidly approaching the tipping point. India is the canary in the coal mine.

Government, Household, Financial & Non-Financial Debt (% of GDP)

An exponential growth model built upon cheap plentiful energy and debt creation has its limits, and we’ve reached them. With the depletion of inexpensive, easily accessible energy resources, higher prices will continue to slow world economies. Demographics in the developed world are slowing the global economy as millions approach their old age with little savings due to over consuming during their peak earnings years. Bernanke has already quadrupled his balance sheet with no meaningful benefit to the economy or the financial well-being of the average middle class American. Financial manipulation that creates nothing has masked the rot consuming our economic system. The game has been rigged in favor of the owners, but even a rigged game eventually comes to an end. Americans and Europeans can no longer maintain a façade of wealth by buying knickknacks from China with money they don’t have. The US and Europe are finding that their credit is no longer good in the exporting Far East countries. This is a perilous development, as the West has depended upon foreigners to accommodate its never ending expansion of credit. Without that continual expansion of debt, the Ponzi scheme comes crashing down. As China, Japan and the rest of Asia have balked at buying U.S. Treasuries with negative real yields, the only recourse for Ben has been to monetize the debt through QE and inflation. The doubling of ten year Treasury rates in a matter of three months due to just talk of possibly slowing QE should send shivers down your spine.

We are supposedly five years past the great crisis. Magazine covers proclaimed Bernanke a hero. If we are well past the crisis, why are the extreme emergency measures still in effect? If the economy is growing and jobs are being created, why do we need $85 billion of government debt to be monetized each and every month? Why are the EU, Japan, and China printing even faster than the Fed? The answer is simple. If the debt was not being monetized, it would have to be purchased out in the free market. Purchasers would require an interest rate far above the 2.9% being paid today. The debt levels in the U.S., Europe and Japan are so large that a rise in interest rates of just a few points would explode budget deficits and lead to a worldwide financial collapse. This is why Bernanke and the rest of his central banker brethren are trapped by their own ideology of bubble production. Just the slowing of debt creation will lead to collapse. Bernanke needs a Syrian crisis to postpone the taper talk. Those in control need an endless number of real or false flag crises to provide cover for their printing presses to keep rolling.

There are a couple analogies that apply to our impending doom. The country is like a 224 year old oak tree that has been slowly rotting on the inside due to the insidious diseases of hubris, apathy, selfishness, dependence, delusion, and debasement. The old oak gives an outward appearance of health and stability. Winter has arrived and gale force winds are in the forecast. One gust of wind and the mighty aged oak will topple and come crashing to earth. I think an even more fitting analogy is the sandpile with grains of sand being added day after day. Seven out of ten Americans receive more in government benefits than they pay in taxes. Goliath corporations and the uber-wealthy use the tax code and legislation to syphon hundreds of billions from the national treasury every year. We spend $1 trillion per year on past, current and future wars of choice. Annual interest on the debt we’ve racked up in the last few decades already approaches $400 billion per year. The entire Federal budget totaled $400 billion in 1977. The sandpile grows ever higher, while its instability expands exponentially. One seemingly innocuous grain of sand will ultimately cause the pile to collapse catastrophically. Will it be an unintended consequence of a missile launch into Syria? Will it be a spike in oil prices? Will it be the collapse of one of the EU PIIGS? Will it be an assassination of a political figure or banker? No one knows. But that innocuous grain of sand will trigger the collapse of the entire pile.

Worried people are looking for solutions. They often get angry at me because they don’t think I provide answers to the issues I raise about our corrupt failing system. They want easy answers to intractable problems. Sadly, I’ve come to the conclusion that our system and majority of citizens are too corrupted to change our course through the ballot box or instituting policies along the lines of those proposed by Ron Paul and many other thoughtful liberty minded people. We are experiencing the downside of a representative democracy.  Once a person is democratically elected a gulf is created between the electors and the person they elected, as the representative becomes corrupted and bought by moneyed interests. Elected officials become a class unto themselves. The political class grows to be puppets that resemble human beings but are nothing but cogs in a vast corporate run machine, pawns in an enormous game of chess played by powerful vindictive immoral men.

