http://theeconomiccollapseblog.com/archives/5-highly-respected-financial-experts-that-are-warning-that-a-market-crash-is-imminent
5 Highly Respected Financial Experts That Are Warning That A Market Crash Is Imminent
If everything is going to be “just fine”, why are so many big names in the financial community warning about an imminent meltdown? I don’t think that I have seen so many simultaneous warnings about a market crash since just before the great financial crisis of 2008. And at this point, you would have to be quite blind not to see that stocks are absurdly overvalued and that a correction is going to happen at some point. And when stocks do start crashing, lots of fingers are going to start pointing at President Trump, but it won’t be his fault. The Federal Reserve and other central banks are primarily responsible for creating this bubble, and they should definitely get the blame for what is about to happen to global financial markets.
My regular readers are quite familiar with my thoughts on where the market is headed, so today let me share some thoughts from five highly respected financial experts…
#1 When Altair Asset Management’s chief investment officer Philip Parker was asked if a market crash was coming to Australia, he said that he has “never been more certain of anything in my life”. In fact, he is so sure that the investments that his hedge fund is managing are going to crash that a decision was made to liquidate the fund “and return ‘hundreds of millions’ of dollars to its clients”…
While hardly a novel claim – in the past many have warned that Australia’s housing and stock market are massive asset bubbles (which local banks have been forced to deny as their fates are closely intertwined with asset prices even as the RBA is increasingly worried) – so far few if any have gone the distance of putting their money where their mouth was. That changed, when Australian asset manager Altair Asset Management made the extraordinary decision to liquidate its Australian shares funds and return “hundreds of millions” of dollars to its clients according to the Sydney Morning Herald, citing an impending property market “calamity” and the “overvalued and dangerous time in this cycle”.
“Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, who serves as Altair’s chairman and chief investment officer, said in a statement on Monday quoted by the SMH.
#2 Seth Klarman leads one of the biggest hedge funds in the United States, and he believes that U.S. investors are greatly underestimating the amount of risk in the market right now…
“When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high,” Klarman wrote. “By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated.”
Klarman oversees one of the US’s largest hedge fund firms, with some $30 billion under management. He has a huge following on Wall Street — investors named his book, “Margin of Safety,” their favorite investment book in a recent SumZero survey.
#3 Bill Blain is a strategist at Mint Partners, and he is actually specifically pointing to October 12th as the date when things will start to get “horribly interesting”…
But…. Catch a falling knife, why don’t you… I shall spend the summer wondering just how long the Stock Market games continue. When, not if.
At the moment, my prediction is October 12th. Around that day its going to get horribly interesting..
Why that particular day?
Gut feel and knowing how the Bowl of Petunias felt in Hitchhikers. (“Not again.”)
There are just too many contradictory currents out there. The unsustainability of burgeoning consumer debt, unfeasibly tight credit spreads, the sandcastle foundations of student loans, autos, housing and the CLO market, China, Trump, politics.. worries about what follows Brazil in the EM market, and whatever… The risks of a massive consumer sentiment dump..
#4 David Stockman has also been warning about what may happen this fall. According to Stockman, this current stock market bubble “is the greatest sucker’s rally we have ever seen”…
“The market is insanely valued right now. They were trying to tag, the robo machines and day traders, they were trying to tag 2,400 on the S&P 500. They ended up at 2,399, I think, but the point is that represents about 25 times trailing earnings for 2016. We are at a point in the so-called recovery that has already lasted 96 months. It’s almost the longest one in history. What the market is saying is we have reached the point of full employment forever. There will never be another recession or any kind of economic surprise or upset or dislocation. The market is pricing itself for perfection for all of eternity. This is crazy. . . . I think the market could easily drop to 1,600 or 1,300. It could drop by 40% or even more once the fantasy ends. When the government shows its true colors, that it’s headed for a fiscal bloodbath when this crazy notion that there is going to be some Trump fiscal stimulus is put to rest once and for all. I mean it’s not going to happen. They can’t pass a tax cut that big without a budget resolution that incorporated $10 trillion or $15 trillion in debt over the next decade. It’s just not going to pass Congress. . . . I think this is the greatest sucker’s rally we have ever seen.“
#5 Last but certainly not least, David Kranzler seems quite certain “that the stock market bubble is getting ready to pop”…
Anyone happen to notice that several market commentators have argued that Bitcoin is a bubble but the same stock “experts” look the other way as the U.S. stock market becomes more overvalued by the day vs. the deteriorating underlying fundamentals? Bitcoin going “parabolic” triggers alarm bells but it’s okay if the stock price of Amazon.com Inc (NASDAQ:AMZN) is hurtling toward parity with the price of one ounce of gold. Tesla (NASDAQ:TSLA) burns a billion per year in cash. It sold 76,000 cars last year vs. 10 million worldwide for General Motors (NYSE:GM). Yet Tesla’s market cap is $51.7 billion vs. $48.8 billion for GM.
