Ireland

Hillarism

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Published on Peak Surfer on April 24, 2016

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"The Irish Water crisis, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness, offshore tax-avoidance havens, the collapse of ecosystems, Occupy Hong Kong, Australian greedy banks, and the rise of Donald Trump link to a single bad gene in our political DNA."

 


It is the political silly season, although these days it never seems to be otherwise. Delma Rouseff, Brazil’s heroic anti-establishment, anti-corruption President, has been impeached by the lower house on (dubious) charges of corruption, but the former, Brazilian President Luiz Inácio Lula da Silva called it more accurately a "coup d’état.”

Iceland’s Prime Minister Sigmundur David Gunnlaugsson resigned after it was revealed he owned an offshore company with his wife to channel millions of kroner. British Prime Minister David Cameron admitted he owned shares in a Bahamas-based trust up until 2010. In Malta, protesters demanded the resignation of Prime Minister Joseph Muscat for the same tax-avoidance activities.

Scores of countries will hold national elections in 2016. In January, Portugal elected Marcelo Rebelo de Sousa, former leader of the Social Democratic Party and supported by the Social Democratic Party and the CDS – People's Party. Portugal, which rationalized recreational drug policy in 2001, tilted left.

Ireland, which has a gender neutral election law, requiring any election to be supported by at least 30% male and 30% female voters, in February elected a right-leaning Dáil Éireann (parliament). Sadly the coalition is still too fractious to choose a Taoiseach (prime minister)

In 2013 Ireland consolidated separate county and local water authorities into a single national utility, which proceeded to install meters everywhere and raise rates. In 2014 and 2015 local protests blocked meter installers. Four percent of Ireland's population showed up at one demonstration in Dublin. Irish Water is a wedge between Fianna Fáil and Fine Gael, so no prime minister for Ireland.

Legislative elections for 450 Duma seats will be held in Russia on 18 September. Polls April 10th give Dmitry Medvedev’s conservative United Russia 46%, Vladimir Zhirinovsky’s right-wing anti-communist Liberal Democratic Party 11%, Gennady Zyuganov’s left-wing Communist Party 9%, A Just Russia People's Freedom Party 5% and the remainder to 10 other parties, including the Greens led by Oleg Mitvol.

In Peru, the first round on April 10th narrowed the field to Keiko Fujimori, daughter of former President Alberto Fujimori, of the Popular Force party, and Pedro Pablo Kuczynski candidate of the Peruvians for Change party. Fujimori has a healthy lead and the second round of voting comes June 5th. Peru is interesting if for no other reason than the names of its political parties (as translated): 

Popular Force
Peruvians for Change
Broad Front
Alliance for Progress
Popular Alliance
Popular Action
Direct Democracy
Possible Peru
Hope Front
Order Party
Developing Peru
Everybody for Peru

These names seem like something you might read on post-its on the wall of the “creatives” room in an ad agency.

In Australia, Prime Minister Malcolm Turnbull said last November: "I would say around September–October is when you should expect the next election to be.” However, when parties predictably deadlocked over bills to reinstate the Australian Building and Construction Commission, a bone of contention for the opposition Labor Party, Turnbull this week announced he would dissolve Parliament on May 3 and call for new elections July 2. Turnbull himself is well known to Australians and his party the clear frontrunner. But lately he has been losing ground to Labor leader Bill Shorten in the polls. Labor needs to win 21 seats to take power, a swing of 4.3%. BBC reports:

“Mr Turnbull will attempt to paint Mr Shorten as a union lackey who cannot manage the economy; Mr Shorten will say Mr Turnbull is an out-of-touch protector of greedy banks leading a divided party that stands for nothing.”

The Philippines just concluded its presidential debate cycle and is headed to national elections May 9th. At the top of the ballot is the election for successor to Philippine President Benigno Aquino III. The leading candidate is the current VP Jejomar Binay. His opponents include Senator Miriam Defensor Santiago (People's Reform Party) who is suffering from stage 4 lung cancer. Called "the Iron Lady of Asia,” she was the widely expected winner of the 1992 Philippine Presidential Elections, but lost after an inexplicably unscheduled power outage during the counting of votes. The Supreme Court of the Philippines recently declared optical scanner counting devices “corrupt” and forced precincts to return to hand counts.

