Money

The First Law of Wealth

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Published on The Doomstead Diner on January 8, 2017

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The First Law of Thermodynamics:

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

 

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

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

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

The Gymnastics Bizness

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

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

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

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

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

The Dental Racket

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

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

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

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

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

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

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

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

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

Quote

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

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

 


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

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

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

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

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

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

The Elon Musk Flim-Flam

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

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

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

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

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

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

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

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

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

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

Going Cashless

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Published on The Doomstead Diner on December 22, 2016

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Collapse Cafe 8/6/2016

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Aired LIVE on Collapse Cafe YouTube on August 6, 2016

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The Strange Idea of Negative Interest

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Published on FEASTA on April 13, 2016

money-burning

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This article addresses the role of demurrage (negative interest) in the design of new currencies. But it takes a roundabout route with diversions around the zero and negative interest rates being currently applied to fiat money; and a detour via positive interest which is itself a stranger idea than we have been led to believe. It suggests that demurrage is worth a place in the designer’s kitbag, but not for the reason normally postulated.

The basic idea of interest is simple. It’s a special type of rent. If we loan out something we have no immediate need for ourselves, it seems reasonable that the borrower should pay us rent for its use. So interest is a rent on money.

A fundamental problem with the rent rationale in general occurs when the ‘property’ concerned is a public good – a commons which has been enclosed – or where it has been secured by violence or some other unfair means. In that case we might feel a little aggrieved at having property we feel we should have a degree of proprietorship over sold or rented back to us. This is the way many people feel about water for example.

Another issue arises when the property owner has (and will have) no need for the property themselves and have acquired it only for its rental value. Seeking a store of value via investment is understandable but when the asset class created is a ‘stuff of life’ good, tensions are sure to arise because investors are affecting the price of essentials. The more they can corner the market the more they can increase the cost of basic living. This seems to be increasingly the case with housing.

There is some mileage in a perspective which considers Money as a Commons [1]. But the rental of surplus money, where that surplus is the result of the ‘sweat of the brow’ – the energy and innovation of the lender – can be defended to an extent. Unfortunately very little money lent is in this category. Most of it (97% it is said [2]) appears in our accounts as bank loans, created ex-nihilo specifically for the purpose by commercial banks. This is mostly well understood now and any doubters who still believe loans are redeployed money from savers are usually referred to the Bank of England paper on the subject [3]. The interest earned is a significant revenue stream for the banks [4] that have been given the right to create money-as-credit. This right is not merited – it is a privilege that forms part of the unarticulated Bank-State Bargain [5].

So interest as we know it is rather a stranger animal (with a weaker rationale) than we might have thought.

There is a huge literature on interest/ usury of which the most compelling and readable recent examples are from http://www.kreatoczest.com/kz_publishing_ourtitles-pwi.htm”>Tarek el Diwany[6] and the late Margrit Kennedy[7]. But it ain’t going away any time soon, though it almost certainly must do in the degrowth economy that the planet needs.

For a good number of years the so-called base rate – the interest rate set by a central bank for lending to other banks – was seen as the key tool in the policymaker’s kitbag. (If at this point you are wondering why a bank that can create money out of nothing needs to borrow from the central bank, you’re not alone. We’ve all been there [8].) During this ‘monetarist’ phase the prevailing view was that by making money cheaper (lowering interest rates) you would cause more loans to be advanced by the banks and stimulate the economy.

This view has been progressively (and inconveniently for the orthodox school) exposed as an unhelpful over-simplification (i.e. b****cks) for three reasons. First if there is lack of confidence in the future among borrowers, lowering borrowing cost will not automatically trigger more lending (the ‘pushing on a string’ argument); secondly because additional money created may be invested rather than spent, causing asset bubbles (e.g. in housing) which dilute the effect; and thirdly because the ‘call to consume’ is being increasingly resisted.

It is often said that ‘money needs to circulate’. This is not just the mantra of the consumer economy where we all have the citizen’s primary duty of consuming ourselves into oblivion. It is also quoted by currency activists who will claim a higher velocity of exchange for their currencies and a consequent incremental effect on local GDP. The implicit assumption is that more is always better – perhaps unsurprising in a society where GDP is still seen as the primary measure of progress.

More is not always better though. Economists have used the term ‘marginal utility’ to describe the additional satisfaction a consumer gains from consuming one more unit of a good or service. Indeed a key function of advertising is to emphasise the illusory status-improvement associated with purchases in order to boost the perception of marginal utility. But the zeitgeist is changing. There is a cultural emptiness associated with the ‘you are what you buy’ proposition, and this is beginning to express itself via an old-fashioned reluctance to buy unneccesarily. Add the effect of austerity and you have a recipe for resistance.

In response, central banks, who to be fair have very few policy levers at their disposal anyway, have decreased base rates down close to zero with insufficient effect and are now exploring negative interest rate policies (NIRP). So in a forlorn attempt to get banks to lend more they are effectively being charged for leaving reserves with the central bank.

The general idea of demurrage as an accelerator of exchange has been around for a long time, its full delineation often being attributed to Silvio Gesell [9]. In a currency design context the means of exchange function is usually considered paramount, and demurrage is seen to give the holders a ‘use it or lose it’ nudge towards spending.

My problem with it is that although the idea significantly predates 20th century consumerism, it still seems to reinforce the idea that we should buy stuff that we don’t need or really want. In a complementary currency context where the currency operates alongside fiat, ‘rusty money’ would presumably be spent before fiat, giving the currency an ‘edge’, but it still feels as if we are being bounced somewhat into the transaction. Maybe this is a personal thing; or a preciousness – certainly the German Chiemgauer currencies claim demurrage as a key success factor [10]. But its attraction in pre-consumerist times was probably related to the fact that most spending options were local then, so more spending meant more local exchange. Nowadays most spending sucks money out of local economies.

Where a currency is in its early stages or where the remit of the currency self-limits and there are a limited range of goods and services on offer, demurrage feels heavy handed. Overall it seems a somewhat artificial device encouraging users to live beyond their needs.

However demurrage in the right format may facilitate self-financing. In its classic stamp-scrip form holders of currency notes had to periodically buy a stamp for (say) 2% of the note value and attach it to the note for it to preserve its value. The stamp though was paid for in fiat currency so we are back to supping with the deprecated devil. For digital currencies, the option exists to simply deduct a percentage of the account holders balance. That deduction can be routed to the currency administration account and in the words of Pat Conaty et al [11] enables “cooperative accumulation”. In a mutual credit context both positive and negative balances can be adjusted in this way – an approach varied in some new designs [12] and reminiscent of Keynes’ design for the Bancor whcih was aimed at balancing international trade flows [13].

A variation on this theme was suggested by the late Richard Douthwaite, who in his design for Liquidity Networks drew a distinction between currency units that had been given into circulation and those that had been earned. The former he felt might be suitable for the application of demurrage; the latter were not. The rationale here is that ‘taxing’ earned units is on balance a disincentive, whereas taxing unearned income with the aim of increasing liquidity is on balance fair. (The example of currency units which are spent into circulation by a sponsor such as local government is a halfway-house case where the rationale could perhaps be argued both ways.)

Footnote

For currency project start-ups, finding the capital for step-change developments is likely to be problematic. For those that see themselves as fiat-averse [14], options are further limited. For such projects an alternative (or addition) to demurrage is to levy a transaction tax and set that aside for capital investment. This traditional approach to investment via savings might seem quaint and long-winded in comparison with what is now the usual borrow-fiat-to-invest model but it does have the attraction of decreasing outside dependency – a dependency on a deprecated system we are looking to reinvent. So if we can delay our gratification (which is after all meant to be the characteristic of an adult) this may be the right approach.

A secondary benefit of a transaction tax is in controlling gaming of the system. And since we should expect gaming (typically via false transactions) as soon as we introduce any differentiated reward/ penalty scheme, this would be no bad thing.

References:

[1]: Graham Barnes: Money as a Commons http://www.feasta.org/2014/09/05/money-as-a-commons/
[2,3]: Michael McLeay, Amar Radia and Ryland Thomas: Money creation in the modern economy:
Bank of England Quarterly Bulletin 2014 Q1
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
[4]: Joseph Huber, James Robertson: Creating New Money (1997)
http://www.jamesrobertson.com/book/creatingnewmoney.pdf
The authors estimated the gains possible through reclaiming seignorage from UK banks at GBP 47 billion – equivalent at the time to 15% of total UK tax take. The GBP 200 billion + figure is NEF’s updated calculation for 2012.
[5]: Graham Barnes: The Bank-State Bargain: http://www.feasta.org/2015/03/31/the-bank-state-bargain/
[6]: Tarek el Diwani: Tne Problem with Interest http://www.kreatoczest.com/kz_publishing_ourtitles-pwi.htm
[7]: Margrit Kennedy: Interest and Inflation Free Money
http://userpage.fu-berlin.de/~roehrigw/kennedy/english/Interest-and-inflation-free-money.pdf
[8]: See Positive Money http://positivemoney.org/
Essentially it’s because when they create credit-money as a loan, they create both an asset (the loan) and a balancing liability (the credit in the borrowers account) simultaneously.
[9]: Silvio Gesell: “The Natural Economic Order” [1916] e.g. “Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether. For such money is not preferred to goods either by the purchaser or the seller. We then part with our goods for money only because we need the money as a means of exchange, not because we expect an advantage from possession of the money. So we must make money worse as a commodity if we wish to make it better as a medium of exchange.”
[10]: Christian Gelleri: Chiemgauer Regiomoney: Theory and Practice of a Local Currency
http://ijccr.net/2012/05/29/chiemgauer-regiomoney-theory-and-practice-of-a-local-currency/
[11]: David Bollier and Pat Conaty: Democratic Money and Capital for the Commons
http://bollier.org/sites/default/files/misc-file-upload/files/Democratic%20Money%20and%20Capital%20for%20the%20Commons%20Report.pdf
[12]: Colin McKay’s Deror: http://www.deror.org/ has an interesting design variation, progressively cancelling both credits and debits
[13]: https://en.wikipedia.org/wiki/Bancor
[14]: Graham Barnes: New currencies and their relationship with fiat currency
http://www.feasta.org/2015/07/29/new-currencies-and-their-relationship-with-fiat-currency/

Featured image: Wörgl Shilling, a demurrage currency. Source: https://en.wikipedia.org/wiki/Demurrage_%28currency%29#/media/File:Freigeld1.jpg

 

 

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.

RE & Steve Collapse Update 2

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Published on The Doomstead Diner on April 27, 2016

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

Audio Only:

mp3 Download available on Diner Soundcloud

 

Strange Limits to Growth

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Published on the Our Finite World on March 17, 2016

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Our economic growth system is reaching limits in a strange way

Economic growth never seems to be as high as those making forecasts would like it to be. This is a record of recent forecasts by the International Monetary Fund:

Figure 1. World GDP Forecasts by the International Monetary Fund.

 

 

 

 

 

Figure 1. World GDP Forecasts by the International Monetary Fund.

 

 

 

 

 

Figure 2 shows world economic growth on  a different basis–a basis that appears to me to be very close to total world GDP, as measured in US dollars, without adjustment for inflation. On this  basis, world GDP (or Gross Planetary Product as the author calls it) does very poorly in 2015, nearly as bad as in 2009.

Figure 2. Gross Planet Product at current prices (trillions of dollars) by Peter A. G. van Bergeijk in Voxeu.

 

 

 

 

 

Figure 2. Gross Planet Product at current prices (trillions of dollars) by Peter A. G. van Bergeijk in Voxeu, based on IMF World Economic Outlook Database, October 2015.

 

 

 

 

 

The poor 2015 performance in Figure 2 reflects a combination of falling inflation rates, as a result of falling commodity prices, and a rising relativity of the US dollar to other currencies.

Clearly something is wrong, but virtually no one has figured out the problem.

The World Energy System Is Reaching Limits in a Strange Double Way

We are experiencing a world economy that seems to be reaching limits, but the symptoms are not what peak oil groups warned about. Instead of high prices and lack of supply, we are facing indirect problems brought on by our high consumption of energy products. In my view, we have a double pump problem.

Figure 3. Double gasoline pump from Torrence Collection of Auto Memorabilia.

 

 

 

 

 

Figure 3. Double gasoline pump from Torrence Collection of Auto Memorabilia.

 

 

 

 

 

We don’t just extract fossil fuels. Instead, whether we intend to or not, we get a lot of other things as well: rising debt, rising pollution, and a more complex economy.

The system acts as if whenever one pump dispenses the energy products we want, another pump disperses other products we don’t want. Let’s look at three of the big unwanted “co-products.”

1. Rising debt is an issue because fossil fuels give us things that would never have been possible, in the absence of fossil fuels. For example, thanks to fossil fuels, farmers can have such things as metal plows instead of wooden ones and barbed wire to separate their property from the property of others. Fossil fuels provide many more advanced capabilities as well, including tractors, fertilizer, pesticides, GPS systems to guide tractors, trucks to take food to market, modern roads, and refrigeration.

The benefits of fossil fuels are immense, but can only be experienced once fossil fuels are in use. Because of this, we have adapted our debt system to be a much greater part of the economy than it ever needed to be, prior to the use of fossil fuels. As the cost of fossil fuel extraction rises, ever more debt is required to place these fossil fuels in use. The Bank for International Settlements tells us that worldwide, between 2006 and 2014, the amount of oil and gas company bonds outstanding increased by an average of 15% per year, while syndicated bank loans to oil and gas companies increased by an average of 13% per year. Taken together, about $3 trillion of these types of loans to the oil and gas companies were outstanding at the end of 2014.

As the cost of fossil fuels rises, the cost of everything made using fossil fuels tends to rise as well. Cars, trucks, and homes become more expensive to build, especially if they are intended to be energy efficient. The cost of capital goods purchased by businesses rises as well, since these too are made with fossil fuels. Needless to say, the amount of debt to purchase all of these goods rises as well. Part of the reason for the increased debt is simply because it becomes more difficult for businesses and individuals to purchase needed goods out of cash flow.

As long as fossil fuel prices are rising (not just the cost of extraction), this rising debt doesn’t look like a huge problem. The rising fossil fuel prices push the general inflation rate higher. But once prices stop rising, and in fact start falling, the amount of debt outstanding suddenly seems much more onerous.

2. Rising pollution from fossil fuels is another issue as we use an increasing amount of fossil fuels. If only a tiny amount of fossil fuels is used, pollution tends not to be much of an issue. Air can remain safe for breathing and water can remain safe for drinking. Increasing CO2 pollution is not a significant issue.

Once we start using increasing amounts, pollution becomes a greater issue. Partly this is the case because natural sinks reach their saturation point. Another is the changing nature of technology as we move to more advanced techniques. Techniques such as deep sea drilling, hydraulic fracturing, and arctic drilling have pollution risks that less advanced techniques did not have.

3. A more complex economy is a less obvious co-product of the increasing use of fossil fuels. In a very simple economy, there is little need for big government and big business. If there are businesses, they can be run by a small number of individuals, with little investment in capital goods. A king, together with a handful of appointees, can operate the government if it does not provide much in the way of services such as paved roads, armies, and schools. International trade is not a huge necessity because workers can provide nearly all necessary goods and services with local materials.

The use of increasing amounts of fossil fuels changes the situation materially. Fossil fuels are what allow us to have metals in quantity–without fossil fuels, we need to cut down forests, use the trees to make charcoal, and use the charcoal to make small quantities of metals.

Once fossil fuels are available in quantity, they allow the economy to make modern capital goods, such as machines, oil drilling equipment, hydraulic dump trucks, farming equipment, and airplanes. Businesses need to be much larger to produce and own such equipment. International trade becomes much more important, because a much broader array of materials is needed to make and operate these devices. Education becomes ever more important, as devices become increasingly complex. Governments become larger, to deal with the additional services they now need to provide.

Increasing complexity has a downside. If an increasing share of the output of the economy is funneled into management pay, expenditures for capital goods, and other expenditures associated with an increasingly complex economy (including higher taxes, and more dividend and interest payments), less of the output of the economy is available for “ordinary” laborers–including those without advanced training or supervisory responsibilities.