This insanity is the surest sign that the stock market bubble is getting ready to pop. If you read between the lines of the the comments from certain Wall Street analysts, the only justification for current valuations is “Central Bank liquidity” and “Fed support of asset values.” This is the most dangerous stage of a market top because it draws in retail “mom & pop” investors who can’t stop themselves from missing out on the next “sure thing.” There will be millions of people who are permanently damaged financially when the Fed loses control of this market. Or, as legendary “vulture” investor Asher Edelman stated on CNBC, “I don’t want to be in the market because I don’t know when the plug is going to be pulled.”
Could all of these top experts be wrong?
It’s possible, but I wouldn’t bet on it.
Every stock market bubble of this magnitude in U.S. history has ended in a spectacular crash, and this one will not be any different. We can certainly have some good arguments about the exact timing of the next crash, but what everyone should be able to agree on is that a crash is coming.
You only make money in the stock market if you get out at the right time. Many of those that timed things well have made a tremendous amount of money, but most investors will be entirely caught off guard by the market implosion that is rapidly approaching.
As I have explained to my readers repeatedly, markets tend to go down a whole lot faster than they go up, and in the not too distant future we are going to see trillions of dollars of investor wealth wiped out very, very quickly.
Let’s hope that the coming crisis will not be as bad as 2008, but I have a feeling that it is going to be much worse.
We didn’t learn our lessons the last time around, and so now we are going to pay a very high price for our stubbornness.
Wednesday, May 31, 2017
SC144-6
http://kunstler.com/clusterfuck-nation/the-so-called-resistance/
The So-called Resistance
Entropy never sleeps. It works remorselessly to transform things of value into useless, dissipated waste and heat. Complexity stokes it especially as the law of diminishing returns multiplies the wheels of futility spinning down to zero. Hence, the intellectual decay of American life in which spin is everything, anything goes, and nothing matters.
The latest manifestation of this dynamic is the curious movement that styles itself The Resistance, lately adopted by the grotesque handmaiden of the Deep State that the Democratic Party became in the regency of Hillary Clinton. Its mission is to undo the results of the last national election by claiming that Russia undid it. It pretends to seek the restoration of something — but what? Of dissipated power relations within the Deep State itself?
President Trump is actually taking care of that by turning government management over to his generals and the minions of Goldman Sachs. The generals are reinvesting in the strategic black hole of our military adventures overseas. The Goldman Sachs appointees are making Wall Street safe for the continued asset-stripping of the USA. The last time I checked, Hillary’s gang did not oppose either of these endeavors.
The Resistance employs cadres of useful idiots — Black Lives Matter, “undocumented” visitors, “Antifa,” the LGBTQ “community” — to pretend that it stands for social justice, but these are just straw persons fronting a gang devoted only to regaining the levers of “privilege” — which they also pretend to be against. The Resistance takes its name from the movement in World War Two France that fought the Nazi occupation, thus self-valorizing itself. But the pre-owned styling is just another victory of spin in the public relations nightmare that American political life has become.
It also begs the question: what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do.
The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing. A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious.
But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.
One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened.
Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion. And it would lead in the hard work of shedding this over-burden of self-multiplying despotisms.