Santiago announced her candidacy for president in the launch of her book, Stupid is Forever, on October 13, 2015.

Other candidates include Rodrigo “Courage and Compassion” Duterte (PDP–Laban), Grace "Government with a Heart” Poe (Independent) and Mar "Continue the Straight Path” Roxas (Liberal).

While the People’s Republic of China will not be holding national elections this year, what is brewing at the grass roots in Hong Kong is QI — quite interesting.  Wikipedia reports:

The emergence of new political groups led by young activists is set to shake up the political landscape of Hong Kong. Hong Kong Indigenous, a pro-independence localist group, faired well in the February New Territories East by-election by receiving more than 66,000 votes, coming third after pan-democratic Civic Party and pro-Beijing DAB, gaining about 15 percent of the total votes. A day after the election, localist groups including Wong Yuk-man's Proletariat Political Institute, Wong Yeung-tat's Civic Passion and Chin Wan's Hong Kong Resurgence Order announced a plan to field candidates in all five geographical constituencies.

On 10 April 2016. six post-Occupy organisations, Youngspiration, East Kowloon Community, Tin Shui Wai New Force, Cheung Sha Wan Community Establishment Power, Tsz Wan Shan Constructive Power and Tuen Mun Community, political groups formed after the Umbrella Revolution, formed an electoral alliance planned to field candidates in four of the five geographical constituencies with the agenda to put forward a referendum on Hong Kong's self-determination. Hong Kong Indigenous and another new pro-independence Hong Kong National Party also stated that they will run in the upcoming election.

On the same day on 10 April 2016, the student leaders in the Umbrella Revolution, Joshua Wong, Oscar Lai and Agnes Chow of Scholarism and Nathan Law of the Hong Kong Federation of Students (HKFS) also formed a new party Demosisto which was inspired by Taiwan's New Power Party which was formed by the Sunflower Movement leaders and fared well in the 2016 Taiwanese legislative election. The new party calls for referendum on Hong Kong's future after 2047 when the One Country, Two Systems is supposed to expire. The party aimed at fielding candidates in Hong Kong Island and Kowloon East, facing competitions from other new political groups while posing challenge to the traditional pan-democracy camp.

Finally, turning to the USA: With Bernie Sanders’ inability to unset the Hillary Clinton base in New York (Manhattan 66% – 33%; Westchester County 67% – 32%) on Tuesday, it looks more and more like a Clinton victory at the convention is a lead pipe cinch. Who knows? She might even have the team to out-Diebold the Trump machine. In Brooklyn, tens of thousands of voters discovered too late that they were ineligible to vote. The New York City Elections Board confirmed that more than 125,000 Brooklyn voters had been scrubbed from the voter rolls and the NY Attorney General's office is on the case. Clinton can now win less than half of the remaining primaries and still gain the required number of delegates.

Can she throw some kind of a aikido move on the Trump steamroller? We don’t yet know who controls the machines, but it is a pretty good bet it ain’t the Donald.

This past week George Monbiot penned one of the best essays of his career, although it was actually a teaser for his new book, How Did We Get into This Mess? published by Verso for £12.99.

In naming Neoliberalism as the root of all our problems, Monbiot linked the Irish Water crisis, the slow collapse of public health and education, rigged Philippine elections, resurgent child poverty, the epidemic of loneliness, offshore tax-avoidance havens, the collapse of ecosystems, Occupy Hong Kong, Australian greedy banks, and the rise of Donald Trump to a single bad gene in our political DNA.

Monbiot writes:

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

When George W. Bush attributed the rise of Islamic jihadis to “they hate our freedom,” what he was doing was reinforcing the neoliberal meme. As Monbiot puts it:

Freedom from trade unions and collective bargaining means the freedom to suppress wages. Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments. Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty.

Hillary Clinton likes to tell audiences that because of the Affordable Care Act, "We now have driven costs down to the lowest they've been in 50 years.” Actually, health spending in the United States is higher than it's ever been, so the statement on its face is inaccurate. The U.S. spends more per capita than every other country in the OECD; and twice as much per capita as the system in France, with considerably worse average outcomes.