As a result, pay for these workers is likely to fall relative to the rising cost of living. Some would-be workers may drop out of the labor force, because the benefits of working are too low compared to other costs, such as childcare and transportation costs. Ultimately, the low wages of these workers can be expected to start causing problems for the economic system as a whole, because these workers can no longer afford the output of the system. These workers reduce their purchases of houses and cars, both of which are produced using fossil fuels and other commodities.

Ultimately, the prices of commodities fall below their cost of production. This happens because there are so many of these ordinary laborers, and the lack of good wages for these workers tends to slow the “demand” side of the economic growth loop. This is the problem that we are now experiencing. Figure 4 below shows how the system would work, if increasing complexity were not interfering with economic growth.

Figure 4. How economic growth works, if increased complexity is not interfering.

 

 

 

 

 

Figure 4. How economic growth works, if increased complexity is not interfering.

 

 

 

 

 

Also see my post, How Economic Growth Fails.

The Two Pumps Are Really Energy and Entropy

Unlike the markings on the pump (gasoline and ethanol), the two pumps of our system are energy consumption and entropy. When we think we are getting energy consumption, we really get various forms of entropy as well.

The first pump, rising energy consumption, seems to be what makes the world economy grow.

Figure 4. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

 

 

 

 

 

Figure 5. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

 

 

 

 

 

This happens because the use of energy products allows businesses to leverage human labor, so that human labor can be more productive. A farmer with a stick as his only implement cannot produce much food, but a farmer with a tractor, gasoline, modern implements, hybrid seeds, irrigation, and access to modern roads can be very productive. This productivity would not be available without fossil fuels. Figure 4, shown earlier, describes how this increased productivity usually gets back into the system.

The second pump in Figure 3 is Entropy Production. Entropy is a measure of the disorder associated with the extraction and consumption of fossil fuels and other energy products. Entropy can be thought of as a loss of information. Once energy products are burned, we have a portion of GDP in the place of the energy products that have been consumed. This is why there is a high correlation between energy consumption and GDP. As energy products are burned, we also have an increasing pile of debt, increasing pollution (that our sinks become less and less able to handle), and increasing wealth disparity.

Figure 6. Chart by economist Emmanuel Saez based on an analysis IRS data, published in Forbes.

 

 

 

 

 

Figure 6. Difference in US income growth patterns of the top 10% versus the bottom 90%. Chart by economist Emmanuel Saez based on an analysis of IRS data, published in Forbes.

 

 

 

 

 

Beyond the three types of entropy I have mentioned, there are other related problems. For example, the current immigration problem is at least partly a problem associated with increased complexity and thus increased wealth disparity. Also, low oil prices are a sign of a loss of “information,” and thus also a sign of growing entropy.

Our Energy/Entropy System Operates on an Energy Flow Basis

I think of two different kinds of accounting systems:

  1. Accounting on a cash flow basis
  2. Accounting on an accrual basis, such as GAAP

With respect to energy, we burn fossil fuels in a given year, and we obtain output of renewable energy devices in a given year. We eat food that has generally been grown in the year we eat it. There is virtually no accrual aspect to the way the system works. This is very different from the accrual-basis financial statements prepared by most large companies that allow credit for investments before the benefit is actually in place.

When it comes to promises such as Social Security benefits, we are, in effect, promising retirees a share of energy production in future years. The promise is only worth something if the system continues to work well–in other words, if the financial system has not collapsed, pollution is not too great a problem, and marginalized workers are not revolting.

Governments can print money, but they can’t print resources. It is the resources, particularly energy resources, that we need to run the economy. In fact, we need per capita resources to be at least flat, or perhaps increasing.

Figure 7. World energy consumption per capita, based on BP Statistical Review of World Energy 2105 data. Year 2015 estimate and notes by G. Tverberg.

 

 

 

 

 

Figure 7. World energy consumption per capita, based on BP Statistical Review of World Energy 2105 data. Year 2015 estimate and notes by G. Tverberg.

 

 

 

 

 

Printing money is an attempt to get a larger share of the world’s resources for the population of a given country. Printing money usually doesn’t work very well, because if a country prints a lot of money, the currency of that country is likely to fall relative to currencies of other countries.

What Causes the System to Fail? Too Little Energy, or Too Much Entropy?

In an interconnected system, it is sometimes hard to understand what causes the system to fail. Is it too little production of energy products, or too much entropy associated with these energy products? Astrophysicist Francois Roddier tells me that he thinks it is too much entropy that causes the system to fail, and I tend to agree with him. (See also “Pourquoi les économies stagnant et les civilizations sʼeffondrent”  by Roddier in Économie de l’après-croissance.) The rising amount of debt, pollution, and income inequality tend to bring the system down, long before “running out” of energy products becomes a problem. In fact, the low commodity prices we are now experiencing appear to be part of the entropy problem as well.

Can Renewable Energy Be a Solution?

As far as I can see, renewable energy, unless it is very cheap (like hydroelectric dams were many years ago), absolutely does not work as a solution to our energy problems. The basic issue is that the energy system works on a flow year basis. To match energy-in versus energy-out, we need to analyze each year separately. For example, we need to match energy going into making offshore wind turbines against energy coming out of offshore wind turbines, for each calendar year (say 2016). To keep the net energy flow positive, there needs to be an extremely slow ramp-up of high-cost renewable energy.

In a way, high-cost renewable energy is very close to entropy-only energy. Because of the high front-end energy consumption and the slow speed at which it is paid back, high-priced renewable energy generates very little energy, net of energy going into its production. (In some instances, renewable energy may actually be an energy sink.) Instead, renewable energy generates lots of entropy-related products, including increased debt and increased taxes to pay for subsidies. It also adds to the complexity of the system, because of the variable nature of its output. Perhaps renewable energy is less bad at generating pollution, or maybe the pollution is simply of a different type. Ultimately, it is a problem, just as any other type of supplemental energy is.

One problem with so-called renewable energy is that it can’t be expected to outlast the system as a whole, unless it is part of some off-grid system with backup batteries and an inverter. Even then, the lifetime of the whole system is limited to the lifetime of the shortest-lived necessary component: solar panels, battery backup, inverter, and the device the user is trying to run with the system, such as a water pump.

There are currently many stresses on our economic system. We can’t be certain that the system will last very long. When the system starts collapsing, it is likely to take grid-connected electricity systems with it.

What Is the Connection to Energy Returned on Energy Invested (EROEI)?

If a person believes that energy is a one pump system (the left pump in Figure 3), then a person’s big concern is “running out.” If a person wants to maximize the benefit of energy resources, he will choose energy resources with as high an EROEI as possible. In other words, he will try to get as much energy out per unit of energy in as possible. For example, one estimate gives EROEI of 100 to 1 for hydroelectric, 80 to 1 for coal, and much lower ratios for other fuels. Thus, a mix that is heavy in hydroelectric and coal will stretch energy supplies as far as possible.

Another place where EROEI is important is in determining “net” energy, that is, energy net of the energy going into making it.

As I mentioned above, energy per capita needs to be at least level to keep the economy from collapsing. In fact, net energy per capita probably needs to be slightly increasing to keep the economy growing sufficiently, if “net” energy is adjusted for all of the effects that simultaneously impact the energy needs of the economy, apart from energy used in producing “normal” goods and services. (Most people are not aware of the economy’s growing need for energy supplies. For an explanation regarding why this is true, see my recent post The Physics of Energy and the Economy.)

In theory, EROEI analyses might be helpful in determining how much gross energy is necessary to produce the desired amount of net energy. In practice, there are many pieces that go into determining the total quantity of net energy required to keep the economy expanding, making the calculation difficult to perform. These include:

  1. The extent to which population is rising.
  2. The extent to which globalization is taking place, and with it, access to other, higher EROEI, energy supplies.
  3. The extent to which the economy is getting more efficient in its use of energy.
  4. The extent to which EROEI is falling for various fuels (on a calendar year basis).
  5. The extent to which average EROEI is falling, because the mix of fuel is changing to become less polluting.
  6.  The extent to which it is taking more energy to extract other resources, such as fresh water and metals.
  7. The extent to which it is taking more energy to make pollution-control devices, and workarounds for problems with energy.

Looking at Figure 5, it is not obvious that there is a need for a big adjustment, one way or another, to produce net energy from gross energy. Of course, this may be an artifact of the way GDP is measured. High-priced metals and water are treated as part of GDP, as is the cost of pollution control devices. People’s general standard of living may not be rising, but now they are paying for clean air and water, something they didn’t need to pay for before. It looks like GDP is increasing, but there is little true benefit from the higher GDP.

The one big take-away I have from Figure 7 is simply that if our goal is to get net energy to rise sufficiently, the best way to do this is to make certain that gross energy production rises sufficiently. World leaders were successful in doing this since 2001, through their globalization efforts. Of course, the new energy we got was mostly coal–bad from the points of view of pollution and workers’ wages in developed countries, but good from some other perspectives: low direct debt requirement, low complexity requirement, and high EROEI.

Figure 8. China's energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

 

 

 

 

 

Figure 8. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

 

 

 

 

 

One issue with EROEI calculations is that they disregard timing, and thus are not on an energy flow-year basis. Ignoring timing also means the calculations give little information regarding the likely debt build-up associated with an energy product.

Conclusion

If a person doesn’t understand what the problem is, it is easy to come to the wrong conclusion. Part of our problem is that we need a growing amount of net energy, per capita, to keep the economy from collapsing. Part of our problem is that entropy problems such as rising debt, increased pollution, and increasing complexity tend to bring the system down, even when we seem to have plenty of energy supplies. These are the two big problems we are facing that few people recognize.

Another part of our problem is that it is necessary for common laborers to have good-paying jobs, and in fact rising pay, if the economy is to continue to grow. As much as we would like everyone to have advanced training (and training that changes with each new innovation), the productivity of workers does not rise sufficiently to justify the high cost of giving advanced education to a large share of the population. Instead, we must deal with the fact that the world’s economy needs large numbers of workers with relatively little training. In fact, we need rising pay for these workers, because there are so many of them, and they are the ones who keep the “demand” part of the commodity price cycle high enough.

Robots may be very efficient at producing goods and services, but they cannot recycle the earnings of the system. In theory, businesses could pay very high taxes on the output of automated systems, so that governments could create make-work projects to hire all of the unemployed workers. In practice, the idea is impractical–the businesses would simply move to an area with lower taxes.

Growth now is slowing because of all of the entropy issues involved. People in China cannot stand any more pollution. Too many laborers in developed countries are being marginalized by globalization and by competition with ever-more intelligent machines that can replace much of the function of humans. None of this would be a problem, except that we have a huge amount of debt that needs to be repaid with interest, and we need commodity prices to rise high enough to encourage production. If these problems are not fixed, the whole system will collapse, even though there seems to be a surplus of energy products.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ben Franklin’s Revenge

TriangleofDoomgc2reddit-logoOff the keyboard of Steve Ludlum

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Published on the Economic Undertow on February 29, 2016

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The past year and a half has seen the relentless unraveling of the post-Lehman recovery, the vaudeville act duct-taped and wired together on the ruins of shadow banking … taking the place of a reflective determination why ‘shadow banking’ is necessary in the first place.

Deflation, or rather, entropy has set up shop on our doorsteps. Call it ‘capital E’ entropy: the Golem we have created by way of our blithe and dithering squanderousness. Entropy cannot be bargained with, it can’t be reasoned with; it doesn’t feel pity or remorse … etc.

Entropy has put all the countries, the regions; all the economies under siege. All are struggling with credit market distortions to some degree, from the diminution of purchasing power to the greatest degree. An important and growing fraction struggles with the consequences of pointless wars and the resulting tides of migrants, other fractions are crushed by debts that can no longer be serviced out of cash flows. There is insolvency, inter-temporal contagion and more deflation in a vicious cycle.

Screen Shot 2016-02-23 at 12.55.57 PM

Along with the cycle is the frantic scramble for the next ‘solution’ … even as the only workable response to ‘less’ is stringent conservation. Purposefully doing without is never part of any conversation, it’s unpleasant, it does not offer a fabulous future or much in the way of hope …

There are endless attempts to escape consequences: to cash in, (cash out?); cries for bank bail-ins, increased austerity or the relaxation of it, more quantitative easing or less of it, negative interest rates or higher ones; always more loans adding to what we have in monstrous proportion, a mountain of claims looming over relentlessly diminished purchasing power. We are insolvent, in that purchasing power is the ‘currency’ which we must obtain in order to retire our debts.

limits-to-growth-forecast copy

Figure 1: The long meander to oblivion, this diagram from 1972 ‘Limits to Growth’, Meadows et al, illustrates what we are up against. The best the establishment can come up with is a non-sequitur:

It’s time to kill the $100 bill

… illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds as would be the case if the $20 bill was the high denomination note. And he is equally correct in arguing that technology is obviating whatever need there may ever have been for high denomination notes in legal commerce.

Lawrence H. Summers, Washington Post

 

 

It’s hard to know whether to laugh or cry over the absurdity of it all. Absurdity of it allAbsurdity of it all.

Illegal money transfers have been made electronically, in their billion$ by HSBC and other giant banks. The largest recent single user of US currency is the US military. Summers conveniently ignores the greatest criminals are the bankers, who pay themselves, not with used, non-sequential $100 bills in brown paper bags, but with electronic bonuses.

Establishment economists such as Lawrence Summers can be excused for failing to understand ‘purchasing power’ the way it is described here at Economic Undertow. It isn’t taught at Harvard or any other school nor is it a part of an equilibrium economics curriculum. It tends to be understood as the amount of finished goods or services that can be gained in exchange for a unit of credit. More units = more goods = greater wealth. More valuable units also = more goods and wealth. The idea is to manipulate the number of units to access more goods and to prosper; manipulations haven’t been working lately and the economists have no idea why.

In Debtonomics, purchasing power is the relationship between resources and the ‘work’ needed to make them available. Because resources DO the work as well as being made available BY the work, consuming resources also consumes our purchasing power at the same time. This mirrors what is observable in the real world and explains why adding ‘money’ hasn’t accomplished anything, we keep getting poorer all the time.

Resources and purchasing power are not the same but they may as well be, their relationship is unitary. One obtains or ‘purchases’ the other by way of the application of energy to displace matter over time – ‘power’. Each fraction of purchasing power represents an equal proportion of resources — capital — available to us. As capital vanishes into our machines, our purchasing power is irretrievably extinguished. With time and industrialization there is less of it. In Debtonomics, money is a derivative claim against purchasing power; so are labor, infrastructure, industrial production even the industries themselves. Changes to the particulars of the different claims such as numbers on a paper, worker productivity or interest cost are irrelevant; when we run down our resources we are ruined regardless of how much ‘money’ … or other industrial bits and pieces … we have.

Summers’ argument is disingenuous; currency controls are not to thwart criminals but aim to prevent bank runs if- and when deposit rates turn negative. Runs destroy whatever system being run from, whether it is finance, currencies or banks. Summers’ proposal ‘works’ in the sense in that it traps depositors’ funds, but it undermines depositors’ faith in the system at the same time, it is destructively counterproductive.

The establishment’s first instinct is to punish, to lash out and destroy. Our systems are built upon continuing, exponential monetization of waste. When devastation does not produce the desired outcome, we try harder, reaching for the succession of bigger hammers. After the $100 bill is turned to gristle, the $20 then the the $5 will meet the same fate. What’s left is change hunted for beneath the seat cushions. When that time arrives a nickel will be worth today’s $100, fatally undermining the well-crafted ‘policy proposal’ of the ex-Secretary of the Treasury and Director of the Mossavar Rahmani Center for Business and Government at Harvard University!

Summers proposal would effectively shrink the supply of liquid funds, amplifying dollar preference, something else not taught at Harvard. This would rebound against the fuel supply system. Removing funds from the customer = less of a bid for fuel products and lower wellhead prices. Removing fuel from customer: eventual collapse.

Everything Has To Be Perfect Forever!

