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Epiconomics 101: Our Fiscal Genome

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Published on Peak Surfer on May 8, 2016

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Discuss this article at the Economics Table inside the Diner

 
"Vital public services like health care, education, transportation and communication should be free."

 

In the May 2d New Yorker, Siddhartha Mukherjee wrote an ode to his mother and aunt, identical twins, taking the opportunity to dig into the roles of nature and nurture in shaping our lives, Going a step farther, he brought in one of our favorite topics here, epigenetics, or the ability of the same DNA strand to issue different instructions depending on external stimuli.

Last year, in our discussion of quantum entanglement, we observed how little of what we call our own bodies is actually our own DNA. More than 95 percent belongs to our unique, personal, coevolving microbiome that not only helps us breathe, digest, and heal illness, but influences our patterns of thought and intentions.

Mukherjee chronicled the gross result of this conspiracy, describing how two brothers, separated by geographic and economic continents, might be brought to tears by the same Chopin nocturne, as if responding to some subtle, common chord struck by their genomes, or perhaps by their epigenomes, and how two sisters — separated long before the development of language — had invented the same word to describe the way they scrunched up their noses: “squidging.”

Mukherjee overlooked the closely entangled microbial web of alien presences, but we’d observe that although these twins may have placed distance and culture between themselves, they had been together long enough to have nearly identical microbiomes from gestation, birth and infancy.

Nucleosome crystal structure at 2.8 angstrom resolution showing a disk-like shape. DNA helices at edge, histones and free proteins in center. The worm-like structures are RNA messengers. reasonandscience.heavenforum.org

Mukherjee writes:

It is a testament to the unsettling beauty of the genome that it can make the real world stick. Hindu philosophers have long described the experience of “being” as a web—jaal. Genes form the threads of the web; the detritus that adheres to it transforms every web into a singular being. An organism’s individuality, then, is suspended between genome and epigenome. We call the miracle of this suspension “fate.” We call our responses to it “choice.” We call one such unique variant of one such organism a “self.”

In his visits with various scientists Mukherjee probed the complex connections of the histones that occupy the empty spaces within the double helix and seem to possess a mysterious power to trigger or silence gene expressions. What he seems to overlook is the role of non-human microbiological agents in making these sorts of choices for their hosts. Indeed, his description of a histone begs comparison to other life forms:

In 1996, Allis and his research group deepened this theory with a seminal discovery. “We became interested in the process of histone modification,” he said. “What is the signal that changes the structure of the histone so that DNA can be packed into such radically different states? We finally found a protein that makes a specific chemical change in the histone, possibly forcing the DNA coil to open. And when we studied the properties of this protein it became quite clear that it was also changing the activity of genes.” The coils of DNA seemed to open and close in response to histone modifications—inhaling, exhaling, inhaling, like life.

***

These protein systems, overlaying information on the genome, interacted with one another, reinforcing or attenuating their signals. Together, they generated the bewildering intricacy necessary for a cell to build a constellation of other cells out of the same genes, and for the cells to add “memories” to their genomes and transmit these memories to their progeny.

While we were pondering these things, bicycling through a Spring rainstorm one morning, we tuned our mobile cyberamphibian prosthesis to Michael Hudson’s interview on Extraenvironmentalist #91. Hudson described how debt deflation is imposing austerity on the U.S. and European economies, siphoning wealth and income to the financial center while impoverishing the periphery. Its the theme of his latest book, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

Crossing two hot wires in our rain soaked brain, the comparison between economic theory and genetics wafted a blue smoke that trailed out from under our bike helmet.

The system itself — the DNA code — is monetary policy, trade rules, labor, capital assets and other components of what we call “the economy.” The histones are the central banks and the FED that set the policies epigenetically by turning switches on or off. The wild cards are those alien protein agents that seem to bring about changes in the histones. A century ago those might have included J. D. Rockefeller and J. P. Morgan. Then came Henry Wallace and Franklin D. Roosevelt. Today they would include Jaime Dimon (Morgan Chase), Lloyd Blankfein (Goldman Sachs), Christine Lagarde (IMF), and Prince Mohammed bin Salman bin Abdulaziz Al-Saud.

It is pretty clear from most indicators that since at least 2008, and likely much earlier, our economic DNA has been instructed to express a cancer. As Gail Tyerberg observes:

Both energy and debt have characteristics that are close to “magic” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products.

Back in the era of cheap energy less debt was required. In our era of expensive energy, gigantic and growing debt is required. But you can only build debt on itself up to the point where confidence in repayment by those who are owed the money falters. After that, watch out. No debt, no energy. No energy, no economy.

Greg Mannarino of Traders Choice says:

Let’s just look at the stock market… there’s no possible way at this time that these multiples can be justified with regard to what’s occurring here with the price action of the overall market… meanwhile, the market continues to rise. … Nothing is real. I can’t stress this enough… and we’re going to continue to see more fakery… and manipulation and twisting of this entire system… We now exist in an environment where the financial system as a whole has been flipped upside down just to make it function… and that’s very scary. … We’ve never seen anything like this in the history of the world… The Federal Reserve has never been in a situation like this… we are completely in uncharted territory where the world’s central banks have gone negative interest rates… it’s all an illusion to keep the stock market booming.

… Every single asset now… I don’t care what asset… you want to look at currency, debt, housing, metals, the stock market… pick an asset… there’s no price discovery mechanism behind it whatsoever… it’s all fake… it’s all being distorted. … The system is built upon on one premise and that is confidence that it will work… if that confidence is rattled the whole thing will implode… our policy makers are well aware of this… there is collusion between central banks and their respective governments… and it will not stop until it implodes… and what I mean by implode is, correct to fair value.”

It’s created a population boom… a population boom has risen in tandem with the debt. It’s incredible. So, when the debt bubble bursts we’re going to get a correction in population. It’s a mathematical certainty. Millions upon millions of people are going to die on a world-wide scale when the debt bubble bursts. And I’m saying when not if… … When resources become more and more scarce we’re going to see countries at war with each other. People will be scrambling… in a worst case scenario… doing everything that they can to survive… to provide for their family and for themselves. There’s no way out of it.”

Jason Heppenstall, who lives in Cornwall, England, writes in the 22billionenergyslaves blog:

Aside from the police and the shops closing, public toilets are closed virtually all of the time, and the Post Office too is soon to close down, having been privatised and now asset stripped. The council is being forced to raise its taxation rates by 4% this year to cover the shortfall caused by spiraling costs and diminished funding from central government. Clinics and charities are being squeezed out of existence and the local council tried (and failed) to privatise the town’s midsummer festival.

My wife works in the care sector. The stories I get to hear will make you never want to be dependent on the state in your old age. If you can’t rely on your kids to look after you in your dotage it might be wise to keep a bottle of whisky and a revolver in your bottom drawer. Or maybe you'd rather die of thirst lying in your own mess because the 19-year-old unqualified carer who works for minimum wage is too busy checking Facebook on her phone to hear you pressing the emergency button by the bed.

Former US Budget Czar David Stockman wrote this week:

Owing to the recency bias that dominates mainstream news and commentary, the massive expansion of the Fed’s balance sheet depicted above goes unnoted and unremarked, as if it were always part of the financial landscape. In fact, however, it is something radically new under the sun; it’s the footprint of a monetary fraud breathtaking in its magnitude.

***

In essence, during the last 15 years the Fed has gifted the US economy with a $4 trillion free lunch. Uncle Sam bought $4 trillion worth of weapons, highways, government salaries and contractual services but did not pay for them by extracting an equal amount of financing from taxes or tapping the private savings pool, and thereby “crowding out” other investments.
 

This is not Al Gore. It is Elon Musk, a beneficiary of govt largess

Instead, Uncle Sam “bridge financed” these expenditures on real goods and services by issuing US treasury bonds on a interim basis to clear his checking account. But these expenses were then permanently funded by fiat credits conjured from thin air by the Fed when it did the “takeout” financing. Central bank purchase of government bonds in this manner is otherwise and cosmetically known as “quantitative easing” (QE), but it’s fraud all the same.

In essence, Uncle Sam has gotten $4 trillion of “something for nothing” during the last 16 years, while the Washington politicians and policy apparatchiks were happy to pretend that the “independent” Fed was doing god’s work of catalyzing, coaxing and stimulating more jobs and growth out of the US economy.

What the Fed was actually doing was falsifying and inflating the price of financial assets. As Michael Hudson points out, the prime error is placing the financial sector in the same column as honest labor or capital contributions. Finance is actually a drain on those things. It is a withdrawal from productivity, not a contributor to GDP.

Stockman agrees:

But financial engineering does not add to GDP or increase primary spending; it results in the re-pricing of existing financial assets. That is, it gooses stock prices higher, makes executive stock options more valuable and confers endless windfalls on the fast money speculators who work the financial casinos.

Last month, Mario Draghi, the European Central Bank president, became the first central banker to take seriously the idea of helicopter money – the direct distribution of newly created money from the central bank to eurozone residents.
 

Germany’s leaders have reacted furiously and are now subjecting Draghi to nationalistic personal attacks. Less visibly, Italy has also led a quiet rebellion against the pre-Keynesian economics of the German government and the European commission. In EU councils and again at this month’s IMF meeting in Washington, DC, Pier Carlo Padoan, Italy’s finance minister, presented the case for fiscal stimulus more strongly and coherently than any other EU leader. More important, Padoan has started to implement fiscal stimulus by cutting taxes and maintaining public spending plans, in defiance of German and EU commission demands to tighten his budget. As a result, consumer and business confidence in Italy have rebounded to the highest level in 15 years, credit conditions have improved, and Italy is the only G7 country expected by the IMF to grow faster in 2016 than 2015 (albeit still at an inadequate 1% rate).

The Automatic Earth

With England jumping ship and Germany saying nicht to every reform proposal, the EU is headed for a disaster but Italy seems to be able to still think outside the box. To us this suggests the potential for alien-led histone modification in the DNA of modern finance.

Heppenstall says:

The irony of being called anti-European is that I am ardently pro-European. I’ve lived in four different EU countries, travelled all over and am married to an Italian Dane. Europe, to me, is the most diverse place in the world and has an amazing spread of history and culture. My ideal life would involve spending several months each year travelling around Europe in a camper van and getting to know it in an even more intimate manner. The EU is not Europe; it’s an abstract concept masking a faceless undemocratic organisation that funnels wealth from one place to another and keeps its modesty intact behind a fig leaf of supposed liberalism.

It doesn’t have to be that way. We could still have a Europe united around some core values other than money and power and capitalism. How about a Europe focused on an emerging eco-consciousness? Or what about remaking it as a loose cooperative of bioregions? Or perhaps, at the very least, we could all agree on a shared constitution founded on liberty, equality and fraternity. Former Greek finance minister Yanis Varoufakis has suggested something along those lines, setting up a pan-European umbrella group called DiEM25 that aims to shake things up ‘gently, compassionately but firmly.’ Perhaps there could be more debate about what kind of Europe would be better suited to weathering the coming financial, ecological and energy shocks without causing so much collateral damage to both itself and other nations.

Until that happens we’ll just have to stand back and watch the fireworks. Big institutions like the EU are like skyscrapers; they don’t come crashing down to the ground without taking out plenty of other nearby buildings and the EU is like the leaning tower of Pisa on steroids.  Big things are an artifact of the age of oil – the future is necessarily smaller and more local. The best course of action is to stop arguing over whether it is best to be stood on top of the creaking tower it or beside it, and simply get the hell out of the way before it goes over. 

Draghi’s Italy, it should be recalled, was the country whose Supreme Court last month ruled that Roman Ostriakov, a young homeless man who had bought a bag of breadsticks from a supermarket but had slipped a wurstel – a small sausage – and cheese into his pocket, had acted out of an immediate need by stealing a minimal amount of food, and therefore had not committed a crime. Carlo Rienzi, president of Codacons, an environmental and consumer rights group, told Il Mesaggero, “In recent years the economic crisis has increased dramatically the number of citizens, especially the elderly, forced to steal in supermarkets to be able to make ends meet.” La Stampa said that, for supreme court judges, the right to survive still trumped property rights, a fact that would be considered “blasphemy in America.”

Michael Hudson

Hudson is another epigenetic secret agent. He advocates a debt jubilee similar to what Truman pushed on Europe after World War II, creating the “German Economic Miracle.” In Hudson’s view, the quickest route to reform would be shifting from taxing honest labor to taxing unearned income and capital gains; from burdening the shrinking middle class to shrinking the rentier class. Vital public services like health care, education, transportation and communication should be free.

Ellen Brown, who has been beating the drum for public banks from her Web of Debt page and books, notes that the Bank of North Dakota, the nation’s only state-owned depository bank, was more profitable last year than J.P. Morgan Chase and Goldman Sachs, and that was after the fracked gas bubble burst. She urges local governments everywhere to bypass the Fed and the vulture banking system and create their own public banks.

Ellen Brown

North Dakota has led the way in demonstrating how a state can jump-start a flagging economy by keeping its revenues in its own state-owned bank, using them to generate credit for the state and its citizens, bypassing the tourniquet on the free flow of credit imposed by private out-of-state banks. California and other states could do the same. They could create jobs, restore home ownership, rebuild infrastructure and generally stimulate their economies, while generating hefty dividends for the state, without increasing debt levels or risking public funds – and without costing taxpayers a dime.

The ability of these foreign antagonists to infect the global economy with a new narrative is a relatively recent phenomenon. The false narrative embedded by Bretton Woods and the Chicago School are not that thoroughly ensconced that they can’t be evicted. There is no reason why the inane policies of economic astrologers could not be quickly reversed by protein protagonists with simple but compelling histological reforms, such as basing the future on a bioeconomy that sequesters carbon and runs on sunlight.

Next week: Epiconomics 102: The Sunlight Economy 

Lessons from the Icelandic vs Greek collapse

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Published on the Doomstead Diner on November 11, 2015, and on Peak Resources

Greek protesters clash with policemen during riots at a May Day rally in Athens May 1, 2010.  Credit: Joanna CC-BY-SA 2.0

Discuss this article at the Geopolitics Table inside the Diner

Debt = theft from future generations

All economic activity requires energy to perform useful work. Without an increasing flow of net energy to society the economy starts to contract. The extraction of finite fossil resources cannot sustain increased growth as depletion and diminishing returns eventually leads to bankruptcy and falling supply.

eurozone.JPGGreece cannot afford to import more oil

 
 
Monetization based on the assumption that the resource base is endless, which flies in the face of fundamental physics, can only lead to financial collapse. Intermediate stages that we have witnessed since 2008 is the erosion of the middle class, increased wealth inequality and increased numbers of poor people in society. Borrowing of work and resources from the future, through debt fuelled credit expansion, has become completely insane. To the extent that we are eroding the life-support systems that make up the basis for our own long-term survival. It has indebted future generations in ways they can never repay and is a grave intergenerational injustice
 
Thermodynamic limitations of the physical world don’t even enter the grammar of most economists or central bankers who are wilfully inept to give advice on anything but how to ruin entire nations. The lack of a systems perspective has made the public unaware of the real dangers of a out of control financial system. Economic growth based on credit fuelled debt, which has exploded since the early 1980s, in form of unlimited issuance of government bonds, credit cards without security, sub-prime mortgages or quantitative easing are all just sophisticated ways of sending the bill to the future. 

 

Its obvious that it's not possible to cure problems that arise from too much of something (debt) by doing more of it (piling on more debt). That's just insanity. If credit costs are larger than income minus other expenses then either the income must increase to balance losses or bankruptcy is the only way out. By now, we know that the pile of debt accumulated is unpayable and so a debt restructuring or debt jubilee is the only way forward. The young generation, especially, need to have their debts forgiven or we will have riots in the streets, political turmoil and an increase in crime rates.

 

Protesters in front of the Alþingishús, seat of the Icelandic parliament, on 15 November 2008. Credit:Haukurth (CC BY-SA 3.0)

 

Difference between purely financial and energy-induced collapse

In the fall of 2008 the financial system in Iceland collapsed leading to a closure of the three main banks and a 50% fall in the value of the Icelandic króna. When the banks collapsed they left huge obligations to lenders and customers without coverage. The Icelandic government issued a guarantee for all Icelandic accounts, releasing comparative demands from a large volume of overseas accounts (a net deficit of €3.2 billion after all assets were sold). The government had no way of covering this demand, causing the collapse of the Central Bank of Iceland and the currency. Iceland went bankrupt and loans in foreign currency became unpayable for state, businesses and private persons. The Icelandic people voted no in referendums to repay foreign debts, elected different people in office and jailed bankers for corruption. They basically had to restart the system. However, the real reason that Iceland has not suffered like Greece, for example, is because they were able to keep increasing their oil consumption (from imports) while relying heavily on domestic hydropower and geothermal for electricity production. This is not the case for the PIIGS countries which all were heavily reliant on oil imports that they could no longer afford.
 