Monbiot writes:

The privatisation or marketisation of public services such as energy, water, trains, health, education, roads and prisons has enabled corporations to set up tollbooths in front of essential assets and charge rent, either to citizens or to government, for their use. Rent is another term for unearned income.

Unearned income is what buys elections, and not just in the United States.

What the history of both Keynesianism and neoliberalism show is that it’s not enough to oppose a broken system. A coherent alternative has to be proposed. And that is what none of the elections in 2016 seem to be doing.

A Financial Transaction Tax (FTT) for Ireland

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Published on FEASTA on January 27, 2016

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Around 40 Irish civil society groups and NGOs (including Feasta) have expressed their support for RobinHoodTax.ie, an initiative led by Claiming Our Future aimed at introducing an FTT in Ireland. The launch event yesterday at the Mansion House in Dublin featured speakers from Stamp Out Poverty and the Nevin Economics Research Institute plus, inevitably, a large number of Lincoln Green hats with red feathers for the apres match photo-opportunity.

A Financial Transaction Tax levies a (small to miniscule) percentage tax on financial transactions such as share and bond purchases and derivatives. The idea is as old as the hills (well 1930s) but it has recently reappeared on the political horizon, as ten EU countries work together to flesh out a European implementation under a so-called ‘enhanced co-operation‘ [1] regime – an occasionally used device for facilitating agreement of a subset of EU members when full consensus is not possible in the short-term. David Hillman of Stamp Out Poverty gave a rundown of progress on this front, ending with a ‘you are not alone’ message.

The Irish government has taken a passive aggressive stance on the proposal – lining up (but less vociferously) with the UK and Sweden in the anti-lobby. The last detailed discussion in the Dail looks to be in 2013 [2].

The second presentation at yesterday’s event was from Micheál Collins of the Nevin Economic Research Institute (NERI). He is in the process of completing a quantitative analysis of the likely tax receipts of an FTT in Ireland, based on the emerging European model. Estimates stand at a net positive annual tax receipt effect of 320-360 million euros. Full results are scheduled to be revealed at a NERI seminar on February 10th [3].

So what are the messages that would most likely hit the spot with policy makers? This is difficult territory for me because while I admire policy advocates, I have no deep belief in the power of ideas carrying all before them. The thoughts that follow therefore are more in the tradition of Harry S Truman’s advisors [4].

Fairness. After many years of privatised megaprofits, the losses associated with the 2008+ financial crisis have been socialised. Thats a coded way of saying that the corporations who caused the problems didn’t pay for them, citizens did. The residual resentment at that unfairness is deeply entrenched in society, and despite calls for an end to banker-bashing from the 1%, they are still part of the zeitgeist. The #MakeBankersPay hashtag is therefore understandable.

Whether it is wise is another matter. It identifies with the activist strand within the FTT lobby. If we believe that policymakers are more likely to identify themselves with the 1% than with street demonstrators [7], it may invite a further retrenchment into that embattled minority, and encourage existing confirmation bias against all and any activist agendas. So it may be a good message for recruiting activist support and a bad one for influencing policy makers.

This is not to say there is no fairness issue here, clearly there is. But it may be best approached via a plea for rebalancing the economy. With the prevailing neoliberal self-sufficient self-interest narrative, ‘not fair’ is the complaint of the playground weakling. Sad and deeply disappointing as that is.

Rebalancing. There is a clear sentiment in society at large that the financial economy tail has been wagging the real economy dog for too long. There are also some indications that this sentiment extends into the mindset of many politicians. They are constrained however by the ‘race to the bottom’ between nation states as they seek to compete for the attention of multinationals by deregulating, lowering corporation tax and generally bribing to achieve FDI (Foreign Direct Investment). Arguably FTT gives these nation states a mechanism for embarking on the beginnings of a rebalancing – if – and only if – they can be reassured that their resident financial corporations will not migrate to pastures new at the first mention of the tax. As they will no doubt threaten.

So there’s the rub. At yesterday’s event David Hillman defended the laughably low levels of tax (for example a tax of 0.01% on derivatives) by saying it was easier to get it accepted at that level and then increase it once it was established. This has indeed been the pattern with taxes, and that much will be obvious to the financial lobby who will see it as the thin end of the wedge and resist it tooth and nail. In this context it becomes vital to be able to rebut the FUD (fear, uncertainty, doubt) agenda that will be offered up. FUD is proving a reliable strategy for those seeking to preserve the status quo. It worked well for the electoral reform referendum in the UK and for the Scottish independence vote, and will take some countering here.