Excluding the rates paid (charged) on reserves held by central banks, negative interest rates are largely a market phenomenon, they reflect a retreat out of risk; the ‘flight to safety’. They occur when there are more loanable funds available than there are low-risk investments that can absorb them. There does not have to be much of an excess of these funds for interest to fall negative; like the price of crude oil, rates emerge at the margin. Negative rates apply to securities which are considered ‘money-like’ such as sovereign debt. It is government bonds that offer negative returns.

mzm1

Figure 2: MZM money stock, (Fred). ‘Zero-maturity’ money is liquid funds in the economy (excluding time deposits/certificates of deposit). At the same time finance lends more funds into existence there are fewer destinations for them … they migrate into safe harbors such as bank deposits or credit equivalents.

MZM Velocity

Figure 3: MZM velocity has been declining for years, the reduced flow cancels out increases in the money stock. The bankers are pushing on a string, no wonder they are desperate.

Negative rates indicate the absence of good investments in the functioning, day-to-day economy; they are the imprints of deflation. Whether or not the central banks are in control or not, promoting deflation is not the bankers’ intent. Instead, it’s an unintended consequence of efforts to bail out private finance at public expense.

Central bank manipulation gives the illusion that risk has been ‘legislated out of existence’. This is dangerously false; risk is a First-Law cost associated with the surplus of debt. Increasing the surplus of loans spreads risk around or pushes it out of sight, but only for a little while. Exponentially increasing risk lurks beneath very low/negative rates like a tiger in the jungle. The performance of the loans depends on the ability of international deadbeats such as the Italian government to borrow endlessly into the future, for everything to be perfect forever! Risk springs out of hiding when supposed pristine borrowers stumble and the loans are marked to market as junk. Under the circumstances, losses to the hapless bond speculators — and central banks — are astronomical, bankrupting the entire banking system at one go!

Risk also manifests itself as increased operating expenses for businesses that lack assets to sell to the central banks. These added costs accelerate vulnerable firms’ drift towards insolvency which in turn torpedoes the firms’ lenders, stampeding investors’ toward government bonds and (perceived) safety. All of this makes the risks worse. Surplus-related costs also discount the overall worth of commerce relative to holding currency = more dollar preference. Intervention endangers through the back door the same enterprises the bosses are desperate to support …

Bringing Excess Claims into Alignment With Purchasing Power.

As the bosses vie to increase growth they undermine themselves by destroying resources. They tilt the balance toward increasing claims while purchasing power is cannibalized. Whatever pittances are gained in the immediate-term are at risk going forward as the overhang of claims increases. Alternatively, removing claims tilts the balance the other way: borrower defaults, debt write-offs; by hoarding money or confiscation = ‘Conservation by Other MeansTM‘.

Managers want low-cost money to keep their Vaudeville act running as long as possible, even as it has exhausted itself by every reckoning including its own. Forced credit expansion no longer stimulates business expansion or growth. More costly money would accurately price in the risk that is ballooning (out of sight) within the system.

Managers want their currencies to be cheap so they might increase goods exports and gain foreign exchange. Forex becomes collateral for domestic loans leading to the mercantile increase in ‘wealth’, (China). This strategy fails when all managers strive to export at the same time. The outcome is diminished trade overall and less Forex collateral, amplifying deflation in a vicious cycle. Currency depreciation is also counterproductive for credit providers such as Japan, the US and UK. When credit is a country’s only real product, depreciation represents a reduction of the country’s output. This is also ‘Conservation by Other MeanTM‘ as the credit provider cannot finance imports by ‘borrowing’ them.

Managers also want money that is worth less than commerce so customers lack incentives to hold onto it. This is also dangerous as money can become so cheap that commerce becomes unaffordable.

Diminished finance sector returns, or Net Interest on Margin (NIM)

 

Net Interest Margin

Figure 4: Because finance creates its own funds it has no need to borrow. Interest margin represents the narrowing spread between finance returns from loans to largest- and presumably most creditworthy borrowers and returns from lending overall. NIMs have been declining for decades along with velocity and are, ironically, the consequence of increased financialization and declining customer income. Reducing interest paid by the central banks on excess reserves narrows NIMs further, undoing the bailout effects of QE.

Outcome

There is no overcoming entropy or declining purchasing power, only strategies to ameliorate the consequences and preserve resources/purchasing power for the future, along with some small component of institutional integrity. Managers fail to grasp the seriousness of our onrushing predicament: the destructive potential of declining resource availability/purchasing power is equal to- or greater than a nuclear exchange, the results are just as permanent. If managers aim to destroy this country, doing nothing- or more of the same is a good way to go about it! The establishment obsesses about money even as the real problem is a shortage of resources needed for our economy to produce the goods and services we expect. What needs to change are expectations. The money-system failures are symptoms of our resource shortfall, including declining petroleum prices and the widening circle of related industrial and finance insolvencies. Schemes that seek to maintain the status quo are certain to fail. Almost all of them are variations on the theme of bond-buying, dubious accounting and trickle down economics = robbery. Almost all of them depend upon central banks which have grounded themselves on their own policy contradictions. Absent change, financial accountability will enter through the back door … as central bankers and the their private sector clients are engulfed by the system collapse taking place under their feet. One way or the other, finance claims will be brought into alignment with purchasing power. The hardest path is the annihilation of claims along with finance at the same time.

Thinking Outside the Banking Box.

One way to start down the road to voluntary alignment is to ‘buy down’ claims. The US government has the authority to produce money by itself, without borrowing; “to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;” (the implication is that money is a tool of measurement.) Article 1, § 8, Constitution US, (Legal Information Institute, Cornell University).

US Note

— A $100 US Note, a late(st) model ‘Greenback’. Congress allowed the ‘float’ of $346,681,016 of these notes, however, they are out of circulation with the vast majority having been destroyed by the Treasury.

“If the Nation can issue a dollar bond it can issue a dollar bill.
The element that makes the bond good makes the bill good also. The
difference between the bond and the bill is that the bond lets the
money broker collect twice the amount of the bond and an additional 20%.
Whereas the currency, the honest sort provided by the Constitution pays
nobody but those who contribute in some useful way. It is absurd to say
our Country can issue bonds and cannot issue currency. Both are promises
to pay, but one fattens the usurer and the other helps the People.”

 

 

 

— Thomas Edison

 

 

Last Summer the Undertow examined the possibility of Greece issuing ‘greenback’ or non-liability fiat euro notes. Greece would use the euros to retire maturing debt and to facilitate internal exchange that was — and currently is — stifled by the overhang of debt and the accompanying demand for repayment. While note issue cannot ‘fix’ structural problems outright, it is possible to ease immediate monetary pressures and use the opportunity to put into effect a conservation plan.

As in Greece, the purpose of US notes would be reduce the overhang of debt-claims and the accompanying demand for repayment funds; to bring claims and purchasing power into better alignment. Issued notes would retire maturing debt without requiring new debt to replace it. It’s a legal ‘cheat’, Bankers will object, but creeping system insolvency leaves them in no position to do anything but complain. By way of notes, debts are ‘repaid’ rather than haircut or defaulted upon; the third alternative is a crash or for funds to be forcibly extracted from the citizens and then a crash.

– The Treasury would issue zero-liability US Notes — or ‘greenback’ dollars — as legal tender under current law or new legislation. Unlike the balance of our money supply, notes would simply be issued by the US Treasury rather than ‘borrowed into existence’ from finance.

– Government fiat has been issued for almost a millennium beginning in China. A notable example of sovereign issue money are Demand Notes first introduced during the Civil War by Edmund Dick Taylor. The notes were necessary because big Philadelphia- and New York banks would not lend the Lincoln administration gold at reasonable rates to fund the war.

– The notes would retire government obligations on a fixed schedule, for example, the current $19+ trillion$, to be retired over a period of 20 years. The notes could be applied against any liability that is a claim against circulating dollars.

– Payments would be made electronically, out of ‘thin air’, the same way loans are made by banks, as credits on borrowers’ accounts.

– Notes would be legal tender; to repay any debt, private or public everywhere dollars are made use of. Dollars are fungible: Larry Summers notwithstanding, each dollar is the same as all the others. Fiat issuance by the Treasury is the same as fiat issuance by a private sector bank. The difference is no liability to the government issue. The government can provide funds without digging itself deeper into the debt hole.

Loans are simply issued by banks as credits on a spreadsheet. ‘Bank money’ does not exist until a loan is made. The return from lending is the requirement on the part of the borrower to repay with money that is more costly to him than the loan is to the lender. Bank money costs the lender almost nothing to create as it requires only keyboard entries. The borrower must repay with circulating money; he cannot create repayment on his keyboard but must beg, steal or more likely borrow repayment- or have it borrowed by others in his name (government). Whereas interest cost tends to be a small fixed percentage of the principal payable over time, the expense of circulating money is determined by its availability in the marketplace, by supply and demand. When circulating money becomes scarce the real worth of repayment can be much greater than the nominal balance due, yet this is invariably when the demand to repay is fiercest, as during a margin call. If the loan is secured and the borrower cannot repay, he must surrender collateral along with other rights. These are always worth more than a keyboard entry.

US Notes would give the Treasury the ability to make keyboard repayments, to pay lenders ‘in kind’. By doing so the Treasury would remove the currency drain on the private sector (cash demands against depositors).

– What makes up our supply of circulating money is the unpaid debts of others, funds that are ‘temporarily’ out of circulation, overseas (petrodollars) or hoarded. Money created by lending is extinguished when the loan is repaid. The net increase in circulating funds that results from note issue is zero.

– The Treasury can recapitalize banks directly a with note issue, rather than by bailing in unsecured creditors and depositors. The Treasury could act as ‘issuer of last resort’ in place of- or alongside the central bank. The Treasury can also make up account shortfalls in accounts of deleveraging derivative accounts:

Derivatives

Figure 6: US domestic derivative exposure (dollars) is over four times GDP, (FRED). Unforeseen changes in conditions affecting holders’ collateral position could create liabilities that are too large to meet with funds in hand. Central bank funds are loans lodged against the public. Derivatives shortfall could be made up in any amount with note issue, which would then become a liability lodged against the speculators who let their derivatives positions get out of hand.

– Notes would be available in any amounts to plug liability holes until positions could be closed and accounts zeroed out.

– Note issue would re-balance the relationship between banks and sovereigns, the influence of the banking cartel would be reduced.

– Foreign exchange can be leveraged or merged with Note issue. Because the dollar is the primary reserve currency, Note issue would be very effective as a means of backup liquidity everywhere dollars are made use of.

– Lenders would not be able to hold the US or its citizens hostage by withholding funds.

– Notes would render mercantile leverage against Forex unnecessary – dollar depreciation.

– Any fiat regime would require stringent energy conservation as the external (overseas) flows of borrowed dollars to purchase fuel have bankrupted the country in the first place.

– The US and many other countries are in the same situation as hapless Greece. Our debts cannot be retired because our wasteful lifestyle does not provide the means for us to do so.

– Financialization is both incentive- and means to strip-mine our capital base. This regime falls apart under the weight of its own costs. As a necessary component of reform, financiers must be held accountable for their negligence. The present conditions cannot be endured much longer. If managers refuse to act, citizens will take matters into their own hands.

 

 

 

 

 

 

 

 

War on Cash 2 (Show Me the Money!)

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Published on the Doomstead Diner on February 11, 2016

For Part 1 of War on Cash and MUCH MORE visit

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

 

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

For the rest, LISTEN TO THE RANT!

The Paris Gravity Well 2: Trillionization

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Published on Peak Surfer on January 24, 2016

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"We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams."
 

Charlie said, "That's the trouble. You see it the way the banking industry sees it and they make money by manipulating money irrespective of effects in the real world. You've spent a trillion dollars of American taxpayers' money over the lifetime of the bank and there's nothing to show for it. You go into poor countries and force them to sell their assets to foreign investors and to switch from subsistence agriculture to cash crops. Then, when the prices of those crops collapse, you call this "nicely competitive" on the world market. The local populations starve and you then insist on austerity measures even though your actions have shattered their economy….

"You were intended to be the Marshall Plan, and instead you've been carpetbaggers."

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

“With fundamentals changing slowly and risk appetite falling rapidly, the stage is set for a longer period of risk asset underperformance,” Jabaz Mathai, a strategist at Citigroup Inc., said.  “There is no quick fix to the headwinds facing global growth.”

"Similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009 … all either overlapped with a recession, or preceded a recession by a few quarters."

There has been a storm brewing since the last trifle with full-on collapse in 2008-2009. The extend-and-pretend debt balloon was reinflated and stretched to new enormities as Keynesian cash infusions fueled a Minsky Moment, if not a Korowicz Crunch.

The instability in finance is compounded by the instability in demographics. In Mexico City, Bogata and Rio they call them NINIs — the millions of youth between 15 and 24 who neither study nor work. They are now about a fifth of the population in the underdeveloping world, responsible for higher rates of homicide, gangs, and unwed pregnancy. Of those born to NINI mothers, there is a 22.3% greater likelihood of becoming a NINI, according to the World Bank. All this tinder simply builds, bides its time, wanders the streets, waits for a revolutionary spark.

As we said here last week, the trigger for the markets' sudden move may have been what happened in Paris but could not stay in Paris. When it filtered out from the December summit that 195 countries had actually done the unimaginable and set a goal of carbon neutrality, meaning phasing out net fossil fuel emissions by 2050, the financial sector was at first caught dumbfounded. The World Bank guys flinched.

Now it has sunk in. The Guardian reports:

Former OMB Chief David Stockman's recap

Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 (£11) a barrel, economists at the Royal Bank of Scotland have warned. In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

Government subsidies are about to undergo a titanic shift. Many governments spend more on fossil-fuel subsidies than they do on health and education, more than a trillion dollars. Consumer benefits such as subsidized fuels and cheap finance add $548 billion per year. Government support for companies to expand production add another $542 billion just in G20 overdeveloped countries, and a mere top 8 of those will spend $80 billion of this kind every year, four times the investments going to renewables globally.

Tomorrow those same Big-8, and 188 others, will begin spending several times those trillions subsidizing renewables. Jeremy Leggett, founder of Solar Aid and Solarcentury, calls it "trillionization." It won't begin to fill the energy gap that the switch will create, but the psychology of sunk investment will be in charge from thereon out.

Oil producing states and countries are aghast. The "clear signal" that Paris sent was not what they were expecting. In Alaska, the Permanent Fund has been running in the red and the legislature is talking about an income tax. Had the Paris Agreement not come together, they might hope for a rebound of fossil prices and investments in drilling the North Slope and Arctic Refuge.

Petroblas, the national oil company of Brazil and wellspring of the Brazilian Economic Miracle, is now cash negative. It will be forced to turn to the government for a bail-out, but to where will its government turn?

In Mexico, the deficit is running 100 billion and the peso has dropped from 12 in 2014 to soon-to-be 20 against the dollar. If you have dollars you can get a meal in a good restaurant or a room for the night for 5 or 10 of them. So far in January the price rise of food for the average Mexican is alarming. Onions are up 19%, poblanos 15%, bananas 10%, tomatoes 9%.
 
The national oil company, PEMEX, came out on Monday saying it is not true that its operating with losses, but below the $26 per barrel it would be. On Tuesday the price dropped to $24.74. It closed the week at $22.77 but as we write this you can buy a barrel in Mexico City for as little as $20.32. Mexico's federal budget is entirely dependent on oil money and don't look now but Mexico, when it was petrodollar flush, became a net importer of most staple foods and many other essential commodities, which helps explain the grocery dilemma. Mexico now buys onions, poblanos, bananas and tomatoes from California. Also beans, corn and rice.

Gotta love those World Bank guys.

Venezuela, which surprised everyone by signing the Paris Agreement at the final hour, declared an economic emergency on January 15. France, which foolishly drank too much atomic kool aid thinking it might spare itself from petrocollapse, has a budget shortfall of 2.2 billion dollars and declared national economic emergency on January 17. The jobless rate in France, the eurozone's 2d largest economy, is above 10%, compared with a 9.8% EU average.