Data from the National Energy Agency in Iceland

 

 

 

 

 

 

 
Many of the driving factors behind the Icelandic banking crisis and the GFC arose from a fundamental systems crisis in our present world. The economic model based on eternal financial and material growth has started to meet limits, where the human civilisation has outgrown the capacities of the planet to support it. Borrowing from the future to cover up this fundamental problem is a short sighted strategy that will come to an end, sooner rather than later. And it also means that the collapse curve will be even steeper as we have depleted more resources without making a transition to renewable energy resources.
 
Against such limitations, all talk or negotiations are futile, and pretending the dilemma does not exist has only lead to bigger risks with ever more debt – stealing from future generations. Countries may be able to handle a purely financial crisis, like Iceland, but they won't be able to handle a energy-induced financial crisis, like in the case of Greece. It doesn't matter what financial reforms they make as long as they can't afford the energy needed to operate society they will continue to contract. So while debt forgiveness is necessary it's not sufficient in solving Greece's problems.

 

Exclusive: Refugee Tent Cities in Kos

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Published on the Doomstead Diner on September 13, 2015

http://i2.cdn.turner.com/cnnnext/dam/assets/150813131952-10-kos-migrants-0810-super-169.jpg

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TAKE THE REFUGEE SURVEY HERE

SURVEY CLOSES MONDAY!  GET COUNTED!

Where's Kos?  It's not a place too many folks on this side of the Pond are familiar with.

Kos is one of the plethora of Greek Islands sprinkled around the Greek mainland, which is part of the European Continent.  It's been part of Greece for at least 3 millenia, but it actually sits much closer to Turkey than continental Greece, where the capital of Athens is located..

http://www.kosisland.gr/images/stories/maps/1.jpg

http://www.progc.co.uk/property-abroad/kos-island/kos-map.gif

It's a place many Europeans are familiar with though, because like many of those islands, Kos has beautiful beaches and is a great spot for German touristas to spend their Euros.  Well, at least it used to be.

http://media.afar.com/uploads/images/post_images/images/LedC1fgy3n/post_display_cropped_open-uri20130623-29913-1ifq2rb?1383816767

http://newmedia.thomson.co.uk/live/vol/0/fbd9ec250f9bf48a8f674a0822797ef336c6c36d/1080x608/web/EUROPE__MEDITERRANEAN_GREECE_KOSDES000899_KOS_TOWNRES000907_ATLANTIS_HOTEL.JPG

The nightlife for the Tourista is also fabulous!  Retsina and Ouzo by the Amphora full!

http://www.kosrehberi.com/wp-content/uploads/kos-gece-hayati.jpg

Not only do they have gorgeous beaches for the touristas to frolic on, they also have Clasical Greek ruins you can take the kids to and get them excited about History and Western Civilization!  At least if mom & dad are not too hung over from the Ouzo and Retsina anyhow.

http://file2.answcdn.com/answ-cld/image/upload/w_760,c_fill,g_faces:center,q_60/v1400915207/s8yqpbcxeaavamy4phxa.jpg

Kos is even great for the Doomer Tourista!  You can charter a yacht for a week (captained or bareboat, depending on your sailing prowess) and imagine yourself a Sea Gypsy escaping doom in your trusty sailboat, living off Dates and Fish!

http://lh3.googleusercontent.com/-iM-BSPNZ6tw/Tqqd-x8CC8I/AAAAAAAAAtY/vtGYW5_VTkw/s720/at%252520anchor.jpg

One small problem with all of these things these days in Kos, that is the proximity to Turkey.  Turkey is a main transit station for Syrian and Afghani Refugees seeking to make their way to the Promised Lands  of Germany & Sweden.  Unless they are positively loaded and can afford a Chartered Jet flying straight from Istanbul to Stockholm, they first gotta make it into Europe, and the shortest way with the least risk at the cheapest price  is via water transport into Greece.

Where's the closest and easiest Greek island to get to?  You guessed it, KOS!  It's so close any old rowboat or canoe can make this trip, about 2.5 miles.  Hell, good swimmers can swim that one, or you could paddle a surfboard or use a Windsurfer to make the crossing!

https://upload.wikimedia.org/wikipedia/commons/thumb/0/03/Wales_Windsurfer.jpg/640px-Wales_Windsurfer.jpg

Not that I really think most of the refugees are escaping on Windsurfers or Swimming it, I'm just demonstrating a point.  The boats they really do travel on are mostly old fishing boats of various sizes and capacities, or various categories of inflatables.  I'm not joking, this is an actual photo of refugees arriving at Kos in an Inflatable.

http://d.ibtimes.co.uk/en/full/1441076/kos-greece-island-refugees-migrants.jpg

They're Comin' to Kos in Greece!  They're Comin' to Kos in Greece!  TODAY!

OK, so now they are IN EUROPE! FREEDOM!  In principal anyhow.  Unfortunately, in physical miles and water miles and cash outlays to get to the mainland, they still have a long way to go, and once hitting Kos, they are kinda stuck there until they get Registered as a Refugee and get some kind of permission to move onward to the Promised Land of Germany, where they will all surely own Mercedes and drive the Autobahn at 100 Km/H!  Refugees have dreams too!

So what you have here is a classic Bottleneck situation, and the Refugees are stacking up in Kos, which is not so good for their regular Tourista Trade. It might not be too bad for the overall Kos economy though, as long as the recent arrivals come into shore with a bagful of Euros.

These folks can't spend those Euros TOO FAST though, because if they burn through what they have on Kos, they won't have spare Euros to buy passage on the next, hopefully bigger and somewhat sturdier boat that will bring them over to Athens for the next leg of the Journey.  So they are not wasting the precious Euros on luxury hotels on the scenic beaches.  Rather, they are setting up cheaper accommodations, TENTS.  A small city of tents already.

Recently, the Diner received Boots on the Ground footage from this week in Kos from our informant, Deep Kos.  Here's the latest from the streets of Kos:

Note: If you have Boots on the Ground Video or Pics from the front lines (Greece, Hungary, Italy et al) you wish to share with the world at large, CONTACT us on the Diner.  We have means and methods to get them up securely, with the best Hackers, Encryption Junkies and Code Jockies on the Net.  Do NOT upload or attach to emails prior to talking with us if your material is sensitive and you are concerned for your safety.  AKA, everything you put forth across the net or your cell phone can be tracked.  Always remember that fact of internet life.  It can be made DIFFICULT TO TRACK though, and we will make it as hard as possible for the Enemy.  CYPHER IS THE LAST FREEDOM.

Hopefully next time Deep Kos will video in Landscape instead of Portrait format.  LOL.

More from Deep Kos:

Things are taking a turn for the worse in the homeland… :-[. Golden Dawn (GD) is currying support from desperate islanders who are in fear of being overrun by waves of refugees.

"The issue of illegal migrants is becoming critical & is reaching a fateful crossroads, says GD member"
"The situation here on Kos is unbelievable says the member. The government is doing nothing, just managing PR."
"Save us, plead Kos locals."
"Vote for Us (Golden Dawn) and we'll Send in the Army to deal With this Riff-Raff."
"Otherwise, Greece will become Pakistan, says member."

Video link: http://bit.ly/1MLXKoG
Video translation, courtesy of me…

Numbers are around 7000 at present. Most of the late arrivals have been Syrian. They are particularly well to do as they can afford luxury hotel accomodation whilst awaiting processing by Greek authorities. The ferry boat that was relocating them to the mainland, the Venizelos, hasn't been seen for some time though, so unsure what that will mean for the  Syrians, although they do receive priority passage. The other refugees are roughing it in awful conditions mainly near the Police station and on along the foreshore, none have ventured out towards the villages. Business in town is dreadful, despite the hotel bookings as both locals and tourists alike are shunning the zone. Aid is being distributed by a Greek agency akin to UNICEF…

Anyhow, at least so far these vids look reasonably peaceful, and it actually does not look that much different than the early days of Occupy Wall Street.

http://www.3quarksdaily.com/.a/6a00d8341c562c53ef0154387ca0fb970c-800wi

OK, the weather was chillier in Zucchini Park in November, but otherwise quite similar.

While it remains peaceful for now, one suspects that the locals in Kos will get tired of all the tents and migrants cruising in pretty quickly.  No doubt laws will be passed regarding setting up tents on the street.  Then of course they have to enforce those laws, in the case of Occupy, the NYPD got the job of this.

https://d3n8a8pro7vhmx.cloudfront.net/luisjrodriguez/pages/351/attachments/original/1412788138/ows_nov15_3.jpg?1412788138http://animalnewyork.com/wp-content/uploads/mynypd-nationwide-600x337.jpg

Sadly for Kos though, unlike NY Shity, they don't have a Standing Army of 35,000 Thugs to Protect & Defend the Rights of Wall Street Pigmen to Loot the World.  If Kos has a police force of 100 I would be surprised.  This of course is no match for the 1000s of refugees rolling in there each week.

So at some point they bring in the Army on this, and Deep Kos has mentioned that they have Army Bases on the Island equipped with Tanks and other essential crowd control hardware.

http://infossible.com/infosdata/wp-content/uploads/2015/09/Infossible_Egyptian-billionaire-buy-an-island1-700x442.jpgAll this does not bode well for the Tourista trade though, nor for the local residents either, who would be well advised at this point to GTFO of Kos!  Sell the island to the Eyptian Wannabee Pharoah, split the cash amongst the current resident, take the money and RUN!  Run Away!  Run Away FAST!  RUN AWAY NOW!

As long as Kos remains a part of Greece and then by extension part of Europe, it's going to be a Magnet for every refugee trying to GTFO of the War Zones and climate ravaged countries of MENA.  There is no way to stop the flow short of mining all the waters, which will not be conducive to running a yacht charter biz there.

One small problem for Pharoah, the current infrastructure on the island houses a population of around 30.000.  After they leave, he's gonna have a heck of a time doing upgrades to squeeze even the current 100K on the move in there.  For the 30,000 current residents of Kos though, it's a great deal.  If they sell him the island for $1B, they'll each get $33.3K, plenty of money to get to Germany or Sweden and make a new start!  Plus they already have papers!  It's Win-Win for everybody! Refugees get a new home, Kosians get out of harms way! Well, except Pharoah, who will have to keep bleeding his account building more infraastructure as the population swells.

At some point here, the countries in Europe who are being shamed into accepting refugees will stop accepting more of them.  The pool of potential refugees as we move forward here is simply too large.  At some point there will be a backlash, and when that occurs Kos is not a place you want to be, whether you are Resident, Tourista or Refugee.

If you can, GTFO of Kos.

TODAY.

Financial Doomsday Clock “One Minute to Midnight”

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Midnight-in-the-Market-1024x576

Published on the Daily Impact on August 19, 2015

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The hair-on-fire headline reads, in full: “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control.” But here’s the thing — the headline does not appear in a hair-on-fire, Chicken-Little website such as (one might slanderously call) Zero Hedge, David Stockman’s Contra Corner, Wolf Street or (dare I append this name to the list of Titans?) The Daily Impact. It appears on the website of  one of the world’s top mainstream newspapers, Britain’s  The Daily Telegraph. And here’s the subhead: “China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations.”

Worried yet? Don’t be. It’s way too late.

One of the hair-on-fire websites (first clue: it’s name is The Economic Collapse Blog) lists 23 — count them, 23 — countries whose stock markets are crashing right now. The largest of them, of course, is China, whose markets have been imploding for two months. For most of that time the mainstream media has been murmuring assurances to the rest of us — it’s over, it’s stable now, it’s contained, it won’t affect us — while things got worse, faster, over a wider area.

As the Telegraph article points out, it was China that saved the world after the 2008-9 crash, by expanding its economy ruthlessly, with borrowed and imaginary money (that is, money imagined into existence by the central bank). They built high-rise apartment buildings, whole cities of them, in which no one lives. They built freeways on which no one drives — they poured more concrete in three years than the United States has poured in its entire history. Now, mired in debt that is coming due, its currency devalued, its stock market crashing, China teeters on the brink of unimaginable catastrophe.

The seizures afflicting China’s economy are a major reason why the prices of virtually every industrial commodity have crashed this year, with dramatic effects on the economies and the currencies of the countries whose welfare depends on the sale of the assets nature deposited under their territory. The fairy tale has been that these “emerging” nations, which of course will never deplete their deposits of whatever, will take over the engine of endless global growth as the mantle falls from the shoulders of the exhausted roosters — the United States, China, etc. Instead, each of these countries is in turmoil, its currency fraying, its markets roiled, its economy seizing up.

Money, real and imaginary, is rampaging out of China, out of Greece, out of the emerging markets, out of the bond market, and. yes, out of the American stock market. According to staid and optimistic CNBC, it’s a “stampede,” with domestic equity funds losing $20 billion in investor funding in July, nearly $160 billion in 12 months. The outflows are far worse than they were in the 2009 crisis. Ask not for whom the Chinese gong tolls; it tolls for three.

As the markets, including the US markets, continue to stagger along the edge of the cliff like the proverbial drunken sailors, the Dipsticks (a.k.a. the Masters of the Universe) continue to buy the dip, praying fervently to the great god Mammon that each reverse is a temporary hiccup and not the manifestation of the immutable law of gravity.

Never mind what your smartphone thinks the time is. It’s a minute to midnight, all over the world.

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

My question to Christine Lagarde, Eurogroup 25th June 2015

Off the keyboard of Yanis Varoufakis

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Published on Yanis Varoufakis Blog on August 17, 2015

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Greece’s Third MoU (Memorandum of Understading) annotated by Yanis Varoufakis

The Third Greek MoU is now enshrined in Greek Law. Written in troika-speak it is almost impossible to decypher by those not speaking this unappetising language. Click here for the complete MoU text annotated liberally by yours truly – in pdf form. It is best read in conjunction with my annotated version of the EuroSummit Agreement of 12th July.

My question to Christine Lagarde, Eurogroup 25th June 2015 – as narrated by Landon Thomas in the NYT

yanis-varoufakisDuring the 25th June 2015 Eurogroup, the institutions presented me, in the form of an effective utlimatum, with a comprehensive staff level agreement and funding plan (which I considered financially non-viable). It was the deal that Prime Minister Tsipras decided, on the following day, to put to the Greek people in the form of the now infamous referendum. During that Eurogroup meeting, I posed a question to Christine Lagarde: “Is it the view of the IMF that Greece’s debt is sustainable under the proposed agreement?” Ms Lagarde, when her turn came to speak, tried to skrt the issue but, in the end, conceded that Greece’s public debt “had to be looked at again”. At that point, the Eurogroup President Dijsselbloem interrupted the proceedings and addressed me with the express threat that, if the Greek government insisted on discussing a debt restructure, there would be no deal. I shall have a lot more to say on this and related matters in due course. For now, here is how Landon Thomas Jr narrates this story in his recent NYT piece.

 

For Landon’s complete article click here. Relevant extracts are copied below

In January of this year, the anti-austerity party of Alexis Tspiras came to power. By April, negotiations over debt repayment had stalled, the government was hemorrhaging cash, and the economy was at a standstill.

On Easter Sunday, Yanis Varoufakis, who had become Greece’s finance minister, flew to Washington to meet with Mr. Thomsen and Christine Lagarde, who became the I.M.F.’s chief in late 2013, and threatened to stop payment on more than a billion dollars in loans that were soon coming due.

Relations between fund officials and the Greeks had reached their nadir. Mr. Tsipras said that the fund had “criminal responsibility” for the crisis, and Mr. Varoufakis was telling people that Mr. Thomsen’s work in Greece would go down in history as the I.M.F.’s greatest failure.

Yet having run the numbers, the fund now accepted the central argument being made by Mr. Varoufakis: Greece was bankrupt and needed debt relief from Europe to survive.

The fund was also feeling the pressure from the non-European members of its board who questioned the huge commitment to Greece (currently about $15 billion) relative to the small size of its economy.

Ms. Lagarde and David Lipton, her top deputy, became more insistent, pressing European nations that economic reforms alone were not enough and that a debt restructuring would be needed as well.

In late April, Mr. Thomsen took up the issue once more at a critical meeting of European finance ministers in Riga, Latvia.

Two months later, Ms. Lagarde found herself at the Brussels meeting of European finance ministers, with the country’s future in the eurozone hanging in the balance.

The Europeans were pressuring Mr. Varoufakis to agree to an austerity-loaded debt deal that he was resisting.

I have a question for Christine, he said. Can the I.M.F. formally state in this meeting that this proposal we are being asked to sign will make the Greek debt sustainable?

She could not. And when Jeroen Dijsselbloem, the Dutch finance minister and lead negotiator for Europe, cut off all discussion of debt relief, the die was cast.

Back at I.M.F. headquarters in Washington, the decision was unanimous: It would go public with its assessment that Greece’s debt situation was hopeless.

‘Old Wine in a New Bottle’

The 19 countries of the euro area make up the I.M.F.’s largest shareholder base, but as the world’s financial watchdog, the fund also represents 169 other nations.

If the I.M.F. wants to be seen as an international, as opposed to a European, monetary fund, it must prove that it can speak with an independent voice. And if that means arguing that Europe, its senior partner in these talks, needs to take a loss on its loans — well, so be it.

Many have commended the fund for going public with its views. But the release of its debt reports has not yet had any practical effect.