NERI’s work is vital because it will break down the taxation receipts by instrument, allowing an analysis of the likely effects of a tax at a per instrument level. It seems likely that virtually all the costs will fall on financial institutions and that the potential for them to pass on these costs to consumers will be limited by competition. This is the way the FTT is designed. In 1936 when John Maynard Keynes floated the idea of an FTT, he saw it as a tax on excessive speculation [5]. If a detailed analysis by instrument can reinforce this strategic positioning, there may be a chance. This brings us to the final message – of increased stability and resilience.

Stability. If, as Keynes envisaged, and the more enlightened politicians hope, an FTT dampens some of the excessive speculation/ gambling that takes place in the casino economy, it can be developed as an intervention mechanism for policy makers. Having discovered that control of the interest rate does not give them the power they once thought it did, they have very few tools left in their toolbox and may well welcome one more. To say such a tax could do away with the boom-bust cycle is going too far. Other systemic monetary changes will be necessary for that including the resumption of strategic guidance over the allocation of credit-as-capital [6]. But an FTT could well give potential for a smoothing effect. Policy-makers who must feel like eunuchs in a brothel at present, may well like the idea of having another meaningful instrument at their disposal.

So that would be my prescription for messages – stability, rebalancing and yes,ok, fairness. The final message, which most FTT proponents emphasise and which I called unkindly in the introduction dogoodability is also important. Emphasis is usually placed on the use of FTT receipts for (say) climate change work and international development. As delegates yesterday pointed out, such hypothecation of tax receipts is normally resisted by policy makers as a constraint on their decision-making. But as an appeal to a wider society audience it has it place. And there are precedents in Ireland with some environmental taxes, so why not?

Claiming our Future are to be congratulated for spearheading FTT adoption in Ireland. If NERI can put together some detailed technical rebuttals on a per-instrument basis, we may yet see a proposition for re-empowering economic policy-makers on the back of a societally-beneficial FTT. Used and adjusted actively such a tax can help restore financial resilience – a valuable quality that has been sacrificed in favour of efficiency for too long.

References

[1]: http://www.euractiv.com/topics/enhanced-cooperation which also has an article on banking industry response.
[2]: http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/committe etakes/FIJ2013100200003?opendocument#C00350
[3]: http://www.nerinstitute.net/events/2016/02/10//
[4]: “Give me a one-handed economist! All my economists say, ”On the one hand? on the other.'” Harry S. Truman
[5]: “Speculators may do no harm as bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation.” J M Keynes
[6]: see for example: Richard Werner at http://republicirelandbank.com/?p=601
[7]: http://www.commondreams.org/views/2016/01/26/volcanic-core-fueling-2016-election

Featured image: “Here begynneth a gest of Robyn Hode”, 16th century. Source: https://commons.wikimedia.org/wiki/File:Here_begynneth_a_gest_of_Robyn_Hode.png

 

 

Collapse Cafe 10/4/2015: UK Special Edition

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Our discussion with Norman Pagett and Jason Heppenstall on issues focused on the UK as the collapse of industrial civilization progresses

Also, don't forget to take the Energy Survey!  We are going to hold it open an extra week because links to the survey were broken when  I launched the Survey.  They have since been fixed.

The Future of Energy Survey

Misrule Britannia

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Pubished on 22 Billion Energy Slaves on June 1, 2015

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When I moved back to the UK two years ago after living abroad for a while, nobody could accuse me of not knowing what I was getting into. For quite some time pundits in the collapsosphere have been calling out the UK as one of the riskiest countries in which to live, right up there with Japan. Not only do we have a nation that is heavily over-populated with respect to its resource base, but one which hosts one of the world's major world financial viper pits. It's a nation where Arab playboys drive gold-plated Ferraris around the gentrified streets of London while snot-nosed urchins everywhere else go to school without eating breakfast. It's a nation where an unelected old lady in a £300 million hat recently sat on a throne and managed to keep a straight face while announcing her government's plans to slash money for the poor. Basically it's a nation engaged in a war of attrition between those with wealth and those without.
 