Andrew Roberts, RBS’s credit chief, said:

European and US markets could fall by 10% to 20%, with the FTSE 100 particularly at risk due to the predominance of commodity companies in the UK index. London is vulnerable to a negative shock. All these people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe.

We suspect 2016 will be characterized by more focus on how the exiting occurs of positions in the three main asset classes that benefited from quantitative easing: 1) emerging markets, 2) credit, 3) equities … Risks are high.

Zero Hedge reports:
 

"For dry bulk, China has gone completely belly up,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, talking about ships that haul everything from coal to iron ore to grain. “Present Chinese demand is insufficient to service dry-bulk production, which is driving down rates and subsequently asset values as they follow each other.”

“China’s slowdown has come as a major shock to the system,” said Hartland Shipping’s Prentis. “We are now caught in the twilight zone between shifts in China’s economy, and it is uncomfortable as it’s causing unexpected slowing of demand.”

The continued collapse of The Baltic Dry Index remains ignored by most.

According to  Zero Hedge:

The North Atlantic has few to nil cargo traveling in its waters. Instead, the giant container ships are anchored. Unmoving. Empty.

Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped.

The slow response to the Paris outcome has been a complete portfolio review by every actuary and bean-counter in the biggest banks and investment houses, pension funds and mutuals. Hedge fund managers are scratching and sniffing for places to park billions being lifted from soon-to-be-stranded fossil assets. The clean-tech market, signaled first by China, is reacting by recycling cash out of fossil holdings.

Peter Sinclair of ClimateCrocks.com reports:

The Energy Information Administration calculates in its 2015 analysis that the average U.S. levelized cost for new natural-gas advanced combined cycle plants is 7.3 cents per kilowatt-hour — the same as solar.

However, to compare accurately, we have to add about 10 percent to the cost of solar to firm up this variable resource. So we’re close to cost parity, but not quite there.

At $1 per watt, the levelized cost falls to just 5.7 cents per kilowatt-hour, well below cost parity with new natural-gas plants. With two-axis trackers and the best solar resources, which increase the capacity factor to 32 percent, that cost falls to just 4.5 cents per kilowatt-hour. We’re headed to $1 per watt as an all-in cost in the next five to 10 years.

Bloomberg New Energy Finance reported last summer that wind power was the cheapest source of power in the U.K. and Germany in 2015, even without subsidies. The article’s tagline reads: “It has never made less sense to build fossil fuel power plants.” The same article highlights the feedback loop that solar and wind power have in terms of reducing the cost-effectiveness of fossil fuel power plants due to the dispatch order of renewables versus fossil fuel plants.

The solar singularity is indeed near (here?) in the U.S. and increasingly around the world. I described previously that 1 percent of the market is halfway to solar ubiquity because 1 percent is halfway between nothing and 100 percent in terms of doublings (seven doublings from .01 percent to 1 percent and seven more from 1 percent to reach 100 percent). The U.S. will reach the 1 percent solar milestone in 2016. We’re halfway there. Buckle your seatbelts.

There are plenty of unemployed oil workers ready for retraining. James Howard Kunstler: 

So, in 2015, the shale oil companies laid off thousands of workers, idled the drilling rigs, and kicked back to pray that the price would go back up. Which it didn’t…. The landscape of North Dakota is littered with unfinished garden apartment complexes that may never be completed, and the discharged construction carpenters and roofers drove back to Minnesota ahead of the re-po men coming for their Ford F-110s.

To see what does well in the new, post-Paris domain, watch stocks like First Solar (FSLR), Renewable Energy Group (REGI), SolarCity (SCTY) and Siemens (SIE) over the next quarter, and mutuals like Firsthand Alternative Energy (ALTEX), New Alternatives (NALFX) and Guinness Atkinson Alternative Energy (GAAEX). Some of these know their audience and have vowed to screen for social justice. Gabelli SRI AAA says, for instance:

The fund will not invest in the top 50 defense/weapons contractors or in companies that derive more than 5% of their revenues from the following areas: tobacco, alcohol, gaming, defense/weapons production….

There is a psychology that sets in once the corner is turned on fossil investments that may make a big difference in the political debate about climate change. For more than half a century the GOP, the Fossil Lobby and Wall Street have blocked, cut or delayed investments in renewables and papered it over with greenwash. Forced by pledges made in Paris — and a legally-binding agreement with the word "shall" used 143 times — and the emergence of a huge new global competition to begin not only unchaining the clean-tech sector, but to actively promote it with subsidies, research grants and moonshot-scale deployments, the psychology of chasing after sunk investments will drive an apolitical energy conversion.

Moreover, 350.org and Greenpeace are ramping up campaigns to make sure the promises made in Paris are kept.
 

No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!

Clean energy will not deliver a 1:1 replacement for fossil fuels. Get over it. We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams. But the investments we do make, and the worsening weather, will drive us to make even more and ever larger investments, in a forlorn search for a full replacement. While wasteful, it is not nearly as wasteful as the industrial and military investments of the past century or more.

Persian Gulf wars, going back to antiquity, have never been fought over sunlight. As David Stockman recently recalled:

[A] 45-year old error … holds the Persian Gulf is an American Lake and that the answer to high oil prices and energy security is the Fifth Fleet.

***

That doctrine has been wrong from the day it was officially enunciated by one of America’s great economic ignoramuses, Henry Kissinger, at the time of the original oil crisis in 1973. The 42 years since then have proven in spades that its doesn’t matter who controls the oilfields, and that the only effective cure for high oil prices is the free market.

The switch to sunlight will make the lives we are living better for many, especially those on the front lines of the oil wars, even as we continue towards an Anthropocene Armageddon with little sign of being able to change that trajectory.

Guy McPherson is fond of reminding us, after University of Utah professor Tim Garrett's deft analysis, that industrial civilization is a heat engine.

In a well-read article in Climate Change in November 2010, Garrett ran the simple arithmetic:

Specifically, the human system grows through a self-perpetuating feedback loop in which the consumption rate of primary energy resources stays tied to the historical accumulation of global economic production — or p×g — through a time-independent factor of 9.7±0.3 mW per inflation-adjusted 1990 US dollar.

If civilization is considered at a global level, it turns out there is no explicit need to consider people or their lifestyles in order to forecast future energy consumption. At civilization’s core there is a single constant factor, λ = 9.7 ± 0.3 mW per inflation-adjusted 1990 dollar, that ties the global economy to simple physical principles. Viewed from this perspective, civilization evolves in a spontaneous feedback loop maintained only by energy consumption and incorporation of environmental matter.
 

Unsold cars sit on receiving docks all over the world

Because the current state of the system, by nature, is tied to its unchangeable past, it looks unlikely that there will be any substantial near-term departure from recently observed acceleration in CO2 emission rates. For predictions over the longer term, however, what is required is thermodynamically based models for how rates of carbonization and energy efficiency evolve. To this end, these rates are almost certainly constrained by the size and availability of environmental resource reservoirs. Previously, such factors have been shown to be primary constraints in the evolution of species


What this means is the same thing that Gail Tverberg, Richard Heinberg and many others have been saying for a very long time — modern economies are a product of cheap energy. Take that away and they crash and burn. That’s the good news. Garrett says there is no other climate remediation model that works. Civilization is a heat engine whether it is powered by nuclear fusion or photovoltaics. The global economy must crash for humanity to stand a chance. McPherson would take it a step farther and say it is already too late, enjoy what time you have.

The famous Fermi paradox raises the question: why haven’t we detected signs of alien life, despite high estimates of probability, such as observations of planets in the “habitable zone” around a Sun-like star by the Kepler telescope and calculations of hundreds of billions of Earth-like planets in our galaxy that might support life. To produce a habitable planet, life forms need to regulate greenhouse gases such as water and carbon dioxide to keep surface temperatures stable. Early extinction, before interstellar communication, solves the Fermi Paradox. So does merely the extinction of civilization capable of interstellar communication without the same degree of trauma. No civilization, no heat.

But wait! Can that excess heat civilization is producing be turned into air conditioning for the planet? Is there a permacultural decroissance that could rescue our genome? Stay tuned, but first, next week, we play the Trump card.

 

 

 

 

 

 

 

 

The Paris Gravity Well 1

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Published on Peak Surfer on January 17, 2016

PeakSurfer

Discuss this article at the Environment Table inside the Diner

"The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years."

 

   The World Bank Guys talked about rates of return and the burden on investors and the unacceptable cost of the doubling of the price of a kilowatt hour. Everyone there had said all of this before, with the same lack of communication and absence of concrete results.

Charlie saw that the meeting was useless. He thought of Joe, over at the daycare. He had never stayed there long enough even to see what they did all day long. Guilt stuck him like a sliver. In a crowd of strangers, 14 hours a day.

The bank guy was going on about differential costs. "And that's why its going to be oil for the next 20, 30 and maybe even 50 years," he concluded. "None of the alternatives are competitive." Charlie's pencil tip snapped.

"Competitive for what?" he demanded. He had not spoken until that point and now the edge in his voice stopped the discussion. Everyone was staring at him.

He stared back at the World Bank guys. "Damage from carbon dioxide emission costs about $35 per ton. But in your model, no-one pays it. The carbon that British Petroleum burns per year by sale and by operation runs up a damage bill of $50 billion dollars. BP reported a profit of $20 billion so actually its $30 billion in the red, every year.

"Shell reported a profit of $23 billion but if you added the damage cost it would be $8 billion in the red. These companies should be bankrupt. You support their exteriorizing of costs so your accounting is bullshit. You are helping to bring on the biggest catastrophe in human history.

"If the oil companies burn the 500 gigatons of carbon that you are describing as inevitable, because of your financial shell games, then two-thirds of the species on the planet will be endangered, including humans. But you keep talking about fiscal discipline and competitive edges and profit differentials. It's the stupidest head-in-the-sand response possible."

The World Bank guys flinched at this. "Well, we don't see it that way."

 

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

 While the story coming out of the White House Press Room this week was phrased as a temporary moratorium on new coal mining leases on federal lands, the bigger story was in the details of the review that the President had ordered. Like Robinson's character in Sixty Days, the White House recognized that the real cost of coal is not currently accounted for in its price, so the new review will tally the environmental impacts, including destruction of public lands from air and water pollution from strip mining and failed mine reclamation, public health impacts from transporting and burning coal, damage from ash spills, greenhouse gas emissions and climate change. It will set a price on future leases based on this thoroughgoing review that brings the cost of coal in line with the reality of the actual costs.

If this had to be run through Congress, powerful coal-state Senators like Mitch McConnell would derail it before it got out of committee. As merely Bureau of Land Management regulatory policy, it falls under the Executive Branch, where the President's is the only opinion that counts.

Tomorrow senior politicians, digiratti activists and Hollywood stars ski into the Swiss resort of Davos for the annual World Economic Forum. The theme was to have been the 4th Industrial Revolution – robots, AI and the  biotechno singularity — but the buzz is all about the latest crash of the world economy.

The trigger for all this change may have been what happened in Paris but could not stay in Paris. In December we reported from the United Nations climate meeting where many of these same characters — John Kerry, Leonardo DiCaprio, Justin Trudeau, Angela Merkel — were on stage. We described then how an amazing role reversal was in progress and how it had transformed COP-21, midway through the second week of deadlocked negotiations.

The roles that switched were between the dominants, like Exxon-Mobil, Shell and BP, and the submissives — the entire renewables industry. Renewables are largely a digital world, enjoying advancements in crystal structure, solid state controllers, neodymium and other rare earth metallurgy that follow the proscribed arc of Moore's law, doubling in efficiency and halving in cost at close intervals, driving exponential adoption and dissemination.

Fossils, in contrast, are an analog industry, trying to wring the last drops of intoxicating elixir from the carpet of the pub after closing time. In 2015 those two curves crossed, and renewables are now cheaper (even free at some hours for select consumers in certain markets) while coal, oil and gas are queuing up outside bankruptcy court.
 

Salvaging beer from the bar floor after last rounds

The US Department of Energy reported this week:
 

The Short-Term Energy Outlook (STEO) released on January 12 forecasts that Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. This is the first STEO to include forecasts for 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in April 2016 of $37/b should be considered in the context of recent contract values for April 2016 delivery, suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).

The decline in oil price is too little, too late. It cannot keep pace with the price decline we are seeing in the clean tech revolution. Consequently, more people now work in the US solar industry than in oil and gas at the wellhead. In 2015, for the third straight year, the solar workforce grew 20 percent. Clean tech employs far more women than fossil, and 5 percent of the workforce is African American, 11 percent Latino, and 9 percent Asian/Pacific Islander.

At the same time, rear-guard action by the Coal-Baron-selected legislatures in Arizona and Nevada —  states that could be leading the nation in solar power production — have led to layoffs in the renewables sector. The pushback over solar and wind fees by grid owners, punitive taxes, and net metering promise to keep those states in the Dark Ages, as they did the United States for the past four decades.

In a famous L'il Abner cartoon, Pappy Yokum tells L'il Abner, "Any fool can knock down a barn, it takes a carpenter to build one." To which L'il Abner replies, "Any fool? Let me try!"

Listening to the Republican presidential candidates debate is like watching a Fox-den full of L'il Abners.
 

US Solar Power 2010-2015

So it is not surprising that at the stroke of a pen, three Republican appointees on the Nevada Power Utility Commission decided the fates of millions of ratepayers when they killed solar feed-in-tariffs in that state. It was not unlike Michigan governor Rick Snyder deciding to kill and maim thousands of Detroit residents by switching their water to a polluted source and then covering up the damage. You might say no-one gets killed or maimed from solar energy, and that's closer to true, but plenty more get poisoned every year from the fossil alternative.

The numbers being parsed in Davos will be puzzling to many attending that meeting. From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth. The research group Genscape said rail deliveries to US Atlantic coast terminals continued to drop to the end of the year and the spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill.”

Just 5 years ago investors clamored for more tank cars to pick up the slack from overwhelmed pipeline capacity. Now those cars sit idle on sidings and no one is ordering more. Pipelines are idle too, as refineries on the coasts have found that it is cheaper to buy crude of higher quality than shale oil, shipped by ocean tanker from Canada, Nigeria and Azerbaijan.
 

Junk bond sales are all that supports
the fracked gas Ponzi scheme.

A Congress desperate to please its oil masters in an election year abolished four-decade-old restrictions on exporting domestic crude. While some tankers now take crude from the Gulf Coast to refineries in Venezuela, where the heavy sludges and half-formed keragens can be more economically processed because of fewer environmental restrictions, the US then imports back the finished products at a hefty mark-up.

The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years. And while the shift away from coal-powered energy, the long recession, and the petering out of the fracking and shale Ponzi real estate play would obviously lead to fewer tons, barrels and cubic feet being moved, it doesn't explain the full depth of the stoppage. The rail and barge slowdown is now spreading to more consumer-oriented segments. Intermodal carloads typically related to consumer goods fell 1.7 percent in the final quarter of last year.

"We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says.
 

"Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009."


“When people get hungry, governments fall” — Stuart Scott, Through A Dark Portal, Radio Ecoshock, January 13, 2016

If you can read the tea leaves, or even if you can't, we are now in the long slide. We will examine the financial road ahead, and the Paris Effect on that, in greater detail next week.

 

 

 

 

 

 

 

 

 

 

 

 

Discovery

Anthony-Freda-Illustrations-Politics1gc2smFrom the keyboard of James Howard Kunstler
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Anthony-Freda-Illustrations-Politics1
 
Originally Published on Clusterfuck Nation January 11, 2016
 


It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value — e.g. stocks on the Shanghai exchange — and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment.

Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection.

When various authorities — the BLS, the Federal Reserve, The New York Times — state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin façade of soundness. For instance, Amazon.com. The company continues to seem like a good idea. And it reinforces that idea in the collective imagination by sending a lot of low-priced goods to your door, (all bought on credit cards), which rings your (nearly) instant gratification bell. This has prompted investors to gobble up Amazon stock.