The latest bailout is heavy on austerity measures like privatization of power companies and seaports, reduced pensions and tax increases in shipping and tourism, and says nothing about debt relief.

“This is old wine in a new bottle,” said Meghan E. Greene, chief economist at Manulife in Boston. “I see very little chance that the bailout will succeed — it’s too much like the other ones.”

Would it have made a difference if the fund had officially broken with Europe in the spring, when it began to conclude that the Greek debt had become unmanageable?

Probably not, says Susan Schadler, a former I.M.F. economist and author of a widely read paper on the fund’s Greece saga.

But she argues that by not forcing creditors to take a loss back in 2010, the pain has been borne almost exclusively by the Greeks themselves, and not by bond investors.

“The fund should have pushed for a restructuring then,” she said. “That, after all, is its job — to assess the risks and say whether or not the debt is sustainable.”

The Crash of 2015: Now Arriving at Gates 3,7,12,19…..

Off the keyboard of Thomas Lewis

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Published on the Daily Impact on August 10, 2015

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If the world economy were an airline, what we’d be seeing now is hundreds of late and cancelled flights, missing airplanes, bankruptcies, thousands of staff layoffs and millions of unhappy customers. (Whoa, that was supposed to be a metaphor!) If we were in a hub airport of this airline, every incoming flight would be a tattered, smoking airplane with flat tires and bullet holes bearing more bad news from shell-shocked passengers. Some examples:

International Arrivals:

From China: The Shanghai Composite Index lost 13.4 percent of its value in July. That’s more than a correction and would have been a crash if the government had not a) halted trading in half the stocks listed, b) forbade the selling of large blocks of shares, and c) bought most of the shares that were sold. To say that these measures are not working (except that they have temporarily frozen the crash at gunpoint) is an understatement. The Chinese Crash of 2015 is well under way. [See: Peak Insanity: Chinese Brokers Now Selling Margin Loan-Backed Securities, and “China’s Hard Landing Suddenly Gets a Lot Rougher,” among many others.

From Greece: With the Grexit crisis declared over, the Greek stock market opened last Monday, and promptly crashed; all stocks down 23 %, bank stocks 30%. By Friday it had clawed back about 20 points but was some 600 points down on the year.

From Puerto Rico: On Monday, Puerto Rico became the first U.S. Commonwealth Territory ever to default on a debt payment.

From Venezuelafood riots are breaking out in the aftermath of the economic devastation wrought by the crash of oil prices.

From Canada: Implosion of the tar-sands-oil patch and a related bursting of the housing bubble has the country in an all-but-declared recession.

From EverywhereCommodities are tanking and taking the currencies of the commodoties-exporting nations with them. As happened just before the crash of 2008, the price of virtually every industrial commodity –not just oil, but copper, coal, steel, lumber, you name it — has crashed because of drastically slowing manufacturing worldwide, especially in China.

Domestic Arrivals:

From North Dakota and Texas: America’s zombie shale-oil frackers are finally running out of gas, so to speak, after being propped up despite the crash of oil prices by 1) an avalanche of investment and credit from money handlers convinced the dip was only temporary, and 2) hedge contracts that meant they were still getting some $90 a barrel when the market was around $50. The avalanche is now going the other way and the hedge contracts are running out. Investopedia lists seven major players on the verge of bankruptcyAccording to Bloomberg Business News, North American oil producers have seen a stunning $1.3 trillion of their equity valuation vanish in one year as a result of the crash in oil prices. The sudden loss in value has hit a multitude of pension funds and insurance companies hard.

From New York: The stock market is on its knees. The Dow Jones Industrial average at the end of the week  down 700 points since July 16, and 900 points off the market peak in May. In addition to oil and energy issues, tech stocks (Apple, Twitter, Yelp, etc.), mainstays of the recent market, are down sharply. As are the up-to-now-reliable cash cows, the media stocks — Disney, CBS, Time Warner etc.

From Washington: In each jobs report the government insists that the unemployment rate is stable and job creation is improving. Look a little further and you see that each month, the number of people leaving the labor force is far larger than the number of jobs created; and that the number of jobs vanishing each month is rising fast; the number of jobs cut in the US in July, 106,000, was the highest monthly total since 2011 and up 136% from the previous month, 125% year-to-year.

From all overFactories’ output  and consumer spending are weakening as oil production drops (as even the Energy Information Administration is now admitting).

This is far from an encyclopedic review of the bad news that arrived at our gates last week. I have been assembling it for a week, and found that by the time a draft got to be a few hours old, much of the bad news had been replaced by worse news. And then of course I was waiting to hear how the Republican candidates for President would deal with these urgent and mounting threats. Still waiting. You heard anything?

Gotta go. New arrival at Gate 78.


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

TSHTF Podcast with Nicole Foss, Raul Ilargi Meijer & RE

logopodcastOff the microphones of Nicole Foss, Raul Meijer & RE

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Aired on the Doomstead Diner on August 9, 2015

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Recently, Nicole Foss of The Automatic Earth returned to blogging after taking something of a hiatus over the last year.  I caught one of her recent pieces on the situation in China, and her partner Raul Meijer has been covering the situation in Greece extensively.

Besides the two ongoing clusterfucks of China & Greece, there's quite a bit of ongoing collapse related to climate, the recent publication by James Hansen on Sea Level Rise, and of course the Encyclical by the Vicar of Christ on Earth, His Holiness Pope Francis, Chief Spokesperson for some 1.2B members of the Holy Roman Catholic Church, not to mention all the hubbub about Near Term Human Extinction…. clearly no shortage of Collapse Topics to discuss! 🙂

It's been nearly 2 years since I first got together with Nicole to talk about Energy & Inflation & Deflation.  So this seemed like a good time to do an update, and I nailed her down for another chat this week.  She happens to be visiting with Raul in the Netherlands, so as a bonus in this conversation we got his input as well.

http://momsgrilledcheesetruck.com/wp-content/uploads/2013/03/Just-The-Facts-Maam-Moms-Grilled-Cheese-Truck.jpgNow, for those of you expecting to get the normal "Just the Facts, Ma'am"  type of presentation from Nicole in this Podcast, you may be slightly disappointed.   There definitely are a lot of facts jammed into this hour of KollapsnikTM chat.  However, because Nicole was chatting with both me and Raul, we kind of went off the rails a few times, and hilarity ensued.   I decided to leave some of it in there for a little entertainment value. 🙂  The stuff I cut out is even funnier, but sadly not for public consumption.  LOL.

Additionally, Nicole currently has a DVD in post production, discussing parameters of where you want to live, what kind of choices you can make moving ahead and so forth.  We currently have up a Doomstead Diner SurveyTM on places you DON'T want to live, still OPEN.  We'll have a new survey up next week on places you DO want to live.

Anyhow, crack open a bottle of your favorite beverage and enjoy the latest in Collapse from the Collapse CafeTM on the Doomstead Diner and the folks from The Automatic Earth.

Snippets:

 Nicole:

Just that the people need to understand that this is the model that we've been suggesting as to what's going to happen is not a theory, it's actually happening exactly the way we said it would. It's just not happening everywhere at the same time because systems that are predatory pick off the little sick ones first. They work from the periphery towards the center as you said. But where we're seeing things move more and more to the center now. And China has been the the global engine of liquidity for the last while,  and drives demand for absolutely everything.  That's now tipping over the edge and we are going to see those same consequences manifesting in countries in the center that do not see themselves as being in any way comparable to Greece, but they are, they're just not there yet.  The same dynamic ends up operating there. But when we tell people what's happening people, they tend to think "oh well that's just my theory", but it's not a theory,  it's actually happening and will in the future a lot more places…

RE:

Yeah it's an ongoing phenomenon it's definitely not something that is projected or happening in the future or something like that,  collapse is ongoing now,  it's happening and you can watch.  You can watch it  progress, you can see all the different places where it manifests itself. Greece is one of course and Puerto Rico now as well…

Raul:

Civil War…That makes me think…  People think the French are very good at protests right?   But they haven't seen the Chinese.  The Chinese do protests like nobody else does. (RE: Yea…they get serious about it…) because it's very bloody, very violent and I've been writing about this for years. I don't see how China can not end up in that kind of thing…

For the rest, LISTEN TO THE INTERVIEW!!!

End of More: Interview with Norman Pagett 2

logopodcastOff the Microphones of Norman Pagett, RE & Monsta

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Aired on the Doomstead Diner on August 5, 2015

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In this second part of our podcast With Norman Pagett, we talk about the timeline questions and many of the more complicated questions of resource depletion and collapse.

Part 1 can be found HERE

Snippet:

From Monsta:

….Hello and welcome to another edition of the Collapse Cafe here at the Doomsday Diner.   Today we are joined by RE and Norman Pagett, the main topic in this discussion will be about population overshoot and which regions we would expect to see that are most affected. We also try and cover well are the most likely breaking points in societies and what outcomes we can expect to see once those tipping points are reached. But before we discuss those issues, one of the areas that is most prominent and obvious for most of that is that of the financial system.  One of the recurring problems we see on the gross level here is the various monetary problems we see around the world, for example in China this is seen was declining values in the Chinese Stock exchange while increase we see there simply enormous debt loads are not only a threat to themselves but the entire Euro Zone in the end of war. Do you have any discussion on how money and debt is affecting all nations?….

From Norman:

…I think Nations just borrow money endlessly to keep themselves afloat. The only people who are not borrowing money are the ones producing oil like a country like Saudi.  As a sovereign wealth fund of hundred or close to a trillion dollars or something like that whatever it is, and they just use it to create jobs by building the towers and roads of the hotels and offices and stuff like that, but that's only as long as the goal of flows when the oil stops flowing the economy will crash less like anybody else's. This how do you call of the will crash like Greece crash well and in fact the oil doesn't even have to stop flowing. The price that the oil wealth brings and the market drops like that that crashes the miners. Exactly that's what I meant that when the price becomes unaffordable…

From RE:

..Consider the Greeks.They are now having trouble importing all the stuff that they need to keep going. All the systems functioning, and that's in a country that has like I say good arable land. The Saudis have just no chance of self-sufficiency.  That environment just simply can't support that many people. You know historically it never did, I mean the Saudis themselves are descendants of Bedouin tribesmen and so forth that wandered around the desert and there just weren't a whole heck of a lot of them. They proved I guess to be the best allies that Western nations could find in the aftermath of the breakup of the Ottoman Empire after  World War I, 1914 or so you know, they got the nod and of course the United States/Fascist States of  America built air force bases and what not down there, and you know the Saudis probably have the largest military with the best military hardware of anybody down in the Middle East.  I guess that's basically what keeps them in power right now. Once the oil is gone then the Saudis are toast. You know that's actually my tagline for the Chinese usually, when talking about their population issues and pollution issues and so forth…

Take the latest Collapse SurveyTM on the Worst Cities HERE

And you thought Greece had a problem?

Off the keyboard of Norrman Pagett

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Published on Collapse of Industrial Civilization on July 29, 2015

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Discuss this areticle at the Energy Table inside the Diner

End_of_MoreWhile we might think of money as supporting our economy, only energy can support the solvency of a nation, and only surplus energy can fulfill the aspirations of its rulers and the desires of its citizens. Until the advent of the industrial revolution, and in particular the universal availability of cheap oil, that energy could only come from territory that could produce sufficient food and other essentials for any level of civilized living. We might ‘demand’ that our leaders provide new hospitals, schools, roads and all the other things that make life comfortable, but without the necessary surplus energy to do it, it is impossible. No political posturing or promises or taxation can change that.

Most deny it, but we live in an energy economy, not a money economy. Without the continually increasing forward thrust of energy input, no economy can exist in the context that we have become used to.

Not just the Greeks, but those charged with governing every nation on Earth, have lost sight of the fundamental law of collective survival: if a nation doesn’t produce enough indigenous surplus energy to support the demands of its people, they must beg, buy, borrow or steal it from somewhere else, or face eventual collapse and starvation until their numbers reach a sustainable level.

Our lifestyle support system has been based on that premise since prehistory. Nomadic tribesmen, probably in the region of present day Iraq, had the bright idea of fixing borders around land, then growing their food supply instead of chasing after it. Fences and borders meant land could be owned and given value that could be measured in energy terms.

What we know as civilization is based on that simple concept. Land and its potential energy became capital, and our genetic forces ensured it was exploited to the full. Primitive farmers knew nothing of calorific values, or capitalism; only that too little food meant starvation, sufficient food averted famines, and surplus food offered prosperity. No one wanted to starve, few were content with sufficient, so the drive for surplus became relentless. It still is; only the scale has changed, it has become the profit motive in everything we do. Everybody wants a payrise, few refuse one. We are all capitalists, we differ only by a matter of scale.

Enclosed land needed strong control and the will to fight for it. Strength prevailed while weakness went under as resource competition ebbed and flowed across tribal territories. If land produced enough spare food and other necessary commodities, it was possible to equip and feed an army, and use it to occupy more territory. In that way collective energy could rapidly roll up small territories into a nation or an empire, create warlords and kings, and give credence to gods who were invariably on the winning side.

cool-oil-gas-war-graffiti

Possession of land and what it produces is the hidden support of what we now understand as our economy and the viability of our infrastructure. Conflict makes that economy even more profitable and one that is built on power and aggression provides the potential for endless resource warfare, whether bloody or political. In 1941 Germany invaded Greece using the bloody version. In 2015 Greece is experiencing the political version. As a small weak country Greece lacks the resource strength to resist.

The more land that could be held and ruled, the more food-energy could be produced. Surplus energy that came in the form of meat and grain and timber was too big to carry around, so tokens of gold and silver became an accepted measure of energy value.

Different civilisations arose and used different monetary systems, but all broadly followed the pattern we are locked into now: those who controlled the land controlled the energy that supported the prevalent economy, whether primitive or sophisticated, warlike or peaceful. With sufficient surplus and a big enough labour force held in some kind of serfdom or dependency, tokenized energy could be diverted to pay for the construction of cities, castles and cathedrals. While the labour of men to build them, the allegiance of soldiers to guard them, and the faith of priests to pray over them might be bought with gold and silver, the system depended on a supply of food and basic commodities well above subsistence level, ultimately provided by the heat of the sun. That’s why the great early civilisations and empires began in the warm tropical and sub tropical regions of the world. And why Eskimos did not field armies, build cities, or inflict the hysteria of mass religion on themselves; they didn’t get enough sunshine to provide the energy resources.

That gave rise to the factors we still live with today: warm productive stable land sustains a bigger healthier population. People eat and procreate, need more sustenance, and demand that their leaders provide it, so the thrust of constant expansion is inevitable in order to feed them. This was as true for small farming settlements between the Tigris and the Euphrates, as it was for the Roman Empire. It was the force that drove the European industrial powers outwards to carve up Africa, the Americas and the Far East to give a privileged section of humanity a prosperity that has been unique in our history. Those of us who enjoy those privileges have lost sight of where they came from, and how fragile they are.

Consequently we are still locked into the same energy-hungry capitalist dynamic, only now we believe that money has not only been substituted for the energy that created it, it has replaced it. In most people’s minds, the illusion of money has supplanted tangible, hard resources. Energy is no longer regarded as necessary to sustain prosperity; we can print it, or better still, make it appear electronically.

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Who needs oil? Keynesian economics says that perpetual growth will come through passing bits of coloured paper or plastic from hand to hand at an ever-faster rate.

The leaders of every advanced industrial nation are driven to promise this kind of ‘growth’ to their people, for no better reason than because there has always been growth, so our future will be growth driven too; they and we know no other way. We believe the lie that money itself has taken on an intrinsic worth of its own.

The Greeks fiddled their accounts, joined the EU and accepted the common currency of the Euro and the collective certainty of the money-driven nature of growth, at a time when oil was $25 a barrel. With oil so cheap, any concern about indigenous energy sources was irrelevant. They had a world class (oil dependent) shipbuilding and sea transport industry, and (oil dependent) tourism was booming. In the late 90s, when oil had fallen to $18 a barrel, they borrowed $11 billion to buy still more energy to burn in order to stage the 2004 Olympic games. Greek prosperity depended on infinite supplies of hydrocarbon fuel, but they followed the common belief in infinite money.

When the price of oil peaked in 2008, the crash was inevitable. The certainty that money represented wealth was destroyed by the price of oil, but they borrowed billions more to try to prove it hadn’t. Any reason was better than reality: that you can’t run a cheap energy economy on expensive energy.

The latest clutch of Greek politicos got themselves voted into office because they told the Greek people what they wanted to hear: that prosperity could be voted into office, as if the availability of indigenous energy within their borders was a matter of political choice. Alexis Tsipras believed the Keynesian fantasy and convinced himself that borrowed money put into endless circulation will generate wealth and ‘growth’. $11 billion spent on the now derelict Olympic stadium should have served as a warning, but it didn’t.

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More ‘bailouts’ have been agreed; the Greeks will now settle back into their soporific lifestyle and the headline writers will find something more newsworthy. But the hammer of reality has only been lifted temporarily from the anvil of their economy. In a year or so, when the Greeks have spent their latest loan, it will crash down again, harder.

The Greeks are not money-bankrupt, they are energy-bankrupt.