Maybe this Memorial Day is a good moment to question the claims of the so-called resistance, and perhaps patriotically meditate on what the nature of an authentic resistance would be to the ongoing decay of this nation while it is still possible.
The So-called Resistance
Entropy never sleeps. It works remorselessly to transform things of value into useless, dissipated waste and heat. Complexity stokes it especially as the law of diminishing returns multiplies the wheels of futility spinning down to zero. Hence, the intellectual decay of American life in which spin is everything, anything goes, and nothing matters.
The latest manifestation of this dynamic is the curious movement that styles itself The Resistance, lately adopted by the grotesque handmaiden of the Deep State that the Democratic Party became in the regency of Hillary Clinton. Its mission is to undo the results of the last national election by claiming that Russia undid it. It pretends to seek the restoration of something — but what? Of dissipated power relations within the Deep State itself?
President Trump is actually taking care of that by turning government management over to his generals and the minions of Goldman Sachs. The generals are reinvesting in the strategic black hole of our military adventures overseas. The Goldman Sachs appointees are making Wall Street safe for the continued asset-stripping of the USA. The last time I checked, Hillary’s gang did not oppose either of these endeavors.
The Resistance employs cadres of useful idiots — Black Lives Matter, “undocumented” visitors, “Antifa,” the LGBTQ “community” — to pretend that it stands for social justice, but these are just straw persons fronting a gang devoted only to regaining the levers of “privilege” — which they also pretend to be against. The Resistance takes its name from the movement in World War Two France that fought the Nazi occupation, thus self-valorizing itself. But the pre-owned styling is just another victory of spin in the public relations nightmare that American political life has become.
It also begs the question: what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do.
The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing. A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious.
But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.
One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened.
Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion. And it would lead in the hard work of shedding this over-burden of self-multiplying despotisms.
Maybe this Memorial Day is a good moment to question the claims of the so-called resistance, and perhaps patriotically meditate on what the nature of an authentic resistance would be to the ongoing decay of this nation while it is still possible.
SC144-5
http://kunstler.com/clusterfuck-nation/do-you-mr-jones/
Do You, Mr. Jones…?
In case you wonder how our politics fell into such a slough of despond, the answer is pretty simple. Neither main political party, or their trains of experts, specialists, and mouthpieces, can construct a coherent story about what is happening in this country — and the result is a roaring wave of recursive objurgation and wrath that loops purposelessly towards gathering darkness.
What’s happening is a slow-motion collapse of the economy. Neither Democrats or Republicans know why it is so remorselessly underway. A tiny number of well-positioned scavengers thrive on the debris cast off by the process of disintegration, but they don’t really understand the process either — the lobbyists, lawyers, bankers, contractors, feeders at the troughs of government could not be more cynical or clueless.
The nation suffers desperately from an absence of leadership and perhaps even more from the loss of faith that leadership is even possible after years without it. Perhaps that’s why so much hostility is aimed at Mr. Putin of Russia, a person who appears to know where his country stands in history, and who enjoys ample support among his countrymen. How that must gall the empty vessels like Lindsey Graham, Rubio, Schumer, Feinstein, Ryan, et. al.
So along came the dazzling, zany Trump, who was able to communicate a vague sense-memory of what had been lost in our time of American life, whose sheer bluster resembled something like conviction as projected via the cartoonizing medium of television, and who entered a paralysis of intention the moment he stepped into the oval office, where he proved to be even less authentic than the Wizard of Oz. Turned out he didn’t really understand the economic collapse underway either; he just remembered an America of 1962 and thought somehow the national clock might be turned back.
The industrial triumph of America in the 19th and 20th century was really something to behold. But like all stories, it had a beginning, a middle, and an end, and we’re closer to the end of that story than the middle. It doesn’t mean the end of civilization but it means we have to start a new story that provides some outline of a life worth living on a planet worth caring about.