 
 
But something in the air has changed since the recent election in which David Cameron's Tories won a majority in the House of Commons. Within days – unshackled for their former collation with the moderating hand of the Liberal Democrats –  there were announcements of plans to walk away from human rights treaties, to impose a 'snoopers charter' of surveillance, to further slash welfare spending, push through the TTIP 'trade' agreement, ramp up fracking, bring back fox hunting with hounds. The Left have been howling in pain ever since.
 
Although all this was to be expected of the 'nasty party' the one thing that nobody seems to be talking about is how the nation itself will manage to survive as a modern state given the, ahem, challenges it faces. The three main immediate challenges, as I see it, come from the realms of finance, energy and politics. Failings in each one of them alone could prove disastrous, but it seems as if we will get to witness all three calamities occur simultaneously. 
 
Let's take finance first. 
 
I've been trying to get to the bottom of what the UK's debt/deficit position is. Mention 'the deficit' and most people emit a strangled howl of indignation. "Don't you know the deficit is a tissue of lies fabricated by the right wing who want to impose Dickensian conditions on the poor?" they ask. Granted, it doesn't seem fair to cut the benefits of society's most needy while simultaneously heaping more money up at the other end of the spectrum, but that wasn't the question. That's simply what failing states do – the more powerful grab what they can at the expense of the less powerful. It's all there in the history books. The next act usually involves pitchforks. 
 
But this time is different, they argue. Money can now be created by magic, and all we need to do is do whatever it is that those clever folks at the Bank of England (or Bitcoin) do to create more of it using their computers. And, bingo, then we can simply spend it on 'making things great again'. The country can continue to produce 'services' again, everybody will have a decent standard of living once more and we will be back on track to that future of driverless cars, space missions and living to 150.
 
 
 
 
Money might not seem important if you think it isn't important, but that doesn't alter the fact that throughout modern history there has not been a time when money is not considered important. Especially to creditors, of which the UK has a lot. So, in a kind of back of the envelope way, I decided to try and get a grip on how much debt the government owes. It seems that the total debt is about £1.5 trillion, and the annual deficit is running at about £107 billion – or over £2 billion a week. At that rate the proposed 'austerity' of £12 billion will thus be used up in six weeks. This doesn't matter, according to the economists in the mainstream media, because Britain's economy is doing so well that the annual deficit will be wiped out by rising tax receipts in a couple of years. 
Yet tax receipts from oil and gas have fallen by about 75% since 2008, and will probably drop to zero when North Sea oil and gas stops flowing completely in a couple of years' time (still no mention of this in the media…). And tax receipts are falling as a) more people are in lower-paid jobs and/or falsely counted as employed because they have been forced to declare themselves self-employed b) the larger companies have had their corporation taxes cut and can avoid paying tax entirely if they have savvy accountants.
 
 
 
VAT receipts are flat as most consumers have maxed out their credit cards and run out of spending power. The only way they can rise is if people take on EVEN MORE personal debt – which a lot have actually been doing (currently average personal debt is running at an all-time record of 172% of income, according to a PwC report). But personal debt needs to be repaid one day, and with falling real incomes and plenty of hidden stealth inflation (e.g. food items getting smaller, durable goods getting shoddier, hidden charges becoming more unavoidable etc.) that will become more difficult.
 
Moneyweek's take on the debt situation
 
Future projections of the debt/deficit all presuppose a 'healthy' and growing economy. This seems very unlikely IMO given that a financial 'accident' is likely to happen at any moment. And all the while the structural deficit grows larger as the population ages, annuities reach maturity and the bill for the NHS soars. In this context GDP figures don't really mean anything useful: the economy might be improving but it's not the economy that most people ordinarily live in. Plus, any downgrade of the economy by ratings agencies caused by – say – a fracture of the UK, or a severe credit event, will have a knock-on effect on the government's ability to borrow cheaply  and we will simply end up paying the interest on the national credit card, while the capital debts piles up. The interest on this debt alone already costs us £55 billion a year and that's with interest rates at near zero.
 