But so is every other nation, to a greater or lesser degree. Saudi Arabia is in a worse state of energy bankruptcy than the poverty stricken Greeks, they just don’t know it yet.

A century ago, Greece had a population of around 5 million, and had only partially freed itself from control by the Ottoman Empire. Despite wars, revolution, hyperinflation and foreign occupation during the 20th century, it remained poor but largely self sufficient as a pastoral country. During that period, the population doubled, due in a large extent to reclaiming Turkish held territories in the early 20th century. In a worst-case scenario, if Greece defaults on its debts, and drops out of the EU and the European currency, 11 million Greeks will be left to feed themselves at a very basic level. They will have no choice but to fall back on a more primitive lifestyle, forgo the luxuries bought by oil consumption and live on the energy sources within their own borders. When they do that, their energy bankruptcy will disappear.

100 years ago, Arabia had a population of 1.5 million, and was also a region of the Ottoman Empire. The term Saudi had not been prefixed to it and the Gulf States did not exist. Their people were basically nomadic, with no concept of national identity, or civilization approaching the Greek level. Though under nominal control of the Turks, they were effectively protected by their hostile desert. Living was primitive, but like the Greeks, self sufficient on their terms.

Then in 1938 oil was found in Arabia, now the population is over 30 million. The current excesses of Saudi Arabia are too familiar to need recounting here. We’ve all watched the Saudis use their oil to build unsustainable cities in deserts, where previously there had been none. They have used their oil to suck finite water out of aquifers and desalinate seawater to maintain the fantasy of endless prosperity. They buy in every conceivable luxury and try to outdo each other with meaningless towers of vanity that they see as expressions of wealth and status. They build because they can, believing the economic nonsense that spending energy-based tokens, i.e. money, creates profit and wealth. Just like the vanity of the Greek Olympic venues, the glittering towers of Riyadh and Mecca and Jeddah are seen as a source of commercial prosperity that will deliver and provide cashflow long after the oilflow has dried up.

Vertropolis-3

As the Greeks discovered when the energy flow stopped going into their arenas, they began to disintegrate. Without constant energy input, money embedded in concrete, glass and steel can only show a return if more money (energy) is constantly added to resist the ultimate certainty of entropy. No one has pointed out that while Saudi towers may be designed to last 100 years, the oil-energy that supports them will run out in less than 30, maybe as few as 20 years. (It has been suggested that Saudi might become an oil importer by 2030, though exactly where the imported oil will come from, or how it might be paid for, is not clear). Then the towers will start to fall apart just as the Saudi economy will fall apart because the oil-energy they use to fuel such vanities is borrowed from their own future. And they will have no means of repaying it; their creditors are not foreign bankers, but their own young and dispossessed. They will violently reject the certainty of a life as goat herders and camel traders if only for the reason that they wouldn’t know how.

Just like the Greeks they will demand that the lifestyle they know carries on unimpeded by the reality of energy shortage. They will try to borrow money to maintain it, with the same result. Bankruptcy on the Saudi scale will make the Greek version look like a small bank overdraft. Unlike Greece, the desert is hostile to human life at the current Saudi density, and needs constant input of food, water and air conditioning to survive 50o C summer heat.

11 million Greeks can feed themselves from their own land. 30 or 40 million Saudis are going to have to face the brutal truth that they can’t. The Saudis currently produce about 10 million barrels of oil a day, and they have to use one third of that to keep themselves alive and in the luxury they think they need. They have created an artificial existence entirely dependent on trading oil for food, and face a future of actual starvation, because there will not be sufficient surplus food energy available anywhere in the world to prevent it once the oil has gone. At current rates of growth their population is projected to reach 60 million by 2050 so between now and then a sudden and catastrophic end to the oil-excess is certain. That life-subsidy of one barrel of oil in three will rapidly disappear, with Saudi using constantly depleting oil to buy food at constantly increasing prices in a race to stay alive. Unemployable young men face a non-future where their luxurious privileges are stripped away by forces beyond their control and understanding. With the oilwells sucked dry, the US fleet will sail away from Bahrain, and discontent will manifest itself into riot. In perhaps only 10 or 15 years, Saudi Arabia as a viable nation will not have sufficient indigenous energy to prevent collapse. There will be nowhere to buy, beg, borrow or steal it from, and no oil for export. Which is where Greece is right now.

Since the oilwealth kicked in and the population exploded, Saudi now has a youth bulge in their population. 37% are under 14, 51% are under 25. Already the unemployment rate in the 16 to 29 age range is reported as 29%, possibly much higher. Of those with graduate level jobs, most have been absorbed by the public sector, with Shias being actively discriminated against by the dominant Sunnis. Jobs requiring technical skills are filled by foreign workers. Effectively this means that virtually all wages and unemployment benefits are paid out of oil revenues. This is where violent unrest will come from when the oil flow begins to dry up. Already Saudi has paid out $billions in freebies to pacify their unemployable young men, while maintaining the unreality of gasoline at 16c a liter, effectively using oil to subsidise itself.

With its oil wealth diminishing, Saudi is a ticking time bomb, split by religious factions and sectarianism, confined by repression at a medieval level and surrounded by religious zealots who see infidel industry being supported by the holy oil that rightfully belongs in the land of the prophet. Compared to that, Greece is an oasis of tranquility.

Masked Sunni gunmen pose for a photo during a patrol outside the city of Falluja April 28, 2014. Iraqi soldiers say they have been trapped in and around the western city of Ramadi. They say they have run low on tank shells, lack aerial cover and armoured vehicles, and have been hit by high casualties and desertion rates. In March and April, ISIL seized a dam in Fallujah, flooded farmland on the outskirts of Baghdad in Abu Ghraib, and drained offshoots of the Euphrates river; the Iraqi government evacuated the main prison for Sunni detainees in Abu Ghraib because of the ongoing clashes; and militants, thought to be from ISIL, bombed the country's oil pipeline to Turkey.  REUTERS/Stringer (IRAQ - Tags: CIVIL UNREST POLITICS CONFLICT) - RTR3MZIX

For a different energy/economy collapse scenario, move on to China.

There, energy is being locked into unusable real estate on a truly colossal scale, concentrated on building cities in places where there are no people to live in them. City after city is being constructed right across the country, creating an illusion of ‘Gross Domestic Product’, where officials can only achieve recognition by the rate at which infrastructure is built. A building without people in it is disregarded as irrelevant. 6 million people enter the Chinese job market every year. Construction creates employment, GDP means everything and urbanization targets must be reached.

Employment is the biggest thing for well-being. The government must not slacken on this for one moment … For us, stable growth is mainly for the sake of maintaining employment. Prime Minister Li Keqiang, November 2013

If an apartment block or shopping mall costs $10 million to build, then that is the ‘value’ of the building on the ledger of national prosperity. If it stands empty for years, the ‘value’ is somehow retained. In China, the motivation is different to that in Saudi Arabia or Greece, but there is the same determination to spend money on projects that are intended to deliver infinite commercial prosperity based on the imagined value of the building itself.

They are building dozens of fully functioning cities on the assumption that workers will show up to fill them. But of course those workers will need food as well as ongoing and permanent employment, which isn’t going to be there, so the ghost cities will not have the means to exist. The cities are where people are supposed to live, the countryside is where food is supposed to be produced.

OB-ZA324_0924gh_G_20130924011534

But both need vast quantities of oil to function. At the current rate of growth of around 8% a year, by 2035 China will (in theory) be using the same volume of oil currently consumed in the world now. That won’t happen of course, because the world oil supply is the same for China as it is for Saudi Arabia, twenty years, maybe much less, no matter how much they buy in and hoard. The Chinese desperation for oil will become critical, just as Saudi exports begin to become unavailable. As supply tightens, so conflict over it will increase, thus restricting supply still further until conflict brings oil production to a virtual standstill. But the Chinese ‘ghost cities’, just like Saudi towers, are intended to last a hundred years.

The figures don’t add up; it’s arithmetic too frightening for most to contemplate. China is dependent on its ever increasing production system to generate new jobs. That drives suicidal pollution and insatiable resource consumption because like capitalist governments everywhere, growth must be prioritized over the environment. Growth without oil is impossible so while the ghost cities of China have a value according to government statistics, they produce nothing; and until they do, will have no value at all. Even if some workers do manage to occupy parts of the ghost cities, without oil there won’t be sufficient power to keep them functioning. Under the inflexible second law of thermodynamics, without constant energy input, entropy takes over and buildings begin to deteriorate from the moment they are completed.

Detroit has followed a different path to bankruptcy.

Detroit Ruins

Ruins at the abandoned Packard Automotive Plant (September 4, 2013 in Detroit, Michigan) serve as canvas for graffiti artists. 78,000 abandoned buildings are strewn across Detroit’s 142 square miles.

Whatever the causes of Detroit’s demise, and there can be said to be many, the overall picture is one of declining energy input. People moved out and no longer spent money on making the city a viable entity. The car plants closed, removing the need for people to be there, the loss of inhabitants removed their collective energy, and the city began to fall apart. The result is unequivocal: remove energy input, and any artifice declines, decays and collapses at an accelerating rate.

Detroit is a bankrupt microcosm of the USA: a nation of 330 million people built entirely on the capitalist system needing infinite expansion, drawing on finite energy borrowed from a future that is unsustainable.

America differs little from the disaster scenarios of Saudi Arabia and China. Finite water is being relentlessly pumped out of depleting aquifers, and finite hydrocarbon is being turned into fertilizer to produce food while cities are forced to grow in hostile deserts. The products of Detroit and cheap fuel allowed suburban sprawl to spread 50 miles out from city hubs across the nation because food and water could be delivered, sewage disposed of and climate altered to personal taste. Declining oil supply will render suburbia hostile to modern living as we know it; the local environment may look different, but the effect on human existence will be the same as the excesses of Saudi or China.

Saudi Arabia, China and America are examples of what our future is going to be. But every nation is promising itself a prosperous future while borrowing from it at an ever-increasing rate, making certain that it cannot exist.

The input of oil into national economics has not exempted humanity from the laws of physics. The trappings of civilization have not altered our fundamental rule of existence: whether your station in life is humble or exalted, if you don’t produce food from the earth on a personal basis, your life depends on someone, no matter how many stages removed, converting sunlight into food on your behalf. Not only that, it must be sold at a price you can afford within a stable environment. Essentially, civilization is just that. Remove it and most will starve while those with enough personal resilience will have no option but to revert to hunter gathering or even scavenging, because what we call civilization is as fragile as the oil it sits on. For the millions of homeless people living on the streets in our ‘civilised’ cities, civilization is over. For them there is little hope of a return to prosperity, with a good job, a warm home and security.

History shows that a radically destabilized environment results in war, famine, disease and death. Any one of those four can and will exacerbate the other three.

Our civilization is becoming increasingly unstable, and right now the four horsemen are getting restless.

In one hundred years time, would you prefer to be living in the United States, China, Saudi Arabia…..or Greece?

The Syndicate takes over Greece

Off the keyboard of Yanis Varoufakis

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Published on Yanis Varoufakis Blog on July 22, 2015

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Europe’s Vindictive Privatization Plan for Greece – Project Syndicate

For the Project Syndicate site click here. Or…

ATHENS – On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece’s remaining public assets.

Eurozone leaders demanded that Greek public assets be transferred to a Treuhand-like fund – a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state’s public property.

This Greek Treuhand would be based in – wait for it – Luxembourg, and would be run by an outfit overseen by Germany’s finance minister, Wolfgang Schäuble, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort.
Euclid Tsakalotos, who succeeded me as Greece’s finance minister two weeks ago, did his best to ameliorate the worst aspects of the Greek Treuhand plan. He managed to have the fund domiciled in Athens, and he extracted from Greece’s creditors (the so-called troika of the European Commission, the European Central Bank, and the International Monetary Fund) the important concession that the sales could extend to 30 years, rather than a mere three. This was crucial, for it will permit the Greek state to hold undervalued assets until their price recovers from the current recession-induced lows.
Alas, the Greek Treuhand remains an abomination, and it should be a stigma on Europe’s conscience. Worse, it is a wasted opportunity.

The plan is politically toxic, because the fund, though domiciled in Greece, will effectively be managed by the troika. It is also financially noxious, because the proceeds will go toward servicing what even the IMF now admits is an unpayable debt. And it fails economically, because it wastes a wonderful opportunity to create homegrown investments to help counter the recessionary impact of the punitive fiscal consolidation that is also part of the July 12 summit’s “terms.”
It did not have to be this way. On June 19, I communicated to the German government and to the troika an alternative proposal, as part of a document entitled “Ending the Greek Crisis”:

“The Greek government proposes to bundle public assets (excluding those pertinent to the country’s security, public amenities, and cultural heritage) into a central holding company to be separated from the government administration and to be managed as a private entity, under the aegis of the Greek Parliament, with the goal of maximizing the value of its underlying assets and creating a homegrown investment stream. The Greek state will be the sole shareholder, but will not guarantee its liabilities or debt.”

The holding company would play an active role readying the assets for sale. It would “issue a fully collateralized bond on the international capital markets” to raise €30-40 billion ($32-43 billion), which, “taking into account the present value of assets,” would “be invested in modernizing and restructuring the assets under its management.”
The plan envisaged an investment program of 3-4 years, resulting in “additional spending of 5% of GDP per annum,” with current macroeconomic conditions implying “a positive growth multiplier above 1.5,” which “should boost nominal GDP growth to a level above 5% for several years.” This, in turn, would induce “proportional increases in tax revenues,” thereby “contributing to fiscal sustainability, while enabling the Greek government to exercise spending discipline without further shrinking the social economy.”

In this scenario, the primary surplus (which excludes interest payments) would “achieve ‘escape velocity’ magnitudes in absolute as well as percentage terms over time.” As a result, the holding company would “be granted a banking license” within a year or two, “thus turning itself into a full-fledged Development Bank capable of crowding in private investment to Greece and of entering into collaborative projects with the European Investment Bank.”

The Development Bank that we proposed would “allow the government to choose which assets are to be privatized and which not, while guaranteeing a greater impact on debt reduction from the selected privatizations.” After all, “asset values should increase by more than the actual amount spent on modernization and restructuring, aided by a program of public-private partnerships whose value is boosted according to the probability of future privatization.”

Our proposal was greeted with deafening silence. More precisely, the Eurogroup of eurozone finance ministers and the troika continued to leak to the global media that the Greek authorities had no credible, innovative proposals on offer – their standard refrain. A few days later, once the powers-that-be realized that the Greek government was about to capitulate fully to the troika’s demands, they saw fit to impose upon Greece their demeaning, unimaginative, and pernicious Treuhand model.
At a turning point in European history, our innovative alternative was thrown into the dustbin. It remains there for others to retrieve.

Read more at http://www.project-syndicate.org/commentary/greece-privatization-plan-public-assets-by-yanis-varoufakis-2015-07#HHZZL9E3voHpScF5.99

Stranded Expectations

Off the keyboard of Albert Bates

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Published on Peak Surfer on July 19, 2015

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 One of the birthplaces of civilization is having its cradle rocked again. Apart from the subjugation of women, children and slaves, Greece's beta version, going back 2500 years, was pretty cool – men in togas strolling though olive groves asking existential questions about life, the universe and all that. An updated version, without the wars, slaves and chauvinism, might not be half bad.

Today Greece is the European Union's current favorite whipping boy – the example to be made in order to keep all the other Ponzi'd patsies in line. It is no small irony that despite street protest bringing a new, defiant Syriza  (“from the roots”) government to Athens and a resounding No! Icelandic-style referendum placing Greece in technical default, the realities of needing a cash drip to keep pensioners breathing and buses running have given the upper hand to German, French and British banksters. 

The irony is compounded when one glances at the score sheet for total debt to GDP, with China at 250%, Germany 302%, Greece 353%, USA 370%, Britain 546%, Japan 646% and Ireland at an enchanted 1,000%.

Commented Dmitry Orlov:

The IMF won't lend to Greece because it requires some assurance of repayment; but it will continue to lend to the Ukraine, which is in default and collapsing rapidly, without any such assurances because, you see, the decision is a political one.


After the US-controlled International Monetary Fund acknowledged that Greece has no possibility of ever repaying its debts, the central bankers’ bank, the Bank of International Settlements, recently issued a very blunt warning

“[T]he world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crisis."


If neoliberalism has a Hall of Fame, surely China has a bronze bust somewhere near the entrance. Literally millions of Chinese, newly employed and making consumerist wages, have opened stock trading accounts. For them, its the Roaring Twenties. What changed? China took extreme measures to increase the liquidity in their financial system – precisely what the European Central Bank denied to Greece. 

Liquidity is what pays off the account holders in the event of a run on the bank, because in reality, banks don't store money or any other assets, they only record accounts of running debts. Liquidity builds confidence. Liquidity is what Ben Bernacke forced down the throats of the Wall Street cabal to staunch the bloodletting in 2008. When Europe pulled the liquidity backstop away from Greek banks, ATMs ran dry and depositors took a haircut on their holdings, but systemically, it was much worse than that.

 


 

Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward.