It’s well-established by now that the “brick-and-mortar” retail operations are majorly sucking wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead. What interests me in that story is the idea that every single object purchased these days has a UPS journey attached to it. Of course, people also drive to the Target store, though I doubt they leave the place with just one thing.

That dynamic ought to call into question just how people are living in the USA, and the answer to that is: spread out all over the place in a suburban sprawl living arrangement that has poor prospects for being reformed or mitigated. Either you drive yourself to the Target store for a slow-cooker and a few other things, or Amazon has to send the brown truck to each and every house. Either way includes an insane amount of transport, and sooner or later both the brick-and-mortar chain store model and the Amazon home delivery model will fail.

Now I don’t believe that will be the end of retail trade, but it will open the door for a painful transition to whatever the next iteration of retail trade will be. Probably much smaller and more local with less stuff. Unfortunately, it is difficult to imagine a resolution of that without also imagining a transition away from suburbia. The loss of faith in the suburban disposition of things will probably represent the greatest loss of perceived wealth in human history — which is how it should be, since it also happened to be the greatest misallocation of resources in human history. It seemed like a good idea at the time, and now its time has passed.

I suppose the loss of faith in value of all kinds will play out sequentially. It is starting in financial “assets” because so many of these are just faith-based stories, and in this quant-and-algo age it has gotten awfully hard to tell what is good story and what is just a swindle. One wonders, for example, how many well-dressed young people at the bond desks have been able to pawn off sub-prime car loans bundled into giant, tranched bonds with attractive yields to hapless counterparts at the asset allocation desks of the pension funds and insurance companies. My guess is the situation is at least just as bad as it was 2007.

The problem is that when this sucker goes down, to paraphrase the immortal words of George W. Bush, you have to wonder how much other stuff of everyday life for everyday people it will take down with it. The discovery phase of our predicament began ever so crisply in the very first business week of the new year. I’m going to hazard to predict that the damage halts briefly in mid-winter and then resumes with a vengeance in March. This may give thoughtful people a chance to rest and assess.

 

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.

A Week that will Live in Infamy: Week 1, 2016

That-Was-The-Week-That-W-That-Was-The-Week-473964gc2reddit-logoOff the keyboard, microphone and video editor of RE

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Published on the Doomstead Diner on January 10, 2016

Discuss this Rant at the Diner TV Table inside the Diner

Audio Only:

Download the mp3 from Diner Soundcloud

Transcript available Inside the Diner

clusterfuckWeek 1 of 2016 turned out incredibly eventful in the World of Collapse, and as a result I shelved my usual text based Sunday Brunch article in favor of a RANT on the ongoing CLUSTERFUCK.  Carnage like we had in the last week simply cannot be adequately treated in an text based blog.  The article I did have planned for Sunday Brunch I will publish sometime this week or maybe next weekend, a response to some issues brought up in the lead off Weather Gone Wild  episode.

The financial end of Collapse appears to be rapidly accelerating now, and may be at the point Central Bank interventions cannot contain the problem, which as I reinforce regularly is not really a monetary problem at all, but rather a resource depletion & population overshoot problem.  Printing more fiat, extending more credit to the uber-rich, flipping to Gold as currency, none of these things can work to resolve resource depletion and population overshoot.  Only depopulation can resolve those problems, which is why all the wars are breaking out over the resources.  No aggregate population willingly depopulates, although increasing suicide rates within populations are a common outcome.  This has been the case in Greece, and is also now apparent in Alberta in Canada as the Tar Sands play goes bust.  Wars diminish population and continue until some sort of balance is achieved with the resources in the environment.  Given the current level of resource depletion relative to population size, you can expect the wars to continue onward here for quite some time to come, although the profile may change in terms of international conflicts vs civil wars and high tech battles vs trebuchets and atl-atls over time.

In any event, Week 1 of 2016 saw a major escalation on all levels, particularly the financial one, which as it continues inexorably toward final collapse will drive all the rest of the civilization structures toward collapse as well.  Insulating yourself against these oncoming calamities as best you can remains the priority for individuals and small communities as collapse plays itself out.

Also, in case you missed it, here's the recap from 2015 moving into this Clusterfuck

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rising Tides and Economyths

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Published on the Doomstead Diner on December 13, 2015

"A Rising Tide Lifts All Boats…."

Discuss this article at the Economics Table inside the Diner

"…and sinks everyone on shore."

OK, I added the coda to that cliche myself.  LOL.

After that Intro, you probably think this article is going to be about Climate Change, or maybe my Geotectonic Ocean Heat Transfer Theory.  It's not.  It's about Economics and Money, my central focus since I became aware of Collapse Dynamics in 2007-2008 with the collapse of the Investment Banks Bear Stearns & Lehman Brothers.

In some respects this article is also going to be a rehash of concepts I tried to clarify in The Money Valve 4 part Series around a year and a half ago or so now.  For those of you who missed the series, the links are The Money Valve, The Money Valve II, The Money Valve III & The Money Valve IV,

"A Rising Tide Lifts All Boats" has nothing to do with Tsunamis, Earthquakes or even the position of the Moon as it circles the Earth.  It's another one of those Economyths TM like Trickle Down Economics.

The aphorism "a rising tide lifts all boats" is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should therefore focus on the general macroeconomic environment first and foremost. The phrase is commonly attributed to John F Kennedy,[1] who used it in a 1963 speech to combat criticisms that a dam project he was inaugurating was a pork barrel project.[2][3] However the phrase has been used more commonly to defend tax cuts and other policies where the initial beneficiaries are high income earners.[4]

The notion here is that if you hand out money to the already rich, the new money and new prosperity will eventually work it's way down to the bottom end of the society and they will be better off too.  Their Canoes will be higher up, even though they might not be as comfortable as the super yachts of the .01% who get dished out the money first.

https://s-media-cache-ak0.pinimg.com/736x/d1/a5/88/d1a588173dc9e1794df1fe13ee74f6dd.jpg

Tide rises for this boat first

http://usercontent1.hubimg.com/12376698_f496.jpg

Tide is supposed to lift this boat also

Unfortunately, in reality in the world of Economics it doesn't work that way at all.

This Economyth has been long used by the Elite to justify their own wealth & privilege, and for a long time it was semi-believable also  I mean, today even Poor People have Smart Phones!  20 years ago poor people did not have smart phones!  Today even poor people in the FSoA have Used Cars!  100 years ago poor people did not have used cars!

http://www.blogcdn.com/www.engadget.com/media/2013/01/modelx-2013-01-14-600.jpg

The .1% have "Green" EVs like this

http://www.pensacolafishingforum.com/attachments/f51/60566d1347646261-fs-used-diapers-beat-up-cars-goat-carts-old-tennis-shoes-car-jpg

Poor people have nasty polluting ICE cars like these

But at least they have carz now!  See?  The rising tide really DID lift all boats!

Well no, not really, because while the tide was rising up above ground with the production of all those smart phonez and carz, below ground the tide of fossil fuel energy that enabled the production of all those toys was receding.  The "trickle down" effect  of poor folks getting used carz after the new car buyer worked for a while as the energy moved its way downhill, but the poor folks never got the newest latest greatest Tesla or whatever the hot item of the day was, at least with the big ticket items.

Meanwhile, outside of the Heart of Darkness in the 1st World countries, the lives of the poor folks DEFINITELY are not getting better, in fact the Rising Tide for them is making things a whole lot worse these days in quite a few towns, like Jakarta for instance.

http://s.wsj.net/public/resources/images/BN-BD757_INfloo_G_20140119014845.jpg

Wading to school & work every day is NOT an improvement!

All over the 3rd World, the poor people are starting to get the picture that the rising tide for the 1st World countries is not going to lift them out of poverty, in fact it is making them poorer and worse off by the day here in many ways.  Besides the climate and pollution problems endemic to these countries is the fact they are the first place the wars break out as western countries still seek to strip them of any resources still left there and as the locals fight over the scraps left over in brutal civil wars, useful to the Elite for ridding the planet of unecessary Useless Eaters.

Unfortunately for said Elite as well as all the poor and formerly middle class folks in Europe, these folks don't JUST stay in their home countries killing each other off, a decent percentage try to GTFO of Dodge and migrate into their home turf, where the rising tide is no longer helping their local poor people either.  The used cars may still be available for them to buy, however they are not very useful when they don't have money to buy gas or jobs to drive the used car to either!

http://crudeoilpeak.info/wp-content/uploads/2015/08/Spain_oil_consumption_1965_2014.jpg

Spain hit Peak Oil consumption in 2007

http://3.bp.blogspot.com/-c5NNh9wDjpI/UuGNV_YgA9I/AAAAAAAAKCE/fPeaHJ3KIAA/s1600/Italy_Oil_Gas.png

Italy hit Peak Oil consumption a little earlier, around 2005-6

https://gailtheactuary.files.wordpress.com/2013/04/piigs-oil-consumption.png

For all the PIIGS, peak was around 2005, wih the Big Slide downhill beginning in 2007

Are people who are already getting poorer by the day going to be very welcoming of a huge influx of even poorer people who will compete with them for the few part time jobs still left in the shrinking oil economy?  OF COURSE NOT!

http://www.snopes.com/wordpress/wp-content/uploads/2015/11/civil-war-in-sweden.jpg

Normally reserved and politically correct Swedes morph into Arsonists

Meanwhile, the Elite class wants to mandate resettlement of "qualified" non-terrorist migrants, to any neighborhoods except the ones they live in.  This idea of course floated as well as a lead balloon, so now the Elite are trying to buy off Turkey to fence them in over there.  Anybody who thinks the Elite have a real "Plan" here has been drinking conspiracy theory Kool-Aid for too long, there is no plan.  They are flying by the seat of their pants trying to do damage control while they get their Bunkers built in Argentina (Doug Casey), Panama (Bush Family Compound) and New Zealand (Steve Wozniak).

What should be pretty clear here by now is that with the "Rising Tide", the Elite are trying to keep their yachts floating by sinking everybody else's canoes and fishing boats.  This process of making 99% of the population incrementally poorer while making 1% of the population incrementally richer has been working for a while, since the 1970s really but accelerating since the collapse of Bear Stearns and Lehman Bros. in 2008.  In the Slow Boiling Frog paradigm, the average J6P didn't really notice this for the first 30 years or so of the downhill slide, but in the last decade it has become VERY apparent, and nowadays EVERYBODY KNOWS.

The tide rolled in from the Tsunami around 1750 with the invention of the Steam Engine accessing the thermodynamic energy of coal, but it really accelerated at the beginning of the 20th century acessing liquid fossil fuels with the invention of the Internal Combustion Engine.  That made the automobiles and the airplanes possible, without it the Wright Brothers would never have got off the ground at Kitty Hawk.

http://www.multibriefs.com/briefs/pca/NoSubstitute.jpgAs with Porsche, "there is no substitute".

While electric power in rechargeable batteries might run a few cars, it won't run airplanes.  Creating enough biofuels to burn energy flying around at anywhere near the pace we currently use it would take all the arable land on earth, there would be nothing left to eat!  Airplanes, even the Gulfstream V Private Jets the Elite use to commute to conferences like COP21 are not long for this world, but to keep them flying as long as they can, the fuel has to be triaged off from the Useless Eaters and funneled ino their jet engines, by whatever means necessary.  If it takes bombing them back to the Stone Age, that is what will be done until it is no longer possible to do so, for one reason or the other.

It is not just about how much might still be left underground, it is about the economics of trying to yank it up and those economics are failing big time now.  In just this last week, not 1, but 2 hedge funds gated redemptions on the vast quantites of junk bonds issued out over the last decade to extractors of oil to keep the Happy Motoring lifestyle going just a little bit longer in the Heart of Darkness of the portion of the 1st World countries still solvent, which shrinks by the day, in real time you can watch it happening.  The Frog is not boiling so slow here you can't notice it, at least not if you are not already brain dead for one reason or the other.

What has already hit the poor folks in the 3rd World, what is hitting the Poor and Middle Cass of the 1st World as we speak is going to hit the Elite as well, in fact that also is going on as we speak here.  In just the last couple of days, two Hedge Funds gated redemptions from their investors.

Yesterday, in the aftermath of the shocking news that the Third Avenue Focused Credit Fund was liquidating and had gated investors due to its "illiquid" portfolio, we had one simple prediction:

"What this means is that now that the dreaded "gates" are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity – and liquidation – scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well."

 

 

 

 

 

We had to wait just over 24 hours to be proven correct, because moments ago Dow Jones reported that the $1.3 billion Manhattan-based Stone Lion Capital, a distress-focused hedge fund, has just suspended redemptions after "substantial requests."

If you are in the least bit familiar with the Collapse of Bear Stearns and Lehman, you should know by now that a collapse of firms this size with this large an investment portfolio does not stop with them.  They have counterparties to every trade, and when they try to liquidate en masse it forces the price discovery that is hidden until the day comes that everyone runs for the Fire Exit.

http://s3-eu-west-1.amazonaws.com/lookandlearn-preview/N/N842/N842507.jpgKATY BAR THE DOOR!

It does look as of this weekend that the next run is commencing.  This time, it is not clear that the CBs have a big enough Bazooka to provide the liquidity and soak up the losses of all the Pigmen Gamblers out there betting with Other People's Money.

This is the correlary to Margaret Thatcher's criticism of Socialism, which is that sooner or later you run out of Other People's Money to spend on Social Welfare Programs.

https://pbs.twimg.com/media/B9rDkqgIYAE5Qcu.jpg

The problem with Capitalism of course is that eventually you run out of Other People's Money to Gamble with.  You can only fake this for so long by issuing out Irredeemable Debt, eventually EVERYBODY KNOWS that it is a scam.  When they do wake up to this, they are mighty pissed off too!  Cue the Gullotines and Lynch Mobs.

So what is the outcome of this?  MORE MAYHEM!  There is a Snowball's Chance in Hell that "World Leaders" could come together to find a solution, even if there was another solution beside a lot of DEAD PEOPLE.  All you as an individual can do on the Grand Scale is to try to distance yourself as much as possible from the mayhem, but this is of course quite difficult to do considering industrial civilization has infected just about all locations on Earth right now, and even if you are close personal friends with Richard Branson, you have a 100% chance of dieing if you try to escape Earth on one of his Rocket Ships.  They won't even make it to Mars, much less do interstellar travel for the next century at least, and probably not FOREVER.

money-burningSeeing as you are stuck here on Earth here in the first half of the 21st Century, you might as well enjoy the show, because this one is gonna be the Mother of all Shitstorms It's going to be the Greatest Bonfire of Paper Wealth in all of Recorded History, and the Crash & Burn of the first and only truly Global Civilization of Homo Industrialus on the Roller Coaster Ride Down from Population Overshoot to Population Undershoot.

Break out the Popcorn.

http://rs482.pbsrc.com/albums/rr184/Char2152/Cat%20Graphics/Animated-Cats-LitteronaRollerCoaste.gif~c200

Motivations for New Currency Design

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Published on FEASTA on November 15, 2015

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There appear to be four main ‘flavours’ of motivations driving new currency innovation:

a) deprecatory: informed by a view that mainstream fiat money is toxic and a better form can be usefully invented
b) economic: driven by the desire to preference a given sub-economy
c) value-led: where specific social outcomes are sought through the device of a currency
d) commercial: currency invention with narrow commercial aims

The first three map (loosely admittedly) on to Kenichi Ohmae’s ‘strategic triangle’ of competitor, customer and corporation. The first identifies fiat currency as the competitor and sets out specifically to address perceived weaknesses and faults of fiat. The second defines a group of target customers/ users, usually but not always based on geography. The third seeks to build an institution founded on a specific value-set (think mission statement) – albeit that the imagined eventual institution may well be more co-operative and/or digital/ autonomous than standard corporation. (Examples: bitcoin, Brixton Pound, timebanks). Mixed motivations are of course possible.

This article is an attempt to drill down into these motivation flavours and see what insights we can extract. It is part of the Feasta Currency Group’s work programme on Intentional Currencies, and anticipates a diverse future monetary ecosystem where currencies are more under the control of their users. (Who knows? Taxes could be payable in a user’s currency of choice.) Thanks to Phoebe Bright and Ciaran Mulloy for the discussions that preceded this particular brain-dump.