All in all, it's difficult not to conclude that the UK is insolvent. But, in any case, perhaps that doesn't matter because this brings me onto the political aspect of the crisis: perhaps there soon won't even be a UK (after all, what do you call a bunch of small countries that are not united?). Since Scotland got royally shafted in their Independence referendum they replied by booting out practically every MP from a Westminster party and instead elected Scottish National Party members to speak up for them. The upshot of this is that David Cameron wants to press ahead with swingeing austerity measures (which, looking at the dire financial figures will actually have to be FAR worse than most people imagine) – but the Scots say they won't accept it north of the border. It's difficult to imagine all of us in England and Wales living in Third World conditions while the Scots keep handing out brown envelopes of cash to their citizens, and people accepting that as fair.
 
 
 
So, sooner or later, Scotland may well get independence, which means that others might want to follow suit. All of a sudden everyone seems to be talking about breaking up. UKIP and most Tories want us to break away from the EU, Scotland, as previously mentioned, will probably go for a messy divorce (and take a large chunk of GDP with them as they leave), London may want to declare itself a 'city state', northern England might want to join Scotland in getting away from the southerners – even Cornwall is starting to get a bit itchy. 
 
Given that the UK's finances are one big Ponzi scheme (what does the country actually produce these days that has a physical presence?) any political rupture could bring down the house of cards. Parliament, in any case, is almost paralysed as the Tories actually only won by a slim majority and will have trouble passing any contentious legislation. Who knows, perhaps even faraway Greece could provide enough turmoil to shatter the status quo should its amputation from the EU cause death judders. There's a simmering tension and people are already angry enough … what happens when they get even angrier?
 
 
 
Finally, we have the energy conundrum. I've been saying now for at least two years that my guess is that we will see some kind of restriction on the sale of oil and/or petrol in the UK in 2016. I still have 18 months left to see if my prediction will come true, but at the rate things are going it seems like it has a good chance of doing so. As previously noted, North Sea oil is facing a precipitous decline. That decline is accelerating in step with the lower oil price, as new projects are not begun and old ones are mothballed due to high costs. Hundreds of oil workers have been laid off in Aberdeen (and the Scots think they can avoid austerity by using their oil money …).
 
Not to worry, old chap, says the media. Don't you know that we'll be getting LNG from America soon, and fracked gas from beneath our very own land?
 
That's the standard response, whenever energy shortages are mentioned, which is rarely. Of course, it's quite ludicrous that either of these schemes will ever happen in the real world. To unlock the British shale gas they would need to turn huge areas of the country into industrial wastelands – huge areas that currently have millions of people (many of them wealthy) living on them. This, in a country where planning and conservation laws are so tight it's a major achievement just to put up a sign lest it spoil the character of the area. And let's not forget that millions of people are implacably opposed to fracking – to the point where they would be willing to lay down their lives to halt the drillers. Heck, this must be the only country in the world to employ magical defence against frackers (it's working, so far). 
 
Let's add ISIS into the mix. At the rate things are going in the Middle East, if things carry on as they are in Yemen and Saudi Arabia, there could be a major conflagration. It's not hard to imagine oil installations set on fire and the price of crude heading up to $200. This, ironically, is one way the fracking industry and the North Sea could avoid immediate bankruptcy. Not that anyone would be able to afford to fill up their cars any more …
 
So where, exactly, will the UK get its energy from in the future? There are a lot of cars and trucks here. There are millions of shops and offices and ports and sports grounds and malls that all need lavish amounts of energy to keep functioning. It gets cold here in winter and old people are already dying from exposure inside their own homes – what will happen to them all as the inevitable energy crisis begins to bite?
 
 
 
So, as nice as it would be to get a bag of popcorn and watch this spectacle unfold from afar, I find myself up there on the stage. Still, not to worry, as we say …
 

Hope…Change…

Off the keyboard of Steve from Virginia

Published on Economic Undertow on November 7, 2012

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President Obama easily won re-election yesterday: Where do we go from here?

– look for ‘Brand X’ opponent Romney to retreat into what Edward Gibbon called, ‘a well-deserved obscurity’. Smarmy Romney lacks the kooky charisma and media horsepower of a Sarah Palin or Paul Ryan, his TV days are done. He has nothing to say and says it with less conviction than just about anyone in public life. There is little left for Mr. Romney to do but to go back to Wall Street where he can reassure his own customers he is not stealing their money … while he steals their money.