–Michael Hudson

Currently, the average USAnian's net worth is at a record high, but if you were to try to find that average person, it could take you quite a while. Seventy million US citizens are teetering on the edge of financial ruin. They’re one paycheck away from default on their mortgage or health insurance premium. How does one explain their record high net worth? (a) concentrations of extreme wealth at the top of the pyramid; (b) inflated real estate and other asset valuations; and (c) inflated valuation of the dollar, backed by nothing more than vivid imagination. Fantasy is infectious, so there has been a capital flight to Turtle Island on the expectation that it would be a bastion of stability, its deregulated regulators standing as a tall cliff over the tsunami about to engulf the world economy.
 

Hellenistic Greece "Diadochen1" by Captain_Blood – Own work.
Licensed under CC BY-SA 3.0 via Wikimedia Commons

The Greeks invented modern banking a couple millennia ago – credit based trade, hedge funds, options, foreign exchange, and so on. And, as we might expect, what's happening in Greece now is nothing new. Athens suffered a land and agrarian crisis in the late 7th century BCE and its citizens took to the streets, throwing bottles and protesting food prices. The Archon (city manager) Draco made severe reforms in 621 BCE ("Draconian" they were called), but these failed to quell the conflict. The crisis lasted another 27 years until the moderate reforms of Solon (594 BCE) lifted austerity while paying off creditors, with the added benefit of firmly entrenching the aristocracy.

The first financial crisis happened in Greece around 600 BC. Since then, Greece has defaulted on their loans more often than any other country in the modern world. In the past 200 years or so, Greece has defaulted about half the time.

Even though Greece has already received $284 billion in bailout money over the past five years, they still couldn’t get it together. One reason why was because most of that money went to financial institutions, and only a small portion went to the people.

Another reason why was due to their pension system. By now, everyone has heard the stories of the hairdresser example… That is, someone who’s worked as a hairdresser for three years, then retires around age 50-55 and receives nearly a full pension. Multiply this by more than two million pensioners, along with a whole lot of other financial problems, and you see why Greece is in such deep trouble.

Aden Forecast
 


Our spider senses tingle when we hear someone reading from one of Ronald Reagan's index cards about mooching welfare mamas driving a Cadillac. Those spendthrift pensioners! Originally the Greek debt was owed to French, Dutch and German banks but now is owed mainly to agencies like the European Financial Stability Facility, run on behalf of 19 governments, that most recently lent Greece (to kick the can down the road) 145 billion euros borrowed from the bond markets at high interest. Hmmm. Sounds a lot like the sub-prime market of, say, 2005, with European banks in the position of Countrywide and AIG.
Brian Davey writing for Feasta says:

If you kick the can down the road repeatedly you eventually run out of road. What should have happened much earlier in this process was an admission that the French, Dutch and German banks had made a mistake lending to Greece and they should have taken their loss. Perhaps Greek officials and Goldman Sachs, which helped to hide the fact that Greece could not pay, should have been prosecuted.


Davies goes on to draw the crucial link between energy and economy:

[W]hile Greece (and Spain and Italy and Ireland) was growing there were good reasons to send money to Greece – to invest in the building of holiday hotels for example, or in the building and civil engineering companies that built the hotels and the roads to the resorts. This was not buying and importing Greek goods – but it was putting money back into the pockets of Greeks in the form of investment in the business activities of a growing economy. If deficit countries are growing then mechanisms will exist to recycle purchasing power internationally. Once growth stops then there is no reason to send money to deficit countries and they are in trouble – as has happened throughout southern Europe and Ireland. I think that this is the most plausible way of seeing things. And the reason that growth began to fall off was rising energy prices because of depletion, because we are reaching the limits to economic growth. Because energy enters into all economic activities this undermines growth because people and companies struggle to service their debts AND pay the higher energy prices. That’s the ultimate reason that interest rates had to come down through quantitative easing.

 
Looking at a historical chart of US debt, one sees that it remained virtually unchanged from first ill-fated settlement in the 16th century, showing only slight bumps with each major war, until approximately 1970 when it went ballistic. What happened then? Gold bugs will tell you it was Nixon taking the dollar off the gold standard, unleashing the beast of fractional reserve banking and fiat currency. Rather, we find it more plausible that 1969 was the year US oil production peaked and, like their Greek counterparts, US companies began to struggle to service their debts AND pay the higher energy prices.

The US trashed Bretton Woods when it took the dollar to the oil standard by getting Saudi Arabia and other producers to sell their oil for dollars only. If you wanted to buy oil you needed dollars, and so dollars flowed back into the US, favorable trade balances masked the dollar's inflation (and the massive debt to sustain cheap energy) and American banks laughed all the way to the voting booths.

Meanwhile, life in Greece goes on, amid the financial wreckage. As Jan Lundberg, who has been trying to revive commercial sail transport in the Mediterranean (to replace more than four million fishing and small cargo vessels now spewing oil smoke and bilge) reports:
 

The jump in homelessness, many of the housed doing without heat in winter, and foregoing improvements in life that people had grown accustomed to, are well known. So it is no wonder that money is almost universally seen as the problem and the solution. The once hopeful consumer population has been ravaged: 1.3 million people, or 26% of the workforce, are without a job (and most of them without benefits); wages are down by 38% since 2009, pensions by 45%, GDP by a quarter; 18% of the country’s population unable to meet their food needs; 32% below the poverty line. Almost 3.1 million people, 33% of the population, are without national health insurance.


The ECB could solve Greece’s problem with a few computer keystrokes. The effect would actually be to stimulate the European economy.
 
Instead, Greece remains a whipping boy to keep the rest of the periphery in line. If either side decides to reject the latest deal, we could see an exit from the European Union, and a return to the drachma. This would likely be good for Greece but not for the EU, which could then see so many countries exit that the central currency tumbles into obscurity.

If Greece switches to drachmas, the funding possibilities are even greater. It could generate the money for a national dividend, guaranteed employment for all, expanded social services, and widespread investment in infrastructure, clean energy, and local business. Freed from its Eurocrat oppressors, Greece could model for the world what can be achieved by a sovereign country using publicly-owned banks and publicly-issued currency for the benefit of its own economy and its own people.

 Jan Lundberg says:

There are two kinds of people, whether in Greece or elsewhere: those who welcome or understand that fundamental change and discontinuity are inevitable, perhaps on the way too soon for convenience, and, those who fervently want the level of income and consumption of the past — regardless of economic and ecological realities. Fortunately for Greeks, they have a continuous and ancient society under the surface of the unstable transnational corporate state.


Summer in Greece often brings wildfires and this year is no different, although climate change doesn't help. In 2007 one fire covered 25.000 hectares north of Athens and as we write this flames are again creeping towards Athens from the North and the government has called out the Air Force and Army to help fight 34 separate fires. Isn't it lucky they still have organized fire departments and emergency responders there? They have come very close to not having that.

Greece is retracing its steps back through the ascent of Western Civilization to an earlier era when the best hedge was a good olive press. Many there, as elsewhere, cannot imagine losing the perks of advanced civilization. Stranded expectations – whether in Athens or Brussels – cloud peoples' thoughts. We are all Greeks. Harder lessons are coming. 

Simplifying the Final Countdown

Off the keyboard of RE

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Published on the Doomstead Diner on July 19, 2015

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It's been a watershed week here in the world of collapse, watching both the European economy and the Chinese economy circle the toilet bowl.  Oil also is back on its downward trend line, and Pigmen everywhere remain perplexed, blaming the problems variously on Socialist Goobermints, Unions or Keynesian Economists, but none of those are in the least bit correct.

The problem is really a very simple one, which is that there are too many people chasing too few resources, particularly the energy resource necessary to live the Industrial lifestyle those of us who have enjoyed that in the west have been pursuing for the last 200 years or so.  Here is how we looked diagramatically 200 years ago at the beginning of the Industrial Revolution:

Industrialization-Beginning

oilwellAs this trip began, there were just tons of Fossil Fuels in the ground, Coal, Oil and Natural Gas, and they weren't too hard to find or extract either.  In fact in the early years, the Oil just squirted out of the ground under its own pressure, as soon as you popped a hole in the container.  It has become progressively harder to extract though, and nowadays to get the last of the extractable stuff up, the Frackers have to pump millions of gallons of water and chemicals to coax the stuff up out of the rocks it is embedded in.  Similar with NG, it takes real sweet high tech equipment that can drill horizontal wells to get to the remaining supplies of this stuff.  Its not cheap to get this out of the ground anymore.

You also had a relatively low population that was mostly agrarian at the beginning of this trip.  Both the North & South American continents were relatively empty of people, with most of the indigenous population wiped out by the Smallpox, Tuberculosis, Scarlet Fever and other diseases brought over to the continent in the early years of colonialization.

There was little pollution in those years, you could pretty much drink out of any stream or even lake without treating the water in any way.  Long as you disposed of your own waste downstream from wherever you were, you were OK long as there was nobody else immediately upstream from you.

Most of the CO2 in the atmosphere up at that point was what occurred naturally from forest fires, vulcanism and so forth.  There was some addition from Homo Saps burning stuff to smelt metal for Ag Equipment and War Tools, but since the population overall was not that large, it was not overwhelming the capacity of the earth to absorb this waste, or the sun to provide enough energy to replace what was wasted. Overall, it was a fairly Balanced system to this point, although Ag was defintely desertifiying many portions of the planet where it had been practiced for 1000s of years.  Over time, even without Industrialization, Ag as practiced in most places would have done the same job as industrialization, though probably not quite as fast.

Fast Forward now here to the situation 200 years later in this game:

Indistrialization-Now

All the main resources are shrinking in size, quite rapidly in many areas.

In Fossil Fuel Energy Resource, the real easy sources of Coal, Oil and NG are gone, and just extracting what is left takes more energy and more technology all the time.  Accessing Debt Money to do that extraction becomes more difficult as well, and credit to the end consumer to buy that energy also becomes more scarce.  All together, this reults in fewer people able to afford to waste this energy, and so little by little, country by country, some folks are triaged off of the credit necessary to participate in this economy.  It is most obvious in Greece right now, but it is occurring just about everywhere, even in the Core economies of Industrialized Nations of the FSoA, Germany, the UK and China.  In these places you have an increasingly large underclass of people receiving Food Stamps and supplements to stay alive, but they aren't commuting to work and aren't buying tankloads of gasoline for their SUVs every week.  Currently, out of the 320M people living in the FSoA, 45M of them are on Food Stamps.

http://www.trivisonno.com/wp-content/uploads/Food-Stamps-Yearly.jpg

While the energy resource continues to deplete, as the second diagram shows the total Global Population continues to increase, which will continue until there is a major fracture in the total system, which seems more imminent all the time.  More people all the time need the water, energy and food that the planet can provide on a daily basis.  No amount of Debt Issuance can resolve a food deficit problem, in a given year the food to support the population is either there or it is not.  A certain amount can be held in reserve, food storage techniques are pretty good these days, but overall the margin here is pretty small.  Currently, if there were to be a major falloff in any major food producing region, within one year there would be a major deficit in available calories for the population as a whole.  We are already looking at a major falloff in food production from Sunny Califonia, where the ongoing and accelerating Drought situation is likely to make produce a good deal more expensive right here in the FSoA pretty soon.  This problem of drought is mirrored in many areas of Ag production of the globe right now, from India to China to South America.  It is unlikely to improve anytime too soon.

Drought-Monitor-July-8-2014While you have the problem of steadily increasing human population and steadily decreasing sources of energy, water and arable land, you ALSO have steadily increasing CO2 content in the atmosphere (exacerbating Climate Change issues) and steadily increasing areas of Desertification turning formerly productive food growing regions into deserts.  There is no absolute quantification for this I am aware of, however anecdotally it is possible to track it from Syria to Sao Paolo, from China to India and beyond.  Pretty clearly, the Earth is maxed out in converting solar energy to food, and the Human Population can only survive at current levels with close to the current levels of food available to them.

In the end, this is a very simple and straightforward Thermodynamic Problem of how much energy it takes to run the Human Population Engine.  In order to survive, each Homo Sap consumes X number of calories each day in food.  Because of distribution problems and diet issues with types of food consumed, you have some fat people in some places and some emaciated people in others, but in aggregate you need X calories to keep all the Homo Saps currently walking the Earth ambulatory.

http://www.chemguide.co.uk/physical/equilibria/haberflow.gifThe Industrial Revolution enabled Homo Sap to produce more Food Calories than he ever had before in history, by several orders of magnitude.  In the aftermath of WWII, we learned how to create Ag Fertilizer directly from Oil, through the Haber process  The Ammonia produced is used to make Ammonium Nitrate, useful in bombs but also useful as an Ag Fertilizer.  The very same plants that made the Bombs dropped in the Fire-Bombing of Dresden were converted into making the fertilizer that spawned the "Green Revolution".

Cheap food was produced by the truckload, and the population of Homo Saps EXPLODED over the last 70 years, from around 2.5B in 1940 to around 7B now.  All those people compete for the same resources of water and food, and nearly all of them are dependent on the same monetary sytem that distributes that water and food.  It's a GLOBAL SYSTEM at this point.  Few places are completely independent, even food exporting nations like the FSoA are not independent, since in order to export so much food, it imports a lot of Oil.

It's not just the fertilizer here that enables this, it is also all the farm machinery from tractors to combines, and the whole transportation system from trucks to rail to container ships that moves all this food all over the globe, and often puts outta biz any local production of food as well.  It comes in cheaper even with all the transportation than local food production, and each year thousands of small farmers commit suicide because they cannot make a living selling the food they grow.

India's shocking farmer suicide epidemic

Falling into a debt-trap and besieged by bad weather, thousands of farmers are taking their own lives each year.

Bhagwan Datatery said his father was under tremendous financial pressure before killing himself [Baba Umar/Al Jazeera]

The MSM, and even the Blogosphere on websites like Zero Hedge often paint the problems we face as simple Monetary Problems and Political Problems, Socialism vs Capitalism, Keynesiasm vs Misesanism, Gold vs. Fiat, Democracy vs Dictatorship, etc.  It is none of those things.  It's a straight resource and energy problem which nobody in control will acknowledge, because there is no palatable economic solution to it.  It's not that the only solution entails giving up the Carz and the Happy Motoring lifestyle we have come to expect as a God Given right (the Amerikan lifestyle is NON-NEGOTIABLE according to Dick Cheney), it's that the only solution is a lot of DEAD PEOPLE.

http://i0.kym-cdn.com/entries/icons/original/000/012/818/Movie_i_see_dead_people-769472.jpg

"I see Dead People"

There is no way whatsoever to engineer the death of billions of people in an equitable manner, there IS no equitable manner for such a catastrophe.  Occassionally you hear talk on the internet in the collapse blogosphere of reducing population through birth control, but first off the Chinese tried that with the One Child policy over the last 30 years and it really did not work, and second even such a policy can only be implemented by the most powerful of governments.  To be really effective, it requires such onerous proceedures as FORCED STERILIZATION and MANDATORY BIRTH CONTROL, and both of those are wicked difficult to implement on the grand scale in any case.

On the upside to this, the Birth Rate in many developed nations is falling, as more people who realize they simply can't afford to have children stop having them, but that is more than made up for as people in the 3rd  World countries reproduce as fast as they still are able to do so, long as they have enough food to do that anyhow.  That supply of food looks like it will run short or be unaffordable for them (or both), so high birth rates and high survival rates for infants in these locations seems unlikely moving forward into the future.

The total population will diminish at some rate, from a decreasing birth rate, and increasing child mortality rate and an increasing death rate in the adult population as well.  That will all come from the usual vectors, the 4 Horsemen of the Apocalypse, Famine,Pestilence, War and DEATH.

http://aeroventure.com/END-TIMES/the-four-horsemen-of-the-apocalypse.jpg

The only real questions left now are how fast this will occur, where the best & worst locations will be to be trying to keep living, what are the best strategies for surving this catastrophe, and whether anybody at all can make it through the Zero Point.  Is this Extinction, or a Knockdown Event?

https://33.media.tumblr.com/e25d581eb34b31b9e0a2c909d0d5cf1b/tumblr_nia06yYg6e1rnh7cyo1_500.gifFor the individual who realizes this is coming down the pipe, I don't think it matters which way it actually ends up, because either way, if you want to LIVE, you are going to operate in the same way.  You pick the best strategies for survival you can think up and also implement in some fashion, given the resources you personally have.  You absolutely cannot depend on you Goobermint to save you in the end, since your Goobermint is quite likely to collapse even before you do, at least if you are fairly young anyhow.  Either way its a sorry end, because if everybody dies, its the end of Sentience on Earth.  If you or your progeny survive it, it is still a sorry end, because you are left with Survivor Guilt.  It is a sure thing that if you are to survive this, somebody else must die in your place.  There are just too many people on board the Spaceship Earth now, as a species we are in serious Overshoot, probably 3X to 4X minimum as of now, maybe more than that.

The Greek situation remains an important one to keep track of, because they are the first of the European Nations being kicked off the Titanic of industrial Civilization without a Lifeboat.  How quickly will the situation deteriorate there, how long before they deteriorate to Civil War, how long before Contagion brings their problems to the rest of Europe?