The Deprecation of Fiat

Fiat money operates within and is notionally controlled by an individual state (the euro being the problematic exception). Its main success is that of total acceptance within the relevant nation state. But it is an invention of man, and the question is ‘can we do better?’. Dissatisfaction with fiat revolves around its private creation as credit by an oligopoly of banks; its subsequent rental (via interest) transferring wealth from the have-nots to the already-haves; its misallocation away from productive use to fuel the casino and asset bubbles; and its lack of democratic or strategic control.

Currency reformers are gaining some traction in the unenviable task of effecting policy change in the teeth of enormous vested-interest resistance. [1,2,3,4,5]

But the nation states (who are in theory if not in practice the custodians of money-issue privilege) are being increasingly undermined by globalisation. Multinationals spearhead a race to the regulatory bottom. Trade trumps virtually any ethical or environmental concern and the sole recognised measure of progress is increasing GDP.

Against this background, the oft-inferred libertarian ambition behind Bitcoin – taking back money-issue-control from the state – hardly seems worthwhile if that control is already being outsourced to corporations. Anyway, setting aside the issue of Bitcoin’s democratic credentials [6], we can still assert that its underlying technology, the blockchain, does open up possibilities for decentralised co-operative management of information, and will clearly pave the way for the development of other digital currencies.

Given the multi-faceted and anarchic but energetic nature of cryptocurrency development it is starting to look as if the nation state’s only choice might be how exactly it wishes to be undermined – by globalised capital from the inside or by citizen-led ‘digital heteropeia’ [7] from the outside. Or maybe both at the same time, meeting in the middle to contest the emaciated remains of national sovereignties.

We have suggested elsewhere that the attitude of new currencies to fiat can usefully be made explicit – as fiat-friendly, fiat-cautious or fiat-averse [8]. But there is probably a fourth category – fiat-agnostic – for currency designers that haven’t the time or inclination to understand precisely the nature of fiat-toxicity.

Economic

The motivation here springs from an identification with a given sub-economy, and a desire to preference that sub-economy over the outside-world. The most common manifestation of this is where the sub-economy is a town or identifiable region that senses it is losing its sense-of-place under an onslaught from major brands and centralised supply. The preference then is for genuinely locally-rooted independent businesses and for keeping money circulating in the local economy, against the tide of centralised supply chains.

Currency projects of this sort, like the proxy-pounds, can be seen as much as local-identity reenforcers as economic interventions. Claims are made for increases in ‘local-GDP’ due to increase in velocity of exchange, but real additionality is difficult to prove. Some substitution of local for remote supply surely takes place, but the key objective – the creation of new local businesses – is elusive. The heavily centralised (out-of-area) supply of stuff-of-life transactions such as food, energy, shelter makes this a huge challenge.

Local economy currencies tend to attract activist support during start-up, but can struggle to retain a progressive mindset. Recently a tendency has been observed for them to attempt to grow via inter-connection [9], thereby arguably undermining the local-preferencing objective. Other ways of keeping up the progressive enthusiasm include new technology, local council integration and aggressive anti-consumerism.

Value-led

Value-led currencies are the most potentially interesting of the motivation-types because they are exploring the ability of a currency to be used for good. This positioning sets aside the economics professions conceit that money is neutral and replaces it with the assertion that if monies always carry values/ promote behaviours/ trigger specific outcomes then designers should be explicit about their objectives and how they are to be achieved. [10]

However, to move from no-brainer propositions such as ‘transactions are not all equal’ and ‘growth is not always good’ to a rigorous theory of value-led currencies is a bit of a challenge. It is hampered by the fact that there aren’t too many examples to study. The best examples are perhaps the Fureai Kippu [11] elder-care currrencies of Japan and the timebanks of various flavours that facilitate the exchange of participant-hours.

Review of the literature does suggest a number of challenges for such currencies. Staying true to themselves is perhaps the most severe. There is always the temptation to try to scale inappropriately by extending into non-core transactions. This is not to say that such scaling is always unwise – more that the potential value-conflict it surfaces should be carefully scrutinised and assessed. Part of the pressure for scaling is the underlying assumption that currencies must be as widely used as possible. But in a future diverse monetary eco-system this rationale potentially disappears. Another part of that pressure is the human desire for what might be called qualitative growth. The operators perhaps tend to get bored if the game isn’t perpetually changing. Tech developments deliver a continuing stream of possible futures and it seems unadventurous to ignore them.

Since around 2010 there has been a surge of interest in Behavioural Economics [12] – fuelled to a large extent by the Nudge unit set up within the UK Cabinet Office [13] and now being replicated world wide. There is likely some read-across from this experience to value-led currencies. One particular potential mindset-clash however needs to be addressed. The would-be discipline of Behavioural Insights, like it or not, carries a hint of citizen manipulation with it that sits ill with the sort of fully participative governance anticipated for value-led currencies. Put it this way – if we are going to be nudged then its important that we buy into the process and are aware of the intervention. It is clearly a hierarchichal process with the nudger and the nudgee. It would be good to see the nudger nudged; the policy makers directionally influenced via an understanding of their underlying psychology – #reversenudge .

Commercial

The proposition that corporations should be free to issue their own currencies and have them competing in a free market goes back to the seminal paper by Hayek [14,15], probably before. Arguably, the emergence of multi-nationals with multiple brands and a diverse range of ultimate products should encourage this approach, but as yet no examples seem to exist.

Of course, we have a proliferation of loyalty schemes but these tend to operate at the individual brand level, (though coalition loyalty schemes such as Nectar are obviously an attempt to widen the redemption options available). There does seem to be a recent pattern of the ‘superbrand’ asserting ownership of its sub-brands. Unilever comes to mind, as does the ‘peel-off’ corner on Danone ads. So there is probably a brand bun-fight going on internally at some of these organisations. Indeed, taking the Unilever connection further, their recent well-resourced attempts at CSR initiatives [16] might indicate a fertile ground for a value-based superbrand currency.

Loyalty schemes on their own are significant for one reason. They have driven the engineering of an alternative payment mechanism – when I go into Costa I can pay in cash or in Costa points if I have enough of them. The significance here is that the Point of Sale systems, settlement and back office systems permit it. The card swipe takes my Costa loyalty card and routes data to the back-end Whitbread servers rather than to the merchant acquirer. So loyalty systems are paving the system way for the diverse monetary ecosystem that is coming.

Summary & Conclusions

There will clearly be mixed-motive currencies – indeed most new and developing currencies will want to explore the various motivations and set out for themselves – ideally explicitly – their balance of motives. This process should not be seen as an additional chore, rather it can be part of developing a coherent and compelling narrative for a currency project – feeding into statements of mission and values in a way that gives a currency real brand-value. It can act as a guide to future action and as a mandate with external partners including potential funders. The tensions that the process of motivation disclosure surfaces should themselves be treasured. They will form an important part of the agenda going forward, and their publication will underline the transparency of governance that is needed for real progress. Feasta would be happy to play a part in such motivation audits.

References

[1]: Swiss group says it has signatures for ‘sovereign money’ vote
http://uk.reuters.com/article/2015/10/31/uk-swiss-sovereign-money-idUKKCN0SP0FW20151031

[2]: Sovereign Money : Joseph Huber
http://www.sovereignmoney.eu/

[3]: Creating a Sovereign Monetary System: Positive Money
http://positivemoney.org/our-proposals/creating-sovereign-monetary-system/

[4]: Iceland looks at ending boom & bust with radical money plan [March 2015]
http://www.telegraph.co.uk/finance/economics/11507810/Iceland-looks-at-ending-boom-and-bust-with-radical-money-plan.html

[5]: International Movement for Monetary Reform: Coalition of 22 national sovereign money groups
http://internationalmoneyreform.org/member-organisations/

[6] For example around 2% of BTC addresses control over 92% of BTCs:
https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

[7]: Miscione G & Kavanagh D : UCD School of Business, University College Dublin [July 2015]
Bitcoin and the Blockchain: A coup d’état in Digital Heterotopia?
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2624922

[8]: http://www.feasta.org/2015/07/29/new-currencies-and-their-relationship-with-fiat-currency/

[9}: For example the ‘Town Pound’ project
http://guildofindependentcurrencies.org/wp-content/uploads/2014/11/GoIC_Conf2014_TownPound_GW.pdf

[10]: Series of articles on Intentional Currencies at:
http://www.feasta.org/author/graham-barnes/

[11]: Hayashi, M. (2012) ‘Japan’s Fureai Kippu Time-banking in Elderly Care: Origins, Development, Challenges and Impact’ International Journal of Community Currency Research 16 (A) 30-44 <www.ijccr.net>

[12]: https://en.wikipedia.org/wiki/Behavioral_economics

[13]: https://www.gov.uk/government/organisations/behavioural-insights-team

[14]: https://en.wikipedia.org/wiki/The_Denationalization_of_Money and

[15]: Hayek’s Plan for Private Money:
https://mises.org/library/hayeks-plan-private-money

[16}: https://www.unilever.com/sustainable-living/

Featured image: spices. Source: http://www.freeimages.com/photo/many-kinds-of-spices-1566276

All Your Money Are Belongz to US!

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Published on the Doomstead Diner on October 30, 2015

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TAKE THE COLLAPSE PERSONALITY PROFILE SURVEY HERE

All over the Collapse Blogosphere, and even in the MSM, the latest greast paranoia is the disappearance of CASH to STASH in the Bank of Sealy.  Tom Lewis on The Daily Impact wrote a post on this last week which I am cross posting today here on the Diner.

Over in the MSM on Biz Insider, they also had a nice FEAR INDUCING article on NEGATIVE INTEREST RATES coming down the pipe for retail banking customers.  In this case, instead of the bank paying you some interest for the priviledge of gambling with your money, you pay the bank so they can risk your life savings on some dogshit IPO like Poop-On or Alipoopoo.

Quite obviously, the Banksters and their Political Puppets have reached the end of their rope here, not to mention having lost their sanity in trying to keep their monetary system from imploding.  In today's rant, we look at why this fucking nonsense cannot possibly work and is the last gasp of a dying monetary system.

Snippet:

…This week in Doom, I do have a specific topic of interest getting a lot of play not just in the Collapse Blogs but in the MSM as well. This is the rampant FEAR that TPTB running the TBTF Banks and their Marionettes running Da Goobermint are going eliminate CASH, aka Paper Notes in favor of an all digibit monetary system. There is a certain amount of irony to this, since the people most upset and outraged are the same people who hate Paper Fiat Notes to begin with! LoL. Just in this case, they hate the digibit money even more, except for Bitcoin which some folks think is a new and more secure form of money itself.

Now first of all, paper money is already only a small fraction of the total pool of notional money currently being pushed around by supercomputers sporting HFT algorithms, a maximum of 10% of the money supply and that is not counting all the notional money wrapped up in derivatives contracts, which nobody knows the actual amount of, just that it is probably more than a quadrillion dollars…

For the rest, LISTEN TO THE RANT!

Survey Review

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Published on the Doomstead Diner on October 14, 2015

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We're taking the week off from publishing a new survey, in order to let the Energy Survey collect more responses.  When I first put it up, the links to the Survey were all broken, and the first day is when most of the responses come in from regular Diner readers.  I fixed all the links later, but it only has around 50 responses at the moment, and a bigger sample is better.

Besides that, this is a good opportunity for readers who missed taking some of the earlier surveys to go back and take them now.  They are all still open and collecting more data, which I will update in my end of the year recap article.

The current list of Collapse Surveys TM is as follows, from most Recent to Earliest.

The Future of Energy

Fate of Countries in Collapse

Solutions to the Refugee Crisis

Ordering Preps for Collapse

Currency & Debt Collapse

Most Evil to Least Evil: Recent POTUS

When Does Dieoff Begin?

The Most Dangerous to World Peace

Collapse Survival Locations

The Worst City to Live In

Civilization Collapse Priority

Next POTUS

We have a lot of good data already, but more is better!  Your opinion COUNTS on the Doomstead Diner!

What it counts for I am not sure, but it does count. 🙂

Energy Survey Results Next Week.  Get your opinions in before the count!

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

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Published on the Doomstead Diner on September 22, 2015

toast2

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TAKE THE FATE OF COUNTRIES SURVEY HERE

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

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

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

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

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

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

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

TAKE THE FATE OF COUNTRIES SURVEY HERE

Results: Currency Collapse & Debt Implosion Survey

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

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

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

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

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

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

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

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

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

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

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

My order for currency collapse?

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

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

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

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

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

Survey-Gold

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Peak Oil Ass-Backwards (part 2): Crashing Oil Prices Aren’t Due to an Oil Glut But to Demand Destruction and Peaking Credit

gc2smOff the keyboard of Allan Stromfeldt Christensen

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Published on From Filmers to Farmers on September 11, 2015

Visit the New Diner News Page for Daily Updates from around the Collapse Blogosphere

Confusion dawns upon the smartest men in the room (photo by Rafael Matsunaga)
 
Discuss this article at the Economics inside the Diner

 

As I began to mention at the end of the first part of this three-parter, I've only just recently come to the conclusion that oil prices aren't going to have a tendency to rise due to the tightening of supply imposed by peak oil, but to depreciate. This of course flies in the face of the common logic of supply and demand, but when factoring in the method by which the majority of our money is created, a deflationary effect can be seen to come into play. This has taken me an absurdly long time to clue into, for although I'd steadfastly amassed a bunch of pieces (various information), I hadn't realized they were actually all part of the same puzzle.

With peak oil and fractional-reserve banking being the first two pieces of this puzzle, the third piece that I needed to factor in (which oddly enough I'd already written about) is the fact that money is a proxy for energy. As I wrote in a previous post, Money: The People's Proxy,

Simply put,… the core function of money is that it enables us to command energy – the energy used to move our bodies with, to power our machines, to feed to domesticated animals whose energy we then use to do work (which nowadays generally means entertaining us), etc. In other words, it might be tough and/or inconvenient, but one can get by without money. You can't get by without energy.

In other words, at their core, our economies don't run on money, they run on energy. Moreover, it doesn't even really matter what you use as your form of currency – coins, pieces of paper, gold, zero and one digibits, conch shells, whatever – because if you don't have the energy to perform the work and/or create the products your society expects, the money is virtually useless and worthless.

Although it would be far too extreme to say that all our economic problems have always had energy issues as their core problem, peak oil (and peaking fossil fuels in general) combined with the fact that money is a proxy for energy, imply, in reverse, a kind of peak to money. In other words, this therefore implies a limit to credit creation. As a result, since private banks create money as debt via the fractional-reserve system and must continually create new loans so that the interest can be created to service previous loans (so that the system doesn't implode in on itself), well, the system is in a bit of a pickle. Furthermore, with oil prices and worldwide stock markets taking a recent hammering, and the situation in Greece and similar countries still a thorny issue, this fermented cucumber seems to be taking shape.

Regardless, none of these core issues and problems are readily recognized (or at least mentioned) by the mainstream media. As Business Insider aptly, yet perhaps a bit daftly, put it (in regards to the current market confusion),

And this is really the crux of the current confusion in markets right now: there is nothing to point a finger at. There is no tech bubble bursting or subprime mortgage market imploding… And so what the media — like, for example, Business Insider — and actual market participants have to go on is to simply say what has happened without being able to say why.

So far, all that's really been stated by mainstream media sources is that we're in the middle of an oil glut, the reasoning ranging from the US's massive increase of fracked oil production the past few years, OPEC's increased output over the past year, and more, to go along with Iran's possible addition to oil markets upon lifting of sanctions. However, this notion of an oil glut is rather dubious for a variety of reasons. First off, global coal consumption is growing at its slowest rate since the Asian crisis of 1998. On top of that, earlier this year the Baltic Dry Index (an index which measures the price of shipping freight rates) hit a 28-year low. Meanwhile, export orders from Chinese factories just fell for an eleventh straight month, with August's activity shrinking at its fastest rate in three years, and which in turn has led to an increased rate of layoffs.