The Tea Party has unraveled as a political phenomenon. The ultra-libertarian/Austrian/liquidationist faction within GOP politic has discredited itself: the public won’t buy social Darwinism no matter how much religion and patriotic moralizing are spackled over it.

– The GOP has no one to blame for the election outcome but themselves. Their primary process — dominated by petroleum industry stooges and ‘missionary evangelists’ — prevented the Republicans from fielding a candidate able to challenge the vulnerable Obama. Who could have beaten him? An ordinary human being … that is, a non-radical Republican automatically excluded from the candidacy … by the extremist-filtering primary process and funding structure.

– From the ‘Welcome to the ironic universe’ department: this is the end of Ron Paul and his son, while there is no end in sight for Ben Bernanke. Gone: Palin, Santorum, Allen (in Virginia), Akin, Mourdock, Perry, Mack. Lost in influence: Bachmann, Ryan, Cantor, Gingrich.

– Libertarian economics do not appeal to Americans who do not want to be thrown to the ‘free-market’ wolves any more than they already have been. Americans want a level playing field with big business. Disappointment with Obama is that he is unwilling to hold powerful interests accountable, not that they are too accountable. The intrusive, overbearing government doesn’t do its job or it does so in ways that protect private interests at the expense of the public.

– A big winner of the election is Occupy movement. They won by not embarrassing themselves and by helping out in New York City with the hurricane relief … where the reactionaries were notably absent. The crumbling Tea Party has left a political vacuum … if the Occupy group has the wit to seize the moment.

– The clock is ticking on the tycoons. They couldn’t buy this election and won’t get a better chance in any conceivable future. The shift is underway … from tycoons being admired and emulated to being loathed. The step after is for tycoons to be hunted down like rats. Credit the timely hurricane Sandy and a rising public awareness of tycoon-driven climate change.

– If I wuz a tycoon I would make like French and get the hell out of Dodge …

– Having fixed his footnote in history at the cost of a billion-plus US dollars look for the president to retreat with some dispatch from the public stage. ‘Hope and Change’ have morphed into hopelessness on one hand and an establishment death-grip on the status quo with the other. The establishment has few choices that allow it to remain the establishment! Conventional economics have run aground. The austerity camp and the stimulus factions both insist their policies will propel the USA waste-monetizing economic machine forward. None of the factions acknowledge that the operation of the machine itself … is what undermines it. The present devours the future faster and faster: the cost of each fill-up becomes more crushing as the machine annihilates with constantly greater scope and efficiency what it needs to run. The only returns are ‘money’ for the despised tycoons while the rest must be satisfied with the thin gruel of ‘We’re Number One’ and other inconsequential generalities. Meanwhile, the life support on our space ship is fed into the furnace.

– Obama is clever enough to know there is nothing conventional policies can do to remedy our current situation: he has access to the ‘input’ of at least a dozen intelligence services. At the same time, he never has to pay for a round of golf for the rest of his life. He can loiter with tycoons which clearly pleases him, he can start writing the obligatory post-presidential memoirs, he can secure places in corporate boardrooms/in places of tycoon exile. When the time comes in 1,515 days he can become a petit-tycoon himself. The office of Lincoln and Roosevelt has devolved into a running-board or ramp to commercial success. Obama is now a ‘Brand’: one day after the election the president has one foot out-the-door, he is a lame duck.

– Obama the Ironic: no doubt airports across the country will be renamed for the president just as the airline industry collapses due to fuel shortages … that are denied by Obama.

– Obama the Ironic part two: sometime within the next four-plus years the president is going to have to tell the American public the truth about energy supplies: we’ve run out and cannot afford to burn any more for endeavors that don’t pay for themselves — which means fuel for agriculture and some basic services and nothing else! Here is something to live for … and watch on live TV.

Goofiness is not confined to America, the Europeans have similar problems facing reality:

 


Worst of the Eurozone Crisis Is Not Over Yet
 Megan Greene (Economonitor)Greece released its 2013 budget last week, indicating that public debt will surge to 189 per cent of GDP by the end of next year. If Greece’s debt burden cannot be deemed to be on a sustainable path, the IMF cannot release more money.