These are questions we do not have answers for today, but they will be coming down the pipe in the not too distant future.  Of one thing you can be certain here, we are NOT exceptional.  This is a very straightforward problem of Thermodynamics, and it will engulf the entire population of Homo Saps currently walking the Earth.  It has little to do with the political systems or economic systems we run to manage the resources.  None of them can work anymore.  There are too many people, too much pollution and waste and not enough resource left for this planet to bear.

That is all she wrote.

http://www.dfwchild.com/Dallas/images/features/Noted_Cursive_ArticleImage1.jpg

RE

Did the Greeks DESERVE to get Greeked?

Off the keyboard of John Ward

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Published on The Slog on July 16, 2015

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GREECE: Applying a needle and thread to the idea that somehow “the Greeks deserved it”

“Rape ‘er? Are you kiddin’ mate? She was f**kin* gaggin’ for it”

I really don’t know how to define or rationalise this post other than calling the piece “getting it off my chest”.

I was directed to Richard North’s site this morning and read a lucid, well documented column from a powerful eurosceptic voice. But something throwaway towards the end got right up my nose and evoked the comment thread that follows.

Maybe at times I get too sensitive about Greece and what’s being done to it. God knows, I’m more aware than most of the infuriating nature of the place at times. But if you sympathise with this summary, I’d deem it a great favour if you’d pump some internet oxygen into it.

‘Oh dear. Just when I thought that, at last, an article about endemic Greek corruption was going to reach the right conclusion, it turns into a vague apologiae for Troika gangsterism.

I have been a regular visitor to Greece and enthusiastic Grecophile for 45 years. I have probably written more on the injustices inside (and done to) Greece than any other Western blogger. So allow me please to expand and correct here and there.

1. As you point out, Franco-German to Greece export & banking corruption is every bit as disgusting as that of the Greek élites. I don’t see anyone punishing Germany. Or France.

2. 80% of Greeks approve of tax evasion because history has taught them that their payments go into the same back pockets of bureaucrats and bent developers as everything else that the ordinary Greeks produce with such thrift and passion.

3. The entire medical sector is about 6-7% of the Greek population. Every doctor and dentist I’ve ever met takes bribes… even when the treatment is free on the State. None of these people have suffered a jot from austerity, and over 90% of them vote Nia Dimokritia. Pharmacies cheat the system because they too are an élite mafia. Ordinary Greeks don’t benefit from this corruption, they pay through the nose for it. It is the corrupt pols who refuse to regulate it.

4. Despite all this obvious evidence of WHERE the corruption problem lies, Troikas 1&2 chose to deal with precisely those people fostering it…who of course heaped the cost of austerity onto the people who are not the problem. But the EU is every bit as corrupt as they are: Herr Doktor Schäuble prefers to deal with those of like mind to himself.

5. When at last the vast majority of Greeks woke up and elected a government determined to root out and destroy the pre-1789 style privilege of the élites on their backs, the EU, EC, ECB, and Eurogroupe gargoyles worked overtime to turn down every proposal they made and destabilise that Syriza régime. This would seem quixotically deranged behaviour for a group of people allegedly in favour of “reform”. Here they were, presented with the most idealistic, honest and popular Greek political party for more than 40 years…but as the IMF correctly reports, EU fiscal blackmail in the final fortnight (all of it illegal under EU Law) took Greek debt unsustainability from the surreal to the impossible.

What exactly makes you think either Tsipras or the toiling classes he represented ‘deserved’ that level of depraved sociopathy?

6. Cornered at last, the IMF’s Christine Lagarde has blown a massive hole in this ridiculous wall of Brussels-am-Berlin sanctimony. The aim of these three bailouts is now clear for all to see: it never was nor indeed could ever be debt repayment. To use the French term, it was a summary and gratuitous execution pour encourager les autres. And at a level even more base than that, it was a full-frontal attack by federalist fanatics on the sovereignty of a nation…a nation I observe, year in year out, working much harder than any Nordeuropeans of my acquaintance.

https://hat4uk.wordpress.com/2015/07/14/new-troika-perfidy-revealed-by-reuters-the-smoking-gun-with-creditor-dna-all-over-it/

Greece: No Plan B

logopodcastOff the microphone of RE

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Aired on the Doomstead Diner on July 15, 2015

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Snippet:

…I took a break from the Greek Souvlaki Kabuki Theater last week, after being thoroughly saturated with this nonsense for the last month, beginning about the time that Souvlakis stormed out of negotiations with the Euroclowns and the Tsipras called for an impromptu referendum on the terms being offered to them in order to get fresh input of Funny Money they would never see, but merely go to pay interest on old loans that are steadily accumulating over time here.

In what should have been a fairly predictable outcome, the Greek population soundly reected the proposals in a 61-39% majority, but according to Brit Prep School Butt Boy Ambrose Evans-Prtchard Alex the Less than Great did not predict that, but rather thought they would lose this referendum and then Syriza could go ahead and sign the slavery contract with the approval of the slaves. Unfortunately for Alex his pollsters got this wrong, leaving him in the unenviable position of having to go back to the bargaining table once again, this time himself without Souvlakis running interference…

For the rest, LISTEN TO THE RANT!!!

Is Democracy Hitting the Fossil Fuels too Hard?

Off the keyboard of Allan Stromfeldt Christensen

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Published on From Filmers to Farmers on July 14, 2015

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Stick that in your democracy and smoke it?

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Over the past few weeks the notion of democracy has been getting its fair share of attention in the media, and quite rightfully so; Greece had a referendum on whether or not it was going to accept new terms for another round of bailout funds in exchange for the prolongment of austerity measures and the continuation of its debt peonage.

That this was a welcome occurrence is thanks to the short shrift that the term "democracy" has been getting the past few years, and I'm not just talking about neoliberals claiming to bring "democracy" to Middle East countries and such. What I'm talking about is how the term "democratization" has been continually added willy-nilly to just about every new technology that comes along: there's been the democratization of cell phones, of high-speed Internet access, of automobiles, and much more. So rather than "democratization" implying the beneficence of freedom upon a people, it now generally means the accessibility and wide adoption of the latest consumer gimmick by the masses.

Democracy, however, did not start out as a device for unfettered consumption, but rather implied a government assembled by the people through freely elected representatives. So it was therefore a welcome relief to hear Greece's prime minister stating the other day after the recent referendum that "Today we celebrate the victory of democracy. We proved even in the most difficult circumstances that democracy won't be blackmailed," for that was in fact an exercise in democracy.

Nonetheless, with some commentators going so far as to claim that we are seeing an "epic battle for the future of European democracy," one could be forgiven for thinking that the Greek crisis has spurred on what might be called "democracy at the crossroads." For in a somewhat similar manner, an article entitled Europe Doesn't Have a Debt Crisis – it has a Debt Crisis goes on to examine a piece by author Wolfgang Merkel: Is Capitalism Compatible with Democracy? In it, Merkel makes the claim that "the crisis of capitalism threatens to turn into a crisis of democracy." What does that mean? From what Merkel explains, "an interventionist tax and welfare state was able to belay the tensions between capitalism and democracy," but which has since resulted in "the financialization of capitalism [which] since the 1980s [has been breaking] the precarious capitalist-democratic compromise." True enough. For as Merkel also explains, "deregulated globalized markets have seriously inhibited the ability of democratic governments to govern." This can be seen in many ways, be it Structural Adjustment Programs forced upon 3rd World countries, or free trade agreements (of which are oftentimes orchestrated behind closed doors) foisted upon the better-off nations.

 

That all being said, there is the notion out there that democracy itself poses a problem. As William Ophuls puts it in his short, yet very insightful book Immoderate Greatness: Why Civilizations Fail,

In the end, mastering the historical process would require human beings to master themselves, something they are far from achieving. (This is why democracy, considered by some to be an asset in the struggle against the forces that challenge industrial civilization, is in fact a liability.)

As Ophuls describes it, a democracy is a particular liability in this time of collapsing industrial civilization due to a lack of mastery we have over ourselves. This "mastery" can take the guise of many forms (and is fodder for books of its own), but I think that a quick stroll down most any street and an observance of all the advertising around is enough to validate the notion that we certainly haven't mastered ourselves. Nonetheless, I do wonder if it's fair to say that democracy is the problem, and if it might then be more appropriate to instead combine Merkel's and Ophuls' statements so that together they read: "the crisis of industrial civilization threatens to turn into a crisis of democracy."

First off, that neatly rids us of the distraction of squabbling over right wing vs. left wing, free-market capitalism vs. state capitalism (aka communism), and rightfully lumps both sides of that argument under industrialism. Secondly, by insinuating that the supposed crisis of democracy is due to a crisis of industrial civilization, then we are able to ponder about what, if anything, might a crisis of industrial civilization be. And the answer to that, fortunately, is easy enough. The crisis that industrial civilization is facing is one that gets to its very core – a shortage of fossil fuels.

Since fossil fuels – and specifically oil – are currently peaking, this means that there will be less and less of the "lifeblood" that makes industrial civilization "go." As an early example of this we can take a look at Greece which, for various reasons, is lacking an adequate supply of fossil fuels to make its modern industrial civilization run at mid- to late-20th century levels. This is no small issue. With seemingly very few people aware of the underlying issues affecting Greece, and with much denial going on as well, an immense amount of confusion, dissatisfaction, frustration, and worse, will likely occur and escalate as the crisis in Greece makes its inevitable jaunt across the globe. This is where the crisis of democracy enters.

First off, democracy has been around for much longer than the copious use of fossil fuels, dating all the way back to ancient Greece. Secondly, democracy entails a citizenry with enough surplus energy so that it may have the time and opportunity to govern itself. Although ancient Athens didn't have fossil fuels, what it did have was the energy of slaves.

While slavery has been a vital component and institution of human societies throughout history, those with a penchant for optimism are quick to point out that slavery was eliminated some 200 years or so ago in developed parts of the world. But putting aside that there are actually more slaves today than at any other time in history (although there's also a larger population today than at any time in history), this generally accepted notion of enlightened progress overlooks one crucial point: the energy of slaves was replaced with the energy of fossil fuels.

Thanks to the improvements upon the steam engine by James Watt in the late 1700s, the conferred ability to pump water out of coal mines allowed for greater extraction (and use) of coal, and thus triggered the Industrial Revolution. In short, the "cheap" energy extracted from deep mines thus enabled a machine enabled to do more work than a human via manual labour. In strict monetary terms, to a large degree this made slavery uneconomic. Meanwhile, congruent to their powering of the Industrial Revolution, fossil fuel usage also led to and allowed for various social and political changes, such as demands for greater equality and, no less, democracy.

As the 19th and 20th centuries progressed, increasing fossil fuels in the form of coal, then oil, then natural gas also allowed for the reduction, if not elimination, of such things as child labour, poor working conditions, and low living standards. This rising prosperity allowed for the emergence of what is called "the middle class," and led to political campaigns for strong labour unions and ever-expanding public projects – in the form of hospitals, schools, highways, and more.

But with oil supplies now hitting their peak, the fossil fuels that have allowed for our current experience of democracy will be putting the very foundation of our modern way of life into question – and for some people it already is.

(image by Aleksandr Zykov)

 

To a certain extent, it might be said then that Greece, the birthplace of democracy, is turning out to be a bit of a litmus test in regards to how the crisis of industrial civilization will play out and effect our modern variant of democracy. Are we to realize the fundamental factors behind crises such as that currently besetting Greece, or are we to stick to our outdated and ultimately distracting notions of right wing vs. left wing, 1% vs. 99%, etc.?

As stated by Greece's defence minister and head of Independent Greeks (the coalition member of Syriza), "I want to state clearly, I am not afraid of Grexit [but] I am afraid of one thing: national division and civil war." In other words, there are already those in office publicly recognizing possible unfortunate outcomes of industrial civilization's crisis. But are those such as Greece's defence minister aware of what the crisis is truly about? I'm not so sure about that, and it appears that although circumstances such as those described by Greece's defence minister have once again been averted (what with Greece's third loan package just agreed to the other day), one might wonder if they've just been delayed to another day when loans and subsidies and bailouts and bailins are no longer possible and so make unwanted crises inevitable.

Nonetheless, the possibility still exists that a lower energy future will see significant amounts of political power move back from the centres to the peripheries as lower energy supplies stifle the grip on power by central governments. If so, then there's a chance that we can re-establish an inclination for local governance and not only maintain some of our political structures, but the social progress we've made while on those fossil fuels.

But seeing how alternatives to democracy – such as the heavy hand of an autocratic ruler and/or state – certainly don't guarantee a merry ride through the collapse of industrial civilization, it's probably a bit of a stretch to single out democracy as a liability.

Do our chances with democracy look good at the moment? I'll leave it to you to answer that for yourself, but I'd nonetheless say that it's fair to point out that fossil fuels have allowed for a lackadaisy modern way of life that places an overwhelmingly stronger inclination on the various guises of narcissism than on genuine civic participation.

That being said, I know that I'd certainly prefer to face our civilizational collapse with at least a chance at a fair share of freedom, as opposed to what the alternatives might imply. And if living, for now, in our modern-day, fossil-fuelled democracy means having to live amongst "the culture of narcissism," then at least I can choose to not own a remote control or a season's pass.

Greek Debt Deal Collapsing

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on July 14, 2015

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The ‘Greek Debt Deal’ Is Already Starting To Fall Apart

The “deal that was designed to fail” has already begun to unravel.  The IMF, which was expected to provide a big chunk of the financing, has indicated that it may walk away from the deal unless Greece is granted extensive debt relief.  This is something that the Germans and their allies have resolutely refused to do.  Meanwhile, outrage is pouring in from all over Europe regarding what the Greek government is being forced to do to their own people.  Most of this anger is being directed at the Germans, but the truth is that without German money the Greek banking system and the Greek economy will completely and utterly collapse.  So even though Greek Prime Minister Alex Tsipras admits that this is a deal that he does not believe in, he is attempting to get it pushed through the Greek parliament, and we should know on Wednesday whether he was successful or not.  But even if the Greek parliament approves it, we could still see either the German or the Finnish parliaments reject it.  It seems as though nobody is really happy with this deal, and these negotiations have exposed very deep divisions within Europe.  Could this be the beginning of the end for the eurozone?

The Germans appear to believe that they can push the Greeks out of the eurozone and that everything will be okay somehow.  This is something that I wrote about extensively yesterday, and it turns out that a lot of other prominent voices agree with me.  For example, just consider what Paul Krugman of the New York Times had to say about this.  I am kind of amazed that he finally got something right…

Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.

Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Greece desperately wants to stay in the euro, and they desperately want money from the rest of Europe to keep coming in.  At this point, they will agree to just about anything to keep from getting booted out of the common currency.  That is why the Germans and their allies had to make the deal so horrible.  They were attempting to find some way to make things so harsh on the Greeks that they would finally choose to walk away.

And to a certain extent it seems to be working.  Even some members of Syriza are publicly declaring that they are going to vote against this package.  The following comes from the Washington Post

Greek Energy Minister Panagiotis Lafazanis, who leads a hard-line leftist faction within Syriza, said in a statement Tuesday that the country’s creditors had “acted like cold-blooded blackmailers and economic assassins.”

Yet he also took indirect aim at Tsipras, calling on the Greek prime minister to reverse himself and tear up the agreement, which he described as a violation of the party’s ideals.

Even if Tsipras can pass the deal in Parliament, as he is expected to do, Lafazanis vowed that the Greek people would “annul it through their unity and struggle.”

Right now, the vote looks like it could be quite close.  Even though Greek Prime Minister Alex Tsipras has publicly admitted that this is a deal that “I do not believe in“, he is really pushing hard to get the votes that he needs.  In fact, according to Reuters he has been actively reaching out to opposition parties to secure votes…

Having staved off a financial meltdown, Tsipras has until Wednesday night to pass measures tougher than those rejected in a referendum days ago. With as many as 30-40 hardliners in his own ranks expected to mutiny, Tsipras will likely need the support of pro-European opposition parties to muster the 151 votes he needs to pass the law in parliament.

But even if this deal gets through parliament, it is highly questionable whether Greece will actually be able to do what is being required of them.  For instance, the 50 billion euro “privatization fund” seems to be something of a pipe dream

Privatisation agency Taiped has put out to tender assets with a nominal value of 7.7 billion euros since 2011, but has cashed in only just over 3.0 billion euros, according to 2014 figures.

On June 26 even the International Monetary Fund (IMF), one of Greece’s creditors, raised eyebrows over the idea of raking in lots of money from privatisations.

It stressed that the sale of public banking assets was supposed to raise tens of billions of euros but it was “highly unlikely that these proceeds will materialise” considering the high levels of nonperforming loans in the banking system.

It said that realistically only 500 million euros of proceeds were likely to materialise each year — at which rate it would take around 100 years to reach the 50 billion euro goal.

For the moment, though, let’s assume that the Greek parliament agrees to these demands and that by some miracle the Greek government can find a way to do everything that is being required of them.

And for the moment, let’s assume that this deal is approved by both the German and Finnish parliaments.