 

What was once the seemingly endless supply of Chinese plastic toys and electronic gizmos (photo by David Grant)

 

Those kinds of things don't occur because there's too much oil — the supposed glut — they happen because people are buying less. It is those and other factors then that have some people thinking that perhaps the problem isn't so much an oil glut as much as a lack of demand — otherwise known as demand destruction.

In the past, dips in the price of oil eventually led to their own recovery since demand became enlivened by the new-found cheap prices. However, those were often after geopolitically induced oil-price shocks, while the current situation is more of a geologically induced oil-price shock. That is, for several years now oil has been selling in the rather high-priced $100 range, due to most of the easier-to-access and so cheaper oil having been extracted and produced first. This has therefore left us with the pricier to get at and produce tar sands, deep sea oil, and fracked oil, all requiring higher prices in order for oil extractors to turn a profit. In effect, while oil at $100 enabled drillers and such to turn a profit, it was costly enough for a long enough period of time to price a significant amount of people out of the market, or at least out of a substantial enough part of the market. In fact, it was just announced a couple of weeks ago by the National Employment Labor Project that "average pay in real terms slumped 4 percent from 2009-14."

In turn, the curtailment on demand has contributed to a depression on oil prices, which has then led to massive layoffs of high paying ("It's easy to earn at least $100,000 a year") oil patch jobs – a loss of 100,000 in the US so far, another 900 more in Canada just last week, and so forth.

 

What looks like an oil glut, acts like an oil glut, but isn't an oil glut? (photo by Joris Louwes)

 

As a result, this increasing number of consumers on the margins has ended up with less money to spend via loss of access to the more conventional form of credit – jobs – while others are no longer seeking out and/or accepting as much of the credit that banks are desperately trying to dish out — either because people are trying to pay off the debts they've already got, or are waking up to the risks of taking on even more. As the Toronto Star conveys (italics mine),

economic troubles could start to weigh on their [the big Canadian banks] results — if not directly, through higher loan losses, then indirectly, by hurting loan growth and other sources of revenue.

If you're anything like me, then you've probably been receiving boatloads of 0% interest rate credit card offers (with an initial fee of 1% or so on said transfers) from all sorts of banks. In other words, banks are increasingly desperate to get consumers to spend credit so that the debt-spiral doesn't come to a halt and the system ultimately seizes up. Similarly, this is why governments are practicing quantitative easing (QE), to increase "liquidity."

In the meantime, while credit problems on the consumer end of things are posing a problem, the credit situation for the energy extraction and production industries isn't doing all that great either. The Canadian tar sands provides as good of a stand-in for explaining this as any.

Never minding the massive ecological destruction left in the wake of tar sands projects, but because of the massive industrial operation entailed, to earn back enough funds so as to turn a profit they require a relatively high oil price (that is, the high prices that contributed to the insolvency of many of their customers in the first place). With oil prices currently so low, only 450,000 of the 2.2 million barrels of synthetic crude currently being produced are in the black. This has then placed many tar sands companies between a rock and a hard place. For as the Toronto Star also quotes,

The problem is these companies just can’t stop producing. They still need to produce, they need to pay their bills, and they need to ensure their bond covenants are not breached.

 

One doesn't stop a juggernaut on a dime (photos by Shell)

 

In other words, with so much money having been sunk in their operations, and with so many bonds having been sold (to go along with all the junk bonds sold by fracking operations, especially in the US), money-losing oil projects must continue extracting to get their bare minimum daily revenues, lest they renege on their payments and go bankrupt.

That being said, some oil producers have hedged their bets through 2015 with a median price of $87.51, and so are making do for now. Nonetheless, with these hedges expiring and debt repayments coming due, producers need to come up with more than half a trillion dollars within the next five years. What happens between then and now is anybody's guess. Are oil drillers and other companies going to be able to restructure their loans and/or access fresh credit if they're bleeding money? Are they going to go bankrupt en masse and get sold off for pennies on the dollar, quite possibly throwing the world economy into yet another bubble-induced recession? Are derivative-exposed banks going to get bailed out yet again after inflating and seeing their second bubble burst in less than a decade?

On the other hand, with low prices being such a problem, it is not possible that some kind of government intervention and/or policies can somehow induce an oil price recovery and save the markets (and, uh, industrial civilization)? Well, as it happens to be, governments did actually do two things last week that made the price of oil increase by 27% in three days. First off, Saudi Arabia announced that it was willing to talk about oil prices. This got the market happy, and so helped prices increase. However, this was essentially just talking up the market since Saudi Arabia was actually saying nothing new, as it had long ago stated that it was willing to engage in a dialogue (for the purpose of curtailing production in line with others, not unilaterally). Secondly, New York's branch president of the Federal Reserve came out hinting that the upcoming interest rate hike that many had expected was likely to be delayed. In effect, the stock markets got another dopamine rush and regained most of their losses, while oil's price concurrently rebounded. However, you can only talk up the markets so much, and for so long.

Similarly, any number of circumstances could cause oil's price to rise, from a well-placed hurricane to an outbreak of war in some relevant part of the world. In reality, guessing oil's prices and movements is ultimately a fool's game, the fools nonetheless getting paid rather handsomely.

Regardless of how this all turns out though, all things being equal, the tendency is now for oil prices to continue decreasing. No longer are we in a cycle of higher highs and higher troughs followed by ever higher highs and troughs, but one of lower highs and lower troughs, bouncing their way down in the opposite direction from the simpleton economics that papers like the New York Times profess: "it boils down to the simple economics of supply and demand."

To close this all off, and to point out a fair enough — and quite relevant — question, does this mean that oil will crash all the way down to $0 and be free? In short, no, and present circumstances can explain. Sure, if governments and bankers decided to just Let The System Be, then yes, the Ponzi scheme would likely go kablooie and implode in on itself, and oil would be $0 — or rather, $N/A. That of course won't be allowed to happen. For as it is, since the credit system is a proxy for the energetic system that industrial civilization maintains, this means that triaging people and nations from the industrial credit machine effectively triages them from the supply of fossil fuels. Supposing that "we" can even afford it, that means that there is less fossil fuels for "them" and more left over for "us" to maintain the operation of our industrial economies and continue living the 21st century fossil-fuelled lives we've become accustomed to (until the triaging hits closer to home, which it already has for some). And the methodology by which all that triaging is enacted is via what we all now know as austerity on the micro scale and Grexits and such on the macro scale.

 

It's pickling time! (photo by Jacki Gallagher)

 

As ambiguous as it/they may be, there is however a third option that can be strived for, which I'll get to in part 3.

Survey: Which Currency Collapses First? Results: The Refugee Crisis

gc2smOff the keyboard of RE

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Published on the Doomstead Diner on September 8, 2015

money-burning

Discuss the results at the Survey Table inside the Diner

As our Global Economic System spins downward here, one of the most important near-term questions is what money will work and for how long?

When the initial phase of the economic collapse got underway in 2008, numeous pundits including John Williams of Shadow Stats, the Tyler Durdens from Zero Hedge and Speedy Gonzalo Lira all predicted imminent Hyperinflation of the Dollar resulting from Quantitative Easing by Da Fed, which never occurred.

In recent weeks however, we have seen big moves in various currencies from around the world, mostly depreciating against the Almighty Dollar.  Even the Chinese removed the peg of the Yuan/Renminby to the Dollar and depreciated their currency, to attempt to remain competitive in the export market with other cheap labor countries. Venezuela's currency is rapidly approaching worthlessness, and the Brazilian Real is starting to look like their old Cruzeiros.  As far as the developing world is concerned, it's a Race to the Bottom these days.

Far as the individual is concerned though, it's important to know which currencies will fall in value fastest, and of course try to have savings in currencies which will last longest.  There are location problems with this of course, since say if you hold Swissies but live in Montana, it's unlikely the local Walmart will take your Swissies for a Can of Beans.  Even if you do believe the Chinese are going to Inherit the Earth, is holding Renminby a good idea?

What about the Precious Metals?  Will they be functional as currency once the last of the current Fiat regimes collapses?

Your opinions on these crucial questions of collapse are solicited in this week's Collapse SurveyTM.

TAKE THE CURRENCY COLLAPSE SURVEY HERE

survey-saysNow onto the results from last week's survey, The Refugee Crisis Survey!


The Refugee Crisis has been the HOT Topic in the world of Collapse over the last week.  Besides myself, Tom Lewis (Daily Impact), Jason Heppenstall (22 Billion Energy Slaves) and Jim Kunstler (Clusterfuck Nation) all weighed in on this topic, along with numerous other articles around the web, both from MSM and Alternative Media sources.

Here on the Diner, we identified this problem fairly early on in the Official Refugee Thread, begun by Eddie in May of 2015.  It has of course escalated substantially since then, and we chronicled the escalation over the last few months in that thread.

This month as it escalated, I got together with a few of my fellow Collapse Bloggers and Authors, Ugo Bardi (Resource Crisis), Steve Ludlum (Economic Undertow) and Norman Pagett (The End of More) to discuss this issue.

After that, I also Ranted on the Refugee Crisis, since there is so much insanity going on with it this makes for good Rant Material.

So this is the history to date of the Refugee Crisis, but what of the FUTURE?  What do Kollapsniks TM think will play out here, how and on what timeline?  So in additon to all the rest, I worked up a Refugee Crisis Survey to get some feedback and numbers on this one.

Here is how it plays out according to Kollapsniks TM.

Survey-refugee-1

Survey-refugee-1

If you were in charge on the Hungarian Border or Italian Beaches, what would be your First Choice for handling the Tsunami of Refugees from MENA?

  Build Refugee Camps and solicit Food Aid from the Red Cross Increase Taxes to send Food Aid to their home countries and set up Refugee Camps there Shoot on sight any Refugees entering your country, including Women and Children Mine and Fence all Borders including harbors and beaches Shut down the Interrail between European Countries Ship them back to where they came from as soon as they arrive (you pay the shipping with your taxes) Give them all a Free Ticket to Germany or Sweden Standard Deviation Responses
All Data 25
(32.05%)
11
(14.1%)
13
(16.67%)
1
(1.28%)
0
(0%)
10
(12.82%)
18
(23.08%)
8.2 78

http://www.profit-over-life.org/teachers_guide/images/germany/buchenwald_kz/buchenwald_crematorium_bones.jpg About 1/3rd of the respondents chose setting up Refugee Camps and soliciting aid from the Red Cross, which basically is the humane, traditional approach to this sort of situation.  However, when the numbers grow large, this methodology tends to break down pretty quickly.  In fact, it has broken down so quickly in Germany they shut down the borders in an attmept to control the problem, AND they are now housing at least some of the refugees at BUCHENWALD.  Yes, that's right, one of the most infamous of the Concentration Camps from WWII, along with Auschwitz and Teresenstadt, where at least one Czech Politician has suggested would be a good repository for these refugees.  What MESSAGE does this send, eh?

The next most popular idea was to give all the refugees a Free Ticket to Germany or Sweden, which definitely would be a cheaper alternative then trying to house all of them.  This might have worked through Monday, when the Krauts shut down the border with Austria.  They clearly are not going to keep taking all comers, and neither I suspect will Sweden.

The countries getting stuck with the refugees are those which simply do not have any real means to keep them out, Turkey currently has around 2 MILLION of them, and I'll bet Serbia is stacking up too.  These Refugee Camps are of course Terrorist Breeding Grounds, accidents waiting to happen.

OK, on to Q2, a Yes/No question on whether Fences and Walls can do anything to resolve this problem.  This is basically split right down the middle amongst Kollapsniks TM.

Survey-refugee-2

How long before Migration begins in earnest out of California to escape drought and water depletion?

  It has already begun. 1 year 3 years 5 years 10 years >10 years There will not be a migration out of California, water problems will be solved. Standard Deviation Responses
All Data 19
(24.68%)
5
(6.49%)
21
(27.27%)
14
(18.18%)
3
(3.9%)
3
(3.9%)
12
(15.58%)
6.95 77

Survey-refugee-3

Is Wall & Fence building, mining harbors and deploying military personel to secure borders going to have a significant effect in preventing or slowing migrations?

  Yes No Standard Deviation Responses
All Data 37
(48.05%)
40
(51.95%)
1.5 77

This is not a lot different than the Two Party problem of Repubtards vs Demodummies.  If you are anywhere near a 50-50 split, nothing gets done, no side has a clear majority and you get locked up in decision making on anything.  Anyone with a little MONEY can sway an election either way at the 50-50 line, you just need to buy a few votes or a few SCOTUS Judges.  See the Bush-Gore Election for this.

My opinion on whether Fences and Walls are a good solution?

hahahahahahahahahahahaha!

It's a waste of time and money, has never worked in the past and won't work now either.  You can't man them and staff them economically and they are way easier to knock down then they are to build in the first place.

Survey-refugee-4

How long before the migration problem overwhelms the capacity of Europe to protect its borders and North America to seal the southern border with Mexico?

  It has already been overwhelmed 1 year 5 years 10 years >10 years The ability to prevent migration will not be overwhelmed, migration can always be prevented if you build and staff your defenses properly. Standard Deviation Responses
All Data 36
(47.37%)
10
(13.16%)
14
(18.42%)
4
(5.26%)
5
(6.58%)
7
(9.21%)
10.95 76

Now onto the text responses!  This is where it really gets interesting, because you start to see the ideological mindset at work here in various groups and types of people. 🙂

Warning!  You may find some replies unpleasant!

What other option would you choose first to handle the Refugee problem?
Anyone who exhibits aggressive behavior is sent back
Arrest them and ship them home.
Autonomous drones. Put chemical weapons back on the table.
build refugee camps
Citizenship and Integration
Crucifixion sends a message that's hard to miss.
electric wire
encourage the USA to receive
with open arms the "huddled
masses"
Enlist aid from other countries to send to MENA home countries
Europe: Work out who can handle new immigrants best and how and be fair to all countries.
But mainly: All those Middle Eastern countries that are doing nothing to help their neighbours, like Saudi Arabia, need to start taking the brunt of the burden.
Find some agreement with other European countries to share the load more equally. Hire more people to process asylum requests.
Forced sterilization of all politicians and their families.
Give them guns and march them back to their own country
Highlight the actual problem that the USA is the real problem in the press, at the UN, the Vatican and every other outlet. Boycott US products.
Huge weapons tax on any manufacturer selling to the Middle East (like 50%)
I would start a infrastructure project, like updating and maintaining all the rail roads through labor (not just machines), and give every refugee a right to stay, with a small plot of land, if they volounteer for the work
In the longer term, quit interfering in foreign countries and making things worse.
Increase bombing in their home countries so you don't need to shoot them when they get to the new one.
Increase public awareness campaigns, try and get more people to donate to charities that support the refugee crisis, try to find jobs for some refugees
Increasing taxes for aid would be my second choice from the list.
It is irresponsible to just send them all to Germany or Sweden. The numbers of potential migrants from their home countries will never be depleted and so the "Tsunami" will never end (until Germany and Sweden are hellish shitholes)
Labor camps, get them fixing infrastructure.
lodge them in properties of value in excess of one million pounds sterling ,or European equivalent.
Make sure they knew that their was their was not sanctuary to be found for them in the poorer countries.
Poverty, injustice, over breeding, overpopulation, suffering, oppression, military rule, squalor, torture, terror, massacre: these ancient evils feed and breed on one another in synergistic symbiosis. To break the cycles of pain at least two new forces are required: social equity – and birth control. Population control. Our Hispanic neighbors are groping toward this discovery. If we truly wish to help them we must stop meddling in their domestic troubles and permit them to carry out the social, political, and moral revolution which is both necessary and inevitable.
Or if we must meddle, as we have always done, let us meddle for a change in a constructive way. Stop every campesino at our southern border, give him a handgun, a good rifle, and a case of ammunition, and send him home. He will know what to do with our gifts and good wishes. The people know who their enemies are.