The only way to reduce Greece’s debt burden effectively and sufficiently is to write down some of its debt. So far, Germany, the ECB and the IMF have all indicated they would refuse to take a hit on their Greek government bond holdings.

… even if Germany wants to give Greece more time and money to achieve a swingeing fiscal adjustment, Greece might not have any interest in doing so, particularly not after five years of economic recession.

A model student

In contrast to Greece, Ireland has been identified by creditor countries as a shining example of how Europe will emerge from the crisis.

It is true that Ireland has stood apart from the other bailout countries in a few important ways. For starters, Ireland has dipped a toe back in the bond markets, despite being in a bailout programme. Investors also seem relatively confident that Ireland will not default, as exhibited by lower, long-term Irish bond yields than its Greek, Portuguese, Spanish and Italian counterparts.

According to the Purchasing Manager’s Index (PMI), Ireland has seen its manufacturing activity expand over the past eight months. This is in sharp contrast with the eurozone, which has, on average, seen manufacturing activity contract for 15 consecutive months.

Ireland’s PMI data is encouraging, with new foreign orders particularly buoyant in recent months. This is a positive indicator for Ireland’s export sector, which should keep expanding.

But here’s the big problem in Ireland: there is no economic growth.

 

It’s hard not to come away from articles like this perplexed. What are the Irish or the Greeks supposed to do over the longer term … like 1000 years or so? How about 100 years? How about 10 years? Where is the ‘reality plan’?

There is the usual ‘growth’ mantra but what is supposed to grow? More auto sales? More vacation ‘villas’ around more miles of Mediterranean coast? More McDonald’s and Tescos? Right now the European auto industry is collapsing. Real estate is a bust. Retail margins are narrowing or gone. The European fuel consumption is almost 15 million barrels per day … most of this is imported from Africa and the Middle East. It is paid for with massive and unaffordable borrowing. The waste-based machine has been backfiring since 2008, the complete breakdown is heaving into view.

From whom are the Europeans borrowing? Ireland and the rest cannot borrow against their own accounts — they are shackled to the euro — they must borrow from financiers in City of London and Wall Street. Currently, credit terms are onerous … what comes next? If Europe cannot pay its bills its fuel consumption is exportable to the United States which can borrow against its own account at all levels. There is a reason why the US president is claiming the country is ‘energy independent’.

How is Ireland supposed to cope with the current state of affairs for more than a few months? Ireland has no domestic fuel production to speak of. It MUST borrow or go onto a severe — and permanent — energy diet. Can Ireland borrow for another year? It must, obviously. How deep a the hole will creditors allow Ireland to dig? How can the country repay- or service its debts when it cannot borrow more fuel? The Irish corporate tax shelter is not very useful to corporations that aren’t earning much. Eire can be the gateway for flight capital to exit Europe but that lasts only until the euro is done away with. At that point Ireland descends toward failed-state status like Serbia … or Yemen.

Figure 1: Irish oil consumption plummets because Ireland cannot afford to borrow. As it wastes more it falls further into debt. Even if the Irish gain new credit today, they certainly cannot do so forever.

This is the debt-energy trap that has enmeshed all the world’s modern nations. The idea is that something magical will turn up in the next decade or so and ‘solve all the problems’ in the meantime, the entire European Enterprise hinges on whether the ECB can keep offering rear-guard actions: making loans … that are more dubious every month! At some point, organic returns are needed … these never arrive. Sadly, there are no returns on consumption … simple waste for its own sake. The West has nothing in the way of real goods or services to offer in exchange for the petroleum they burn up … except for petroleum burning gadgets! Here is the most vicious of all vicious circles.

One outcome of this dynamic is fuel poverty … something that occurring right now across the euro-zone and in the UK. What the Europeans need to do pronto is to rethink the ‘business as usual’ concept and ditch growth. Cheap natural resource capital does not exist any more. What remains is worth too much to waste. The economy built around monetizing waste is a loser. Europe needs to power down and figure out how to provide decent lives for citizens without consumption. Unfortunately, there is little time remaining to figure out how to do this. The ongoing Euro-calm is an eye in the hurricane, the next phase will see Europe cut off from fuel supplies and structural shortages that cannot be dealt with.

Conservation by other means …

Knarf plays the Doomer Blues

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