There are no cures for our disease. It’s terminal. Anyone telling you they have the answers is either lying or trying to sell you something. More people and organizations are on the take than are playing by the rules. The producers are being overrun by the parasites. The barbarians are at the gate. An implosion of societal trust is underway. The next stage of this crisis, which I believe will materialize within the next twelve months will try the souls of the weary.

“As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust. This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on.”The Fourth Turning – Strauss & Howe – 1997

As a nation we have squandered our inheritance, born of the blood of patriots. A freedom loving, liberty minded, self-responsible, courageous people have allowed ourselves to fall prey to selfishness, apathy, complacency and dependency. Once we allowed our human appetites of greed, power seeking, and control to override the moral responsibility for our own lives and the lives of future unborn generations, collapse was inevitable. The danger now is what happens after the unavoidable collapse. Will the millions of dependency zombies beg for a strong dictator to protect them, provide for them and lead them into further bondage? Or will the spark of liberty and freedom reignite, allowing citizens to throw off the shackles of banker and corporate control? I believe most of the people in this country are good hearted. We are merely pawns in this game of Risk being played by those seeking power, wealth and world domination. We are all trapped in our own forms of normalcy bias. Have I cashed out my retirement funds, sold my suburban house and built a doomstead in the mountains? No I haven’t. Do I second guess myself sometimes? Yes I do. But even the aware have families to support, jobs to go to, bills to pay, laundry to do, lawns to mow, and lives to live. I can’t live in constant fear of what might happen. We only get 80 or so years on this earth, if we’re lucky. The best we can do is leave a positive legacy for our children and their children. A drastic change to our way of life is coming, but most of us are trapped in a cage of our own making.

Each living generation will need to do their part during this Crisis if we are to survive the coming storm. Since no one knows the nature of how the next fifteen years will unfold, it would be wise to at least make basic preparations for food, water, heat and protection. This is easier for some than others, but you don’t have to star on Doomsday Preppers in order to stock up on items that can be purchased at Wal-Mart today, but won’t be available when the global supply chain breaks down. Make sure you have neighbors and family you can rely upon. A small community of like-minded people with varied skills is more likely to succeed in our brave old world than rugged individualists. With no financial means to maintain our globalized world, living locally will take on a new meaning. After much turmoil, chaos, violence, and likely mass casualties the best outcome would be for the Great American Empire to break into regional republics, incapable of waging global war, led by law abiding moral liberty minded individuals, and willing to trade freely and honestly with their fellow republics. Daily life would revert back to a simpler Amish like time. Would that be so bad?

This Fourth Turning could end with a whimper or a bang. There are enough nuclear arms to obliterate the world ten times over. There are enough hubristic egomaniacal psychopathic men in power, that the use of those weapons has a high likelihood of happening. It will be up to the people to not allow this horrific result. I love my country and despise my government. The Declaration of Independence clearly states that when a long train of abuses and usurpations lead toward despotism, it is our right and duty to throw off that government and provide new guards of liberty. My family comes first with my country a close second. I will fight with whatever means necessary to protect my family and do what I can to influence the future course of our country. Time is running out. Will we have the courage, fortitude and wisdom to make the right decisions over the next fifteen years? Will we choose glory or destruction? The fate of our nation hangs in the balance. Are you prepared? Are you ready to fight for your family and your rights?

The Fourth Turning could spare modernity but mark the end of our nation. It could close the book on the political constitution, popular culture, and moral standing that the word America has come to signify. The nation has endured for three saecula; Rome lasted twelve, the Soviet Union only one. Fourth Turnings are critical thresholds for national survival. Each of the last three American Crises produced moments of extreme danger: In the Revolution, the very birth of the republic hung by a thread in more than one battle. In the Civil War, the union barely survived a four-year slaughter that in its own time was regarded as the most lethal war in history. In World War II, the nation destroyed an enemy of democracy that for a time was winning; had the enemy won, America might have itself been destroyed. In all likelihood, the next Crisis will present the nation with a threat and a consequence on a similar scale.The Fourth Turning – Strauss & Howe – 1997

 

 IT’S OUR CHOICE.

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

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Aired on the Doomstead Diner on August 28, 2013

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Discuss at the Podcast Table inside the Diner

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

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