Even if everything else goes right, this deal can still be killed by the IMF

The International Monetary Fund has sent its strongest signal that it may walk away from Greece’s new bailout programme, arguing in a confidential analysis that the country’s debt is skyrocketing and budget surplus targets set by Athens cannot be achieved, reports FT.

In the three-page memo, sent to EU authorities at the weekend and obtained by FT, the IMF said the recent turmoil in the Greek economy would lead debt to peak at close to 200 percent of economic output over the next two years. At the start of the eurozone crisis, Athens’ debt stood at 127 percent.

In order for the IMF to participate in this new Greek bailout, the IMF must deem Greek debt to be sustainable.  And at this point that does not appear to be the case

Under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the memo suggests it can no longer do so.

But the Germans made it very clear that there would be no bailout unless the IMF was involved.

So what would satisfy the IMF?

The IMF study seems to indicate that massive debt relief for Greece would be required.  The following comes from Reuters

The study, seen by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.

Needless to say, those kinds of concessions are anathema to the Germans.  There is no way that anything like that could ever get through the German parliament.

But to be honest, the Germans never intended for this deal to be successful anyway.  Just consider what German Finance Minister Wolfgang Schauble told reporters on Tuesday

German Finance Minister Wolfgang Schauble made clear in Brussels on Tuesday that some members of the Berlin government think it would make more sense for Athens to leave the euro zone temporarily rather than take another bailout.

This is what Schauble and his allies have wanted all along.  This entire “deal” was crafted with the intent of creating conditions under which Greece could be forced out of the euro.

By this time tomorrow, we should know what the Greek parliament is going to do.  However, that won’t be the end of the story.  One way or another, the Germans are going to get their wish.  But once they do, I think that they will be quite surprised by the chaos that is unleashed.

Greek Pudding

From the keyboard of James Howard Kunstler
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Originally Published on Clusterfuck Nation July 13, 2015
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The proof of the pudding is in the eating, the old saw goes. This one, alas, is a mélange of several old shit sandwiches bound in a liaison of subterfuge and seasoned with political absurdities. Having been fooled in this bistro before, citizen-patrons leave the table resigned to yet another bout of food poisoning as the music of universal upchuck rings across the European Union from Helsinki to Lisbon

What is on display more brightly and clearly than ever, though, is the utter fakery of international banking. The players have lost faith in their own shenanigans. They simply go through the motions now awaiting the political fallout, which is to say the revolt of the people who can still do arithmetic. So, now Greece can supposedly expect another $90Billion-equivalent in new loans on top of the $350Billion-equivalent already racked up. That’s rich. The loan repayment schedule must look like a map of Middle Earth.

Most perplexing — especially for those on summer hiatus in which time seems to be suspended — is the fact that the rescue package will take weeks, perhaps months, to gin up while Greece is right now so utterly paralyzed in bankruptcy that no goods can move, no bills can be paid, and the economy cannot deliver the necessities of daily life. The old refrain, “your check is in the mail” may not be so reassuring to folks who haven’t eaten for three days. Personally, I would expect the gasoline bombs to be flying around Syntagma Square before the middle of the week.

Has anyone noticed the eerie paucity of news emanating from the other hard-luck nations of the EU, namely Spain, Portugal, Italy, and Ireland? The money hole that these deadbeats are in makes Greece look like a dimple in the sand. What, I wonder, is the message to them from the Greek negotiation melodrama? (Lend more money to real estate developers to build more houses and condos that will never be sold? That’ll work!) No, the entire EU debt fiasco harks back to the original meaning of “ring around the rosie” — a theme song of the Black Death. The eventual implosion of the European Union, and the banking system hugging its face vampire squid style, will be the financial equivalent of the Black Death. Kingdoms will fall and social systems will be turned upside down.

The agonizing wait for that outcome is obviously fraying the nerves of all concerned to the degree that all their exertions seem like little more than tragic and pointless exercises in futility — for instance, the terms arrived at in last weekend’s negotiations. Nobody has a shred of faith that they can or will be carried out. In effect, what they’ve done is put together a Potemkin framework allowing them to go just give up for a month or so and go on vacation.

That would, of course, set things up for a mighty financial convulsion in the autumn — history’s favorite season for ruin — when all the ministers and their factotums venture back to the dismal realities they left fermenting at the office. Of all the many things apt to happen, we can count at least on the current Greek government falling and a failure of Greece to make any gesture of repayment in their just-negotiated loan schedule. That would leave the “Troika” (the EU, the ECB, and the IMF) with zero credibility and initiate the epochal widespread repudiation of the entire EU loan structure — in short, the collapse of Europe.

That wouldn’t necessarily be the end of the world, but it would be the end of nearly seventy-year period of peace, prosperity, and stability. The sorting-out would be epic. The standard of living across Europe would sink to the level of the 1830s. The fundamentals of banking and currency would have to be rebuilt from ashes. More nations will break up into smaller units. Western intellectual life would suffer immense shock as all the certainties of the Enlightenment project seemed to go up in a vapor of insolvency and political upheaval. You have to even wonder whether Europe could defend itself against an onrushing Jihad.

But these are admittedly gloomy thoughts for a morning so early in summer. Myself, I’m going to shop for an outfit to wear to Diddy’s annual party in the Hamptons. Coonskin caps may be oddly coming back in style as people all over America try to emulate Donald Trump and the furry creature that lives on the top of his head. Something tells me that the ladies will not be buying many Hillary-style pantsuits. Wouldn’t it be cunning if Diddy’s caterer came up with something like miniature Greek Pudding bites? That would bring a real frisson to the doings, something to chat about besides the marketing genius of Kim Kardashian.

 

 

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.

What Greece, Cyprus, and Puerto Rico Have in Common

Off the keyboard of Gail Tverberg

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Published on Our Finite World on July 8, 2015

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We all know one thing that Greece, Cyprus, and Puerto Rico have in common–severe financial problems. There is something else that they have in common–a high proportion of their energy use is from oil. Figure 1 shows the ratio of oil use to energy use for selected European countries in 2006.

Figure 1. Oil as a percentage of total energy consumption in 2006, based on June 2015 Energy Information data. (Inverted order from chart originally shown.)

 

 

 

 

Figure 1. Oil as a percentage of total energy consumption in 2006, based on June 2015 Energy Information data. (Inverted order from chart originally shown.)

Greece and Cyprus are at the bottom of this chart. The other “PIIGS” countries (Ireland, Spain, Italy, and Portugal) are immediately above Greece. Puerto Rico is not European so is not on Figure 1, but it if were shown on this chart, it would between Greece and Cyprus–its oil as a percentage of its energy consumption was 98.4% in 2006. The year 2006 was chosen because it was before the big crash of 2008. The percentages are bit lower now, but the relationship is very similar now.

Why would high oil consumption as a percentage of total energy be a problem for countries? The issue, as I see it, is competitiveness (or lack thereof) in the world marketplace. Years ago, say back in the early 1900s, when countries built up their infrastructure, oil price was much lower than today–less than $20 a barrel (even in inflation-adjusted dollars). Between 1985 and 2000 there was another period when prices were below $40 barrel. Back then, the price of oil was not too different from the price of other types of energy, so an energy mix slanted toward oil was not a problem.

Figure 2. Historical World Energy Price in 2014$, from BP Statistical Review of World History 2015.

 

 

 

 

Figure 2. Historical World Energy Price in 2014$, from BP Statistical Review of World History 2015.

Oil prices are now in the $60 barrel range. This is still high by historical standards. Furthermore, much of the financial difficulty countries have gotten into has occurred in the recent past, when oil prices were in the $100 per barrel range.

While countries with a large share of oil in their energy mix tend to fare poorly, at least some countries with a preponderance of cheap energy fuels in their energy mix have tended to do very well. For example, China’s economy has grown rapidly in recent years. In 2006, its share of oil in its energy mix was only 23.0%, putting it below Norway but above Poland, if it were included in Figure 1.

Let’s look a little at what it takes for an economy to produce economic growth, and what goes wrong in countries with high energy costs. I should mention that high energy costs can occur for any number of reasons, not just because a country’s energy mix includes a large proportion of oil. Other causes might include a high percentage of high-priced renewables or high-priced liquefied natural gas (LNG) in a country’s energy mix. The reason doesn’t really matter–high price is a problem, whatever its cause.

What Is Needed for an Economy to Grow

The following reflects my view regarding what is needed for an economy to grow:

1. A growing supply of energy products, either internally produced or purchased on the world market, is needed for an economy to grow.

The reason why a growing supply of these energy products is needed is because it takes energy (human energy plus supplemental energy) to make goods and services.

The availability of today’s jobs is also tied to the use of supplemental energy. High-paying jobs such as operating a bull-dozer, producing large quantities of food on a farm using modern equipment, or operating a computer, require supplemental energy in addition to human energy.  While jobs can be created that use little supplemental energy to leverage human energy (for example, manual accounting without electricity or computers, growing food without modern equipment, or digging ditches with shovels), these jobs tend to pay very poorly because output per hour worked tends to be low.

To obtain growth in the number of jobs available to workers, a growing supply of energy products to leverage human energy is needed. Looking at the world economy, we can see that historically, growth in energy consumption is highly correlated with economic growth.

Figure 3. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

 

 

 

 

Figure 3. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

In fact, we tend to need an increasing percentage growth in energy supply to produce a given percentage growth of GDP because the y intercept of the fitted line is -17.394, rather than 0.000. Back in 1969, 1.0% growth in the consumption of energy products produced 2.2% GDP growth. The fitted line implies that recently, the amount of GDP growth associated with one percentage growth in energy consumption is only 1.2% of GDP. This poor result is taking place, despite all of our efforts toward increased efficiency. Thus, as time goes on, we need more and more energy growth to produce the same level of GDP growth. This is a rather unfortunate situation that world leaders don’t mention. They tend to focus instead on the fact that the growth in GDP tends to be at least a little higher than the growth in energy use.

2.  This growing energy supply must be inexpensive, in order to be able to create goods that are competitive in the world market. 

Human energy is by its nature expensive energy. Humans require food, water, clothing, and housing to support their biological needs–we are not adapted to eating entirely uncooked food, or to living in climates that get very cold in winter, unless we have protection from the elements. Thus, wages must be high enough to cover these costs.

Cheap supplemental energy provides a great deal more leveraging power than expensive supplemental energy. If we can leverage human energy with cheap energy such as wood or fossil fuels, it is easy to bring down the average cost of energy. (This calculation is made on a Calorie or Btu basis, for the sum of the energy provided by human labor plus that provided by supplemental energy.) If we are dealing with supplemental energy that is by itself high-cost, it is very difficult to bring down this weighted average cost. This is why high-cost oil, or for that matter high-cost supplemental energy of any kind, is a problem.

If human energy can be leveraged with increasing amounts of cheap energy, it can produce an increasing amount of goods and services, ever more cheaply. In fact, this seems to be where economic growth comes from. These goods and services can be shared with many parts of the economy, including government funding, wages for elite workers, wages for non-elite workers, payback of loans with interest, and dividends to stockholders. If there are enough goods and services produced thanks to this increased leverage, all of the various parts of the economy can get a reasonable share, and all can adequately prosper.

If there is not enough to go around, then there are likely be shortfalls in many parts of the economy at once. It is likely to be hard to find good paying jobs, for ordinary “non-elite” workers. Governments are likely to find it difficult to collect enough taxes. Governments may lower interest rates, or may take other steps to make it easier for businesses to continue their operations. Even with lower interest rates, debt defaults may become a problem. See my post, Why We Have an Oversupply of Almost Everything. The entire economy tends to do poorly.

Ayres and Warr provide an illustration of how an increasingly inexpensive supply of energy can lead to greater consumption of that energy–in this case electricity–in their paper Accounting for Growth: The Role of Physical Role of Physical Work.

Figure 4. Ayres and Warr Electricity Prices and Electricity Demand, from

 

 

 

 

Figure 4. Ayres and Warr Electricity Prices and Electricity Demand, from “Accounting for growth: the role of physical work.”

There is a logical reason why falling energy prices would lead to rising use of an energy product. If a person can afford to buy, say, $100 worth of energy and the cost is $1 per unit, the person can afford to buy 100 units. If the cost is $5 per unit, the person can afford to buy 20 units of energy. If it is the energy itself that aids growth in economic output (by moving a truck farther, or operating a machine longer), then lower energy prices lead to more energy consumed. This higher amount of energy consumed in turn leads to more economic output. This greater economic output is frequently shared with workers in the form of higher wages because of the workers’ “higher productivity” (thanks to the leveraging of cheap supplemental energy).

When it comes to the cost of energy production, there are “tugs” in two different directions. In one direction, there is the savings in costs that technology can provide. In the other, there is the trend toward higher extraction costs because companies tend to extract the cheapest resource of a given type first. As the inexpensive-to-extract resources are exhausted, the cost of resource extraction tends to rise. We can see from Figure 2 that oil prices first began to spike in the 1970s. After some temporary “fixes” (shifting much electrical production away from oil to cheaper fuels, shifting home heating from oil to other fuels, and starting new extraction in Alaska, Mexico, and the North Sea), the problem was more or less solved for a while. The problem came back in the early 2000s, and hasn’t really been solved. Thus, most of the tug now is in the direction of higher costs of production.1

Once oil prices rose, Greece and other countries that continued to use a high percentage of oil in their energy mix were handicapped because their products tended to become too high-priced for customers. Wages of customers did not rise correspondingly. Potential tourists could not afford the high cost of airline tickets and cruise ship tickets, because these prices depended on the price of oil. Even when oil prices dropped recently, airline companies have not reduced airline ticket prices to reflect their savings.

Because of the high-cost energy structure, manufacturing costs have tended to be high as well. With fewer tourism jobs and few possibilities for making goods for exports, the number of good-paying jobs has tended to shrink. Without enough good-paying jobs, Greek demand for fuel products of all kinds dropped rapidly. (Demand reflects the amount of goods a person wants and can afford. Young people without jobs live with their parents, and thus do not buy new homes or cars, lowering consumption.)

Figure 5. Greece's energy consumption by fuel, based on BP Statistical Review of World Energy, 2015 data.

 

 

 

 

Figure 5. Greece’s energy consumption by fuel, based on BP Statistical Review of World Energy, 2015 data.

Other countries that were positioned to add huge amounts of inexpensive energy were able to continue to continue to grow. The country that did this best was China. It was able to cheaply and rapidly ramp up its coal supply, once it entered the World Trade Organization in 2001. If Greece now adds production of goods, it needs to be able to compete in price with China and other goods-producers.

Figure 6. China's energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

 

 

 

 

Figure 6. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

3. If the energy supply that a country plans to use is cheap, it doesn’t matter whether the energy supply is locally produced or not.

If the energy supply that a country is locked into using is expensive, then using locally produced high-priced energy is “less bad” than using imported energy, but there is still a problem.

If a growing supply of cheap energy is available, this can be used to leverage local human labor to produce inexpensive goods. This works well, regardless of whether the fuel is imported or not. Because imported energy “works” in such a situation, many island nations (including Cyprus and Puerto Rico) were able to develop their economies using oil as the energy base. These island nations typically did not have natural gas available, unless they imported expensive LNG. Coal and nuclear were also difficult to use, because power plants of these types are built on too a large scale to be suitable for on an island. But oil generally worked well, even if imported.

Greece includes 227 inhabited islands, and thus is faced with many of the problems of an island nation. Back when oil was cheap, oil was an easy solution. It could be used for electricity and for many processes that require heat, such as baking bread, dying cloth, making bricks, and recycling metals.

If a county is using imported oil, once oil becomes high-priced, there is essentially nothing that can be done to fix the problem. Devaluing the currency doesn’t work, because then oil becomes higher-priced in the new devalued currency. As a result, it still is prohibitively expensive to make goods, even after the devaluation. In fact, devaluing the currency also tends to make other imported energy products, such as LNG and solar PV panels, more expensive as well.

With respect to previously purchased renewables, the ongoing cost is typically the debt payments for the devices used to generate this energy. How devaluation will affect these payments depend on the currency the debt is in. If these debt payments are in the country’s own currency, then devaluing the currency will not affect the payments (so devaluation won’t help reduce costs). If debt payments for renewables are in another currency (such as the dollar or Euros), then devaluing the currency will increase the cost, making the loans more difficult to repay.

Even for an oil exporter like Saudi Arabia, high-priced oil is a problem, for a number of reasons:

  1. If the oil exporter uses some of its oil itself, the revenue that would have been gained by selling this oil abroad is lost. The government may be able to purchase the oil for essentially the cost of extraction, but it loses the extra revenue that it would gain by selling the oil abroad. This revenue could be used to fund government programs and new oil investment.
  2. The countries that import this high-priced oil tend to find their economies depressed, leading to less use of the oil. Thus, oil exports tend to become depressed.
  3. The price of oil may fall (and in fact has fallen, and may fall more), because of low demand. With low prices, it becomes difficult for exporters to collect enough revenue for government projects and investment in new supply.