 

 

 

 

Edward Abbey

Pressure the UN and EU to pick up the slack and help out.
Put them in China's Ghost Cities.
Refuse entry
Secure Western Syria with UN troops to include US & Russian. Take the fight to the Islamic state. Secure Syrians and Iraqis in there homeland.
Ship them back.
Shoot on sight, border mines
Short of actively trying to prevent war in their countries in the first place, instead of encouraging it to profit from arms sales and reduced labour costs in Europe (we could all see this coming years ago):

 

 

 

 

Build Refugee Camps and Increase Taxes (probably not necessary) for food Aid here.

Solve the problems in their home country
Stop attacking other countries
Stop bombing the bejesus out of their homes
Stop imperialistic wars and the consumption of fossil fuels.
stop the 'west' from funding the unrest. Tee heee…………….
when living creatures are caged together the become stressed and eat each other. You are right, this is a wicked problem. As we knock hard against limits things cannot end with enough for all.
Take out actors who are forcing people to migrate. Isis comes to mind.
There is no good option
try to lessen our government's involvement with generating rip-off of their country's resources.
Try to solicit clerks from other European countries to help with processing the refugees
UNCHR refugee camps close to home countries. Much cheaper and a chance to repatriate the refugees.
Use nuclear weapons on north Africa to kill as many as possible.
Warning shots.
Well, since we gave up completely, long ago, on logic-driven "social policy" and most governments are treating their populations like shit through the use of barbaric policing, there is no real option. We're doomed to unthinking policies and to being told what we will accept. Obviously MENA could function better, but privileged people have benefitted from shitty exploitative global policies, so now they apparently, deserve to have their lives disrupted (even tho they had no real say in these policies). Anyone, from here on out, with stupid ideas to exploit others in ways that severely disrupts a decent way of life, should be jailed in public squares where the rest of us can spit on them and poke them with sticks. However, at this point, we're doomed.
Wow what the fuck even is this survey.

 

Donald Trump has a platform of Deporting Migrants.  Can this platform be implemented, and if so how? (Text Response)
Being a non US citizen I am not up to date on the platform itself.
I can only see it ending in bodies though.
Building a wall
Don't know.
Donald Trump is an incoherent fuckwit.
Doubt it, too many leftie losers
Enforce existing laws. Most will self deport.
Use homeland security to hunt down and dump the rest in Mexico – regardless where they have come from.
First you have to enforce the laws already on the books.

 

 

 

 

The people who employ illegal migrants should be fines and imprisoned… the migrants will not come if their is nothing for them here.

Then start making the deportation stream line and efficient.

Give them back Califonia.
he is a twat
He will threaten them with his hair monster.
His ideas will not work.
I can only see this policy be executed on the condition that there is a false flag attack against the US that is blamed on Mexican terrorists. The attack would give cover for the mass deportation agenda that would never be acceptable to the majority of Americans.

 

 

 

 

The plight of millions of
Mexicans and Latinos being violently dispossessed of their property and liberty would not go unnoticed and something like a civil war could break out. With the massive amounts of jailed people combined with the ease of access to firearms, a radicalized resistance could quickly escalate into armed struggle on a huge scale.

A huge migration of dispossessed people within Mexico could be disruptive to their politics as usual.

I fear it would take a violent form, shipping migrants on huge boats, probably with mass casualties
I have no idea what Trump's plan is
I have no knowledge on the subject
I think that platform is unworkable mostly.
I've no idea. I'm not American so I don't know about this.
Illegal migrants should be repatriated to their homelands. Mexico uses the US as a means to get rid of its poor and criminal class. Anyone with a criminal record needs to be sent back immediately as a good start. Build prisons in Mexico and send all these criminals we are supporting back to where they came from. I has to be cheaper. Pretty expensive jobs program here in the US.
It can be implemented at the point of a gun. If enough people support the Donald the plan will be implemented, if not it will fail in a film at 11 extravaganza of tear gas riot police and screams of refugee lives matter.
It will impede an already broke and overloaded systems and increase collapse.
It will not be possible, there are too many migrants and attempts of deportation will result in violence.
No
No
no
No – he's blowing smoke
No, it cannot. There is too much political opposition in the United States to do anything of scale no matter your political party/ideology.
No, It's too late.
No, there are too many
No, there are too many migrants for that.
No.
No.
NO.
No. Congress would write and bill, make a law and then not fund it.
No. It is an exercise in absurdity.
No….he is a moron who thinks the presidency is about snapping his fingers and having others jump.

 

 

 

 

He would be very unhappy with reality… and if fact has no desire to actually be POTUS, he is currently just drumming up free publicity for his brand.

Not possible
Not really. The Southwest is 30% Latin. If they ever start voting, the Trumps of the world will be barbecued on a spit

 

 

 

 

Se habla Espanol, ya'll.

Probably not, and if it can, it's unethical and barbaric.
Sure. Those who survive will try again, but it can be done.
Trump's talking out his arse.
Wall
We are already deporting more under Obama than any past president. Can we realistically do more than that.
What's the platform.
Who.
With 11 million "illegal" imigrants, the horse is out of the barn
Yes, if they crossed the US, Mexico border, send them back.
Yes, secret police.
Yes, use of military to enforce border protection
How will Donald Trump handle internal migration problems from drought ravaged regions in the FSoA? (text response)
Again as an outsider, I cannot see it ending peacefully. My guess would be that it would be "managed' by some sort of terrible 'disaster' where the administration could the provide assistance to the 'survivors'
All he can do is give service. The cost of this is going to overwhelm the system.

 

 

 

 

Their is no solution to this except a large population reduction.

Bigger walls.
Blame somebody else
Brutality.
Concentration camps
Deport people back to the states they came from.
Deportion
Ditto question 5
Don't know.
Donald Trump AGAIN.!! FSoA pop will hold off migrating till they can get a good deal on the sale of their house; then it'll be too late cuz no one will be buying… That's when the hoards will finally migrate; with nothing. Then they'll be "the homeless" and we all know how we've come to treat "the homeless".
Dont know
Fail.
Give them a straw AND free transport to the Great Lakes
Going on Fox News and Blaming the victims.

 

 

 

 

and building a gold plated tower…

He can't, It's too much for him to figure out.
He might conquer Canada and open up homesteading there.
He will give speeches and after expressing two cents worth of sympathy he will tell them to get jobs.
He will invariably do something profoundly stupid that makes the problem vastly worse.
He will not address it
He will threaten then with his hair monster.
He won't need to
He won't, because he won't be elected. Even Americans aren't that heartless and stupid as to let him take office.
He'll run a solutions competition, and the winner will be a for-profit plan that will relocate millions of poor people into giant new suburb slums outside of exiting urban areas with more water resources. The slums will be built out of recycled steel shipping containers nicknamed Trumpholes.
His people will think of something.
I already mentioned that he is a twat
I don't believe he will be elected. Assuming he is elected, I do not know enough of his platform to give a worthwhile response.
I don't know
I have no knowledge on the subject
I think he will blame immigrants for taking the water and force them out.
just like everything else he does, by saving the rich at the expense of the poor, through violence if needed
lost in space
Non issue
Not a clue. Just following the 1986 regulations would help. California is destined to be a third world state in my opinion.
Not at all
nothing
Put them in camps.
Renounce the citizenship of all Hispanics and Blacks. Then implement 5.
Sell the sw refugees condos in trump towers
The same way the FSoA handles 92 million unemployed. Trailer parks hunger and rotten teeth.
Whatever it is, it will be H-U-U-U-U-GE!
Who.
Why don't you ask Donald.
You fired!
You know, I'm starting to think this poll isn't completely neutral.
If you were in charge, what policies would you put in place now to try and stem the tide of refugees all over the world? (text response)
Actively try to prevent war in their countries in the first place, instead of encouraging it to profit from arms sales. And actual regulation of multinationals that operate from my home country instead of pretending they do not exploit workers and people abroad (and at home).
As King of the World. Migration is a fact. It will happen as climate change begins to bite. Develop soft population growth controls and alter national boundaries/resource consumption to accomodate as many people as possible while working to decreace total population to a sustainable number through natural reductions. (Like this ever has a chance in hell of happening).
Best to provide aid to their homelands and keep people home and with their own cultures. This will become increasing difficult though since the financial system is running on fumes and is really broke.
Birth control for.the population forced sterilization of all elite and their families.
Birth reduction/control.

 

 

 

 

No new babies!!!

Call an emergency meeting of the UN, find a way in which the whole world pitches in.
Can't be done
Deport liberals
Deportations.
Development of autonomous drones. Scrap traditional warfare conventions. There will be no way for humans to stop what's coming. It's time to call in the heartless machines.
Don't stem it. People are getting killed and tortured. Build cheap housing for them, give them a tiny income, hire more police and schoolteachers to reduce the trouble they'll cause. Raise taxes to do all this. When natives complain that the refugees make life slightly harder for them, point out that asylum is a human right.
Drop money instead of bombs.
Educating women seems to be the best way to lower the birth rate. I'd try to educate and empower women in 3rd world countries.

 

 

 

 

Too little too late, though.

erect electric fences
Get all NATO nations together, invade the MIddle East, gain full control of the region and develop it.
I doubt it would take more than a few shots fired and people would be too afraid to try again.
I think the only way we can really stop the migration refugees is to go to the route of the problem. We know why refugees are fleeing their birthplace. Why don't we do anything. They should feel safe. We should end these wars rather than capitalize on them and start them. Ending the source of the conflict would be the only measure I feel would significantly make refugees want to stay in their country.
Another, harsher option would be to reduce the amount of pull factors that entice migrants and refugees. If we limited the amount of perks then surely less refugees would want to arrive in a country e.g. make them unable to have NHS covered healthcare until after a certain amount of time, make them unable to claim benefits until they have evidence that they have searched for a certain number of jobs in a certain period of time.
I would give every person a basic income, instead of other benefits and government programs, which would be enough for survival (adapted to each country's standard of living) and simple living
I wouldn't do this because refugees are human too and deserve to be somewhere safe. Just because they're not rich and powerful doesn't mean they don't deserve safety.
I'm so tempted to say "wholesale takeover of one part of Middle East so that we could set up a working country there, for refugees and aid them to create a better country" but that's pipe dreams. As long as ISIS and Boko Haram etc are operating, there will be refugees and crisis. The only solution is to end the vast imbalance of rich vs. poor – worldwide implementation of high taxation of the top 10%; no country providing "havens" – then we'd have the money to help those who need assistance setting up their lives in a peaceful place. The crisis is due to rich and powerful sucking up the funds to pay for their fun.
If I were "in charge" I would RESIGN IMMEDIATELY, and go spend the rest of the collapse in a suite in Las Vegas,play a fiddle for irony…and Bill the Koch Brothers for services rendered to pay for it all!
Immediately dismiss the neocon cabal orchestrating US foreign policy and bring charges for war crimes against the lot. If the Empire of Chaos would stop its continuous policy of divide-and-rule, the political dimension of the refugee crisis would be mitigated. The coming climate change aspects would, of course, not be.
IMPOSE strict food rationing on indigenous population. for travelers ,bring or grow your own or starve.Its going to happen anyway
International military action to make their homelands safe and foreign aid to keep them from starving. I would form a team of experts to figure out where refugees can go that would cause the least amount of disruption in host countries and which would piss off the smallest number of people.
It is too late.
World population needs to be reduced uniformly and by a large amount.
These issues are an obvious consequence of larger, overarching problems which have been known about for a long time.
We are unfortunate to live in these times.
My brain hurts when I think about it. Being a mother I am torn between wanting to nurture and save(if the numbers are not overwhelming, big if I know) versus getting the claws out to protect valuable resources for my kin. The level of pragmatic coolness with which I can speculate on 'solutions' is disquieting in a way.
No policies will help, too late.
no solution really, we are in overshoot phase
Nothing
Outlaw war.
Politics is about interest, but we could all be fairer and make sure that those don't play fair suffer because of it.
Put them in camps that provide 3 pots and a cot and nothing more.
Rapid culling of the human herd to <1B may provide a viable path for the remainder. Otherwise, economic and environmental conditions continue to deteriorate to the point of no return for all. So let's just cut to the chase and whack the vast majority of the proles. It's gonna happen anyway.
Renounce the UN Charter on Refugees.
Pass a law making it a death penalty offense to be an illegal immigrant – regardless of age or gender.
Rescind citizenship of ALL non Whites and Jews.
Declare ALL non Whites and Jews without citizenship to be illegal immigrants.
Implement the law without mercy, pity or compassion.
Self solving problem we are in massive population overshoot, ecological collapse, a warming planet.
Sink the boats
Sink the boats!
Stop bombing them and raping their natural resources.
Arrest the bankers and captains of the Military Industrial Complex.
stop Donald trump and idiocravy
Stop fucking coming over or you will be shot.
Stop imperialistic wars and the consumption of fossil fuels.
Stop the deliberate creation of failed states such as Iraq, Syria,Ukraine.
Who am I kidding. There is no steming this, we are all out of stems, no stems to be had, stemless.
Stop the MIC from ceeating refugees. Mandatory sterilization all women after 1 child. Restoration agriculture.
Stop the wars that's producing refugees in the first place. Someone smarter than me should be able to figure out how.
Stop US military everywhere and stop pressuring Russia.
There effectively is no way to stop people from trying to get to places that seem better than where they come from.

 

 

 

 

The only thing that can be done is resolve some of the military conflicts; its the only thing about which we have any control (climate change is probably no longer in out control for the short term, anyway).

Unfortunately, the conflicts continue tomultiply without any end in sight. The last round of interventionist policies of the early 2000s caused even more instability than the previous round of interventions in the mid 1990s.

Is there anyone that seriously thinks more intervention is going to solve the conflicts.

There is NO policy that can work now; world pops are too far into the destruction of what was. I certainly couldn't stop the current ripping apart of established, uniquely defined cultures and institutions, thereby forcing people to migrate. Nor could I force other uniquely defined functioning societies to accept overwhelming numbers of uniquely defined and foreign populations. Disrupting civilization ie social systems without rules except as defined by force of the now migrating hoards will always result in disorienting chaos and hostilities. Humans simply can't process, least of all assimilate drastic and dramatic demographic changes into everyday living. This is more of the typical shit started at "The Decider top" for private gains and paid for by the masses at "the bottom" by socializing the costs. Insulting thinking people who want some kind of orderly and comprehensive policies, by labeling them racists and xeno-phobes is only inciting anger. The human condition naturally resists chaos and fear of losing what's familiar. Inclusive empathy only stretches so far before people and systems break down. Another factor of decline and doom.
There is no solution.
Theres nothing that can be done.
Try to find a solution to the problems in their original homes so that there is no need for migration.
Walls. Military. Boarder Guards

OK, that is what the sample of Kollapsniks TM thinks about this problem.

What do I think about it?  Joe D asked this question when I dropped on the Survey:

I made the following point in a text box in the survey and would love to hear more from you directly…that being to get from 8B to 4B to 1B people on the planet in less than two generations means lots of people will die unnaturally.  And if this is not only probable but also potentially beneficial to the remainder, why do all of our conversations revolve around minimizing death rather than accepting its long term benefit to the survival of our species and planet?  I know it feels a little immoral, or at least a little amoral,  but isnt it the right thing? Isnt more death helpful to our long term survival?

Unfortunately, unnatural death is often ugly and sorted so it's easy to throw ideas which support it under the bus as disgusting barbarism. But maybe they are neither disgusting nor barbaric.  Rather they are necessary, practical, and inevitable.

The fact of the matter is this is a Wicked Problem.  It doesn't have a solution which is palatable to everyone, and the solutions that will be undertaken are all inherently unfair, chaotic etc.  The text answers given above are for the most part incredibly STUPID.  I do these things to try to get a feel for the pulse of J6P, but it is incredibly dissapointing when you actually take this pulse.

There is no way to equitably reduce a population of Homo Sap.  It's always a chaotic adventure.  The fact we are in such a massive overshoot situation now means the dowspin is going to be orders of magnitude greater in chaos than has ever come before.  the Four Horsemen of the Apocalypse are coming, and staying out of their path will take a lot of luck and planning.  Now would be a good time to get started if you have not already.

090901horsemen

 

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