The reason why locally produced high-priced oil is “less bad” than imported oil is because jobs related to producing the oil tend to stay in the country. This is a plus, in itself. If there is a currency devaluation, wage costs and other local costs will be lower, making the energy product less expensive to produce. Unfortunately, production costs (including taxes needed to support government services) may still be above the market price, because of depressed demand.

4. Debt helps increase demand for goods. But to make the debt repayable, these goods need to be made with low-priced energy products. 

Ramping up debt for a country helps, but only if, with this debt, the country is able to profitably sell more goods and services in the world marketplace. Greece seems to have added debt, but wasn’t able to use this debt to create goods and services that could be sold cheaply enough that their prices would be competitive in the world market.

China clearly has been willing to add huge amounts of debt to support all of its new industry and new homes it has built with the coal it has been extracting. There is no doubt that the growth in China’s debt has played a major role in extracting growing quantities of coal. Now China’s coal consumption is slowing for a number of reasons including overbuilding of factories, too much pollution, and higher cost of coal production. China’s slowdown in energy consumption is leading to a slow-down in economic growth, and may even lead to a hard crash.

Greece has added a lot of debt in recent years, but this debt has not been used for ramping up the use of a new cheap supply of energy. Much of Greece’s debt seems to be for purposes such as bailing out banks. This doesn’t really tell us what is/was wrong with the economy to begin with. I would argue that high-priced fuel tends to make it difficult to make any kind of goods or services inexpensively enough to compete in the world market, and this is at least part of the problem. The result of this is that companies, no matter what they invest debt in, have a difficult time being profitable.

The Greek government tries to cover up the country’s problems with programs that are funded by debt. Hidden subsidies may be occurring in several government-owned energy-related firms: Public Power Corporation of Greece (Greece’s largest electric utility), Hellenic Petroleum, DEPA Natural Gas, and ADMIE Grid Operating Company. There have been proposals to privatize these companies because they are poorly run. Whether or not they are poorly run, I expect that it will be very difficult to run them profitably, simply because of the inherent high-cost nature of the products they produce and workers’ lack of disposable income. This problem reflects the high cost of the underlying products they are producing.

There have been some proposals to try to get energy costs down, including a proposal to install a new lignite coal-fired electric power plant. There is also a plan to connect four of the islands to the electric grid, so that the islands won’t have to depend on oil-fired electricity. Even if these changes are made, it is not clear that Greece’s energy costs will be low enough to produce goods that are competitive in the world market. For one thing, airplanes and cruise ships operate using oil, not electricity produced by lignite, so will not be affected by additional inexpensive lignite electricity production.

From everything I can see, Greece’s debt needs to be written off. There is no way that the country can change its system to repay it. Greece can perhaps repay a little new debt, if it is channeled to support low-cost energy production to substitute for current high-cost energy.

Conclusion

Most people don’t understand that our world economy runs on cheap energy. High-priced energy is not an adequate substitute, even if the high-priced energy is “low carbon” or claims to have a reasonably high EROEI (Energy Return on Energy Invested) ratio. Our world economy is sensitive to prices and costs, even if the current “politically correct” discussion ignores these matters.

Economies that are part of our current system can’t get along without energy supplies, either. Humans have used supplemental energy since our hunter-gatherer days, when we learned to control fire. In fact, the use of large amounts of supplemental energy seems to be the way we are now able to support a world population of 7+ billion people.

Given that the world economy runs on “cheap” energy, adding expensive energy production, no matter how “green” it may appear to be, does not solve a country’s financial problems. In fact, it likely tends to make its financial problems worse. There is no way that high-priced energy will produce goods and services that are competitive in the world market. In fact, it is doubtful that high-priced energy will return a high enough “profit” to pay its own way, in terms of having the ability to pay suitable taxes to support required government services, such as schools and roads. High-priced energy is instead likely to need government subsidies, both for initially building the devices and for helping citizens pay the ongoing cost of electricity.

Greece clearly has a lot of problems besides its high-energy cost, including excessive pensions and inefficiently operated state-owned companies. To some extent, I expect that these other problems reflect the difficulty of creating goods that can compete profitably in the world economy. If there is no way businesses can successfully compete in the world economy, I can see why leaders would do whatever they could to keep the system operating. This might mean adding more debt, keeping staffing at government-operated companies at higher levels than needed, and providing overly generous pension programs.

The thing that Greece has going for it is a relatively warm climate and a history of doing well with relatively little supplemental energy. Ancient Greece was known for its philosophy, literature and theatre, music and dance, science and technology, and art and architecture. Northern Europe, because of its cold climate, was not able to do very much until it added peat moss and coal as supplemental energy. Once these cheap supplemental energies were added, Northern Europe was able to industrialize, while Southern Europe lagged behind. If we are running into obstacles now with respect to fossil fuels, perhaps the advantage will again go back to people who live in warm enough climates that they can mostly live without supplemental energy.

Note:

[1] While cost of oil production is rising, oil prices are not necessarily rising to match the cost of production, and in fact, have fallen below the cost of production. This occurs because costs are now too high relative to wages, so oil isn’t affordable. This is an important story in its own right, and is likely to eventually bring down the whole system. See for example my post, Ten Reasons Why a Severe Drop in Oil Prices is a Problem.

Greece…One Way…or the OTHER!

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on July 9, 2015

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European Leaders Promise The Greek Debt Crisis Will Be Resolved One Way Or Another On Sunday

The wait will soon be over.  Greece submitted a final compromise plan to its eurozone creditors on Thursday, European finance ministers will meet on Saturday to discuss the proposal, and an emergency summit of all 28 EU nations on Sunday will make a final decision on what to do.  The summit on Sunday is being billed as a “final deadline” and a “last chance” by EU officials.  In essence, Greece is being given one more opportunity to embrace the austerity measures that are being demanded of them by their creditors.  So has Greece gone far enough with this new proposal?  We shall find out on Sunday.

For months, the entire planet has been following this seemingly endless Greek debt saga.  Global financial markets have gyrated with every twist and turn of this ongoing drama, and many people have wondered if it would ever come to an end.  But now European leaders are promising us that the uncertainty is finally going to be over this weekend

This time, the leaders’ summit called for Sunday is being billed by all concerned as the definitive moment that will determine Greece’s future in the euro. It’s “really and truly the final wake-up call for Greece, but also for us — our last chance,” EU President Donald Tusk said on Wednesday, the day after the most recent emergency session.

So what is the general mood of European leaders as they head into this summit?

Overall, it does not appear to be overly optimistic.

For example, just consider what the head of the Bundesbank is saying

Bundesbank Chief Jens Weidmann, meanwhile, said that central banks have no mandate to safeguard the solvency of banks or governments, and stressed that emergency liquidity to Greece should not be increased.

And even normally upbeat leaders such as ECB President Mario Draghi are sounding quite sullen

Just how uncertain the coming days are was highlighted when ECB President Mario Draghi voiced highly unusual doubts about the chances of rescuing Greece.

Italian daily Il Sole 24 Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as saying he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens’ rescue.

Asked if a deal to save Greece could be wrapped up, Draghi said: “I don’t know, this time it’s really difficult.

That certainly does not sound promising.

It isn’t as if the Greeks are not trying to find a compromise.  Their latest offer reportedly contains some very painful austerity measures

Greece is seeking another bailout totaling at least 50 billion euros ($55 billion) from its European creditors and offering to make painful spending cuts and tax increases as it races to avert a financial meltdown, according to government sources.

Under a 10-page blueprint completed late Thursday, the country said it would undertake austerity measures worth between 12 billion and 13 billion euros ($13 billion to $14 billion), including raising taxes on cafes, bars and restaurants.

But once again, it appears that pensions may be a major sticking point.  The following comes from a Zero Hedge report about the latest Greek proposal…

The biggest surprise is once again in the biggest hurdle: pensions. Recall that as we accurately predicted two weeks ago, it was the government’s unwillingness to directly cut pensions that led to the IMF refusing to even negotiate the Greek proposal.

As a further reminder, this is what IMF’s chief economist Olivier Blanchard said almost a month ago on the topic:

Why insist on pensions? Pensions and wages account for about 75% of primary spending; the other 25% have already been cut to the bone.  Pension expenditures account for over 16% of GDP, and transfers from the budget to the pension system are close to 10% of GDP.  We believe a reduction of pension expenditures of 1% of GDP (out of 16%) is needed, and that it can be done while protecting the poorest pensioners

Fast forward to today when MNI reports that “there are no pension cuts in the draft of the proposal.”

And if recent experience is indicative, this likely means that the Troika will once again refuse to move on with the draft.

We shall see what happens on Sunday.

I have a feeling that it is all going to come down to what Germany wants to do.  At this point, the Greeks owe the Germans approximately 86.7 billion euros.  The German people are overwhelmingly against pouring more money down a financial black hole, and German leaders have taken a very hard line with Greece in recent days.

If Germany does not like this new Greek proposal, it will almost certainly fail.  And if there is no deal, Greek government finances will totally freeze up, the Greek banking system will utterly collapse, and the Greeks will probably be forced to switch back to the drachma.

Speaking of the drachma, check out what Bloomberg is reporting

Between June 28 and July 4 at a Hilton hotel in Athens, transactions on a Bloomberg reporter’s Visa credit card issued by Citigroup Inc. were posted as being carried out in “Drachma EQ.”

The inexplicable notation — bear in mind, the euro remains Greece’s official currency — flummoxed two very polite customer service representatives and spokesmen for the companies involved. It depicts a currency changeover that the Greek government and European officials have been working for over six months to avoid.

Banks around the world are bracing for the increasingly real possibility that Greece may be forced to abandon the euro, a currency it shares with 18 other European countries.

Could plans to roll out the drachma already be in motion behind the scenes?

The next few days promise to be extremely interesting.

Meanwhile, there are all sorts of other indications that big economic trouble is ahead for the entire planet.  For instance, global commodity prices have been plunging big time

While market commentators worry whether an economic collapse in Greece could trigger turmoil in financial markets, a slump in commodity markets may be signaling the world is already in a deep recession.

The slump in the Chinese stock market and concern over the Greek debt crisis sent commodities towards multiyear lows. The S&P GSCI—an index which represents a diversified basket of commodities—has been down nearly 40% over the past year and had slumped by more than six percent as of Wednesday, July 8th.

We witnessed a similar pattern just prior to the financial crisis of 2008.

And in addition to the problems that have erupted in China, Greece and Puerto RicoCNN is reporting that every major economy in Latin America “is slowing down or shrinking”…

Every major Latin American economy is slowing down or shrinking. The World Bank predicts this will be Latin America’s worst year of growth since the financial crisis. As if that’s not dire enough, the world’s two worst performing stock markets are in the region as well.

Very few people are talking about Latin America right now, but the truth is that the region is in the midst of a slow-motion economic implosion.  Here is more from CNN

Venezuela is arguably the world’s worst economy with sky-high inflation. Next door, Colombia has the world’s worst stock market this year. Its index is down 13% so far this year. The second worst is Peru, down 12.5%.

Right now, trouble signs are emerging all over the planet.  That is why we shouldn’t just focus on Greece.  Yes, if Greece is kicked out of the euro that is going to greatly accelerate things.  But no matter what happens with Greece, the truth is that we are steamrolling toward another major worldwide financial crisis.  Perhaps you didn’t notice, but I purposely did not use the word “Greece” once in my recent article entitled “The Economic Collapse Blog Has Issued A RED ALERT For The Last Six Months Of 2015“.

Yes, I am taking what is happening over in Europe very seriously.  I believe that we are about to see some things happen over there that we have never seen before.

But the Greek crisis is only part of the picture.  Everywhere on the globe that you look, red flags are going up.

Sadly, just like in 2008, most people have chosen to be willingly blind to what is happening right in front of their eyes.

SHORING UP THE SHANGHAI & GANGING UP ON GREECE

Off the keyboard of John Ward

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Published on The Slog on July 9, 2015

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Tell me: is there a decent hero on the planet?

Market control in a supposedly neoliberal world, fortunate glitches in a nervous Stock market, and bullying hypocrisy from the squandered marbles army. There is little or nothing worth saving in any of it.

The Shanghai index’s collapse was ‘stemmed’ during Asian trading earlier today. Much relief all round, but there are two reasons not to be joyful about it: first, the market is still around 55% higher than it was a year ago, when the property market collapse pulled novices into stocks…so logic would suggest it has further to fall; and second, it is not market sentiment that has stopped the rot, but more draconian Beijing regulation. 50% of all China stocks are now suspended, and yesterday the government ordered a blanket ban on anyone with more than 5% of a company’s stocks from selling for the next six months.

So this is not a rally, it’s a dam. In the US yesterday, a glitch came to the rescue of NYSE traders already nervous and gloomy. Nobody I spoke to believed the hiccup was either accidental or satisfactorily explained.

“There’s definitely an issue if we see a further correction in the Chinese stock market,” said Russ Koesterich, BlackRock’s chief investment strategist, but then he added a tell-tale bit right at the end about the EU (my italics): “Greece is going to be a negative in the short term. If you don’t see a deal on Sunday, you’re going to see a negative knee-jerk reaction on Monday. I don’t think a ‘Grexit’ is priced in,” he said. However, he did not see Greece as a major problem for the market longer term, “since Europe is backstopped by the European Central Bank.”

In recent days, more and more people with their brain functions intact are starting to gen up on the real Greek debt canvas that’s been gradually painted over since 2009 by ham-fisted cover-up artists called Draghi, Schäuble, Dijesslbleom, Schulz, Samaras et al. I’d refer those who missed it to the Daniel Hannan demolition job The Slog performed on June 17th this year   in relation to his woeful ‘analysis’ of Greek debt and surplus, because Point 4 therein is an important reality that the daubing history-changers would prefer you didn’t perceive. This is that the ECB could this afternoon write off two-thirds of the entire Greek debt without any harm or cost to anyone anywhere at any future time.

A central bank configured like the ECB can put a zillion quadrillion Swiss francs of debt into its ‘negative assets’ column and forget about it, because the ECB cannot go bust. The surreal accounting system behind the euro ensures that the Central Bank can be blown up by a direct nuclear hit, but its viability as a financial institution will remain intact. The markets and the first Troika were perfectly well aware of this, as are the hypocrites working forTroika2.

The Greek debt is not being forgiven for a number of reasons – lending market dislike of written-off debt, fears about default contagion, a German determination to contain all resistance contagion, and a continuing belief that the euro’s cadaver is not dead, it is simply resting. That’s it: there is no fiscal or economic logic to any of it. Club Med is being destroyed by austerity to show the markets that European debt will be repaid come what may – even if the entire region has to starve and degenerate into Civil War in order to achieve that goal….a goal that is mathematically unachievable anyway. The situation really is that surreal, and its practitioners that profoundly deranged.

Degrading and depriving millions of EU citizens for the sake of a fiat currency with no Sovereignty to guarantee it, and no way to opt out of it – because it was designed by hubris-fuelled idiots keen to offset any and all responsibility for unsound fiscal governance.

That’s what we are looking at here: a policy that is blatantly unconstitutional under the Rome and Lisbon treaties, and one that demands the bill be paid by the waiters, not the troughing borrowers. In exactly the same wicked and lawless manner, the Berlin FinMin is now lobbying for any failed Greek banks to be the subject of bailins whereby entirely innocent citizens will lose such savings as they have left…precisely as Cypriot citizens and foreign retirees lost theirs. For Mr Dijesslbleom has his template, and that template must be used.

Meanwhile, the odiously irresponsible Troika1 lenders got away with their margins largely intact from the early stages of this ripoff – because they either sold on their investments to vultures, or the vultures themselves paid 10cents on the Dollar and received only a 40% haircut. Goldman Sachs (which conspired with the original right wing Greek government to deceive Brussels about the scale of the debt they were busy selling to the fat cats) in turn has never been brought to book for that heinous crime.

So to sum up, the German position as of last night was a flat refusal to accept any devaluation of a debt that can never be repaid, but which could be largely vapourised by one push of an electronic button. Some call this intransigence; I call it insanity…the insanity of fanatics who refuse to accept defeat. The same mentality, if you will, as those SS officers who – with the Russians two streets away from the Reichschancellery in 1945 – walked around calmly shooting any citizen unwilling to resist the Soviet advance.

Francois Hollande – the Socialist President of France – and his FinMin Muscovici have now fallen in with the eurogroupe Schützstaffel tendency… fully aware of the fact that France played a central lobbying role in designing and then exploiting the irresponsible nature of the euro’s format: since EMU came into being, the French have failed to hit a single deficit target they were set by the Commission. No bat-pummelling for the French, though: bullies, after all, never take on anyone approaching their own size.

There remain for me this morning three other targets for ire. First, Tsipras – for offering to continue with a 3-year bailout. That’s not so much a red line as a red rag to all those tired and tortured bulls who voted for Syriza in January. Second, the European Parliament, whose behaviour towards Tsipras was horribly reminiscent of Mussolini’s fascists shouting down Haile Selassie’s speech to the League in 1936. And finally, a disgraceful British Labour Party too ideologically constipated and europhile to align itself with the People.

‘Forward with the People’ a famous Labour paper used to say. What a truly reticent, flappy-bottomed shower of pampered fluffies they are.

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