For the moment the fragmentary stories of redemption revolve around technological rescue remedies, chiefly the idea that electric cars will save the nation. This dumb narrative alone ought to inform you just how lost we are, because the story assumes that our prime objective is to remain car-dependent at all costs — when one of the main features in the story of our future is the absolute end of car dependency and all its furnishings and accessories. We can’t imagine going there. (How would you, without a car?)
The economy is collapsing because it was based on cheap oil, which is no longer cheap to pull out of the ground — despite what you might pay for it at the pump these days. The public is understandably confounded by this. But their mystification does nothing to allay the disappearance of jobs, incomes, prospects, or purpose. They retreat from the pain of loss into a fog of manufactured melodrama featuring superheros and supervillains and supernatural doings.
Donald Trump could never be a Franklin Roosevelt or a Lincoln. These were figures who, if nothing else, could articulate the terms that reality had laid on America’s table in their particular moments of history. Mr. Trump can barely speak English and his notions about history amount to a kind of funny papers of the mind. A sinister host of adversaries who ought to understand what is happening in this country, but don’t, or can’t, or won’t, are coming after him, and they are going to get rid of him one way or another. They have to. They must. And they will.
And then what?
Do You, Mr. Jones…?
In case you wonder how our politics fell into such a slough of despond, the answer is pretty simple. Neither main political party, or their trains of experts, specialists, and mouthpieces, can construct a coherent story about what is happening in this country — and the result is a roaring wave of recursive objurgation and wrath that loops purposelessly towards gathering darkness.
What’s happening is a slow-motion collapse of the economy. Neither Democrats or Republicans know why it is so remorselessly underway. A tiny number of well-positioned scavengers thrive on the debris cast off by the process of disintegration, but they don’t really understand the process either — the lobbyists, lawyers, bankers, contractors, feeders at the troughs of government could not be more cynical or clueless.
The nation suffers desperately from an absence of leadership and perhaps even more from the loss of faith that leadership is even possible after years without it. Perhaps that’s why so much hostility is aimed at Mr. Putin of Russia, a person who appears to know where his country stands in history, and who enjoys ample support among his countrymen. How that must gall the empty vessels like Lindsey Graham, Rubio, Schumer, Feinstein, Ryan, et. al.
So along came the dazzling, zany Trump, who was able to communicate a vague sense-memory of what had been lost in our time of American life, whose sheer bluster resembled something like conviction as projected via the cartoonizing medium of television, and who entered a paralysis of intention the moment he stepped into the oval office, where he proved to be even less authentic than the Wizard of Oz. Turned out he didn’t really understand the economic collapse underway either; he just remembered an America of 1962 and thought somehow the national clock might be turned back.
The industrial triumph of America in the 19th and 20th century was really something to behold. But like all stories, it had a beginning, a middle, and an end, and we’re closer to the end of that story than the middle. It doesn’t mean the end of civilization but it means we have to start a new story that provides some outline of a life worth living on a planet worth caring about.
For the moment the fragmentary stories of redemption revolve around technological rescue remedies, chiefly the idea that electric cars will save the nation. This dumb narrative alone ought to inform you just how lost we are, because the story assumes that our prime objective is to remain car-dependent at all costs — when one of the main features in the story of our future is the absolute end of car dependency and all its furnishings and accessories. We can’t imagine going there. (How would you, without a car?)
The economy is collapsing because it was based on cheap oil, which is no longer cheap to pull out of the ground — despite what you might pay for it at the pump these days. The public is understandably confounded by this. But their mystification does nothing to allay the disappearance of jobs, incomes, prospects, or purpose. They retreat from the pain of loss into a fog of manufactured melodrama featuring superheros and supervillains and supernatural doings.
Donald Trump could never be a Franklin Roosevelt or a Lincoln. These were figures who, if nothing else, could articulate the terms that reality had laid on America’s table in their particular moments of history. Mr. Trump can barely speak English and his notions about history amount to a kind of funny papers of the mind. A sinister host of adversaries who ought to understand what is happening in this country, but don’t, or can’t, or won’t, are coming after him, and they are going to get rid of him one way or another. They have to. They must. And they will.
And then what?
Monday, May 29, 2017
SC144-4
http://www.oftwominds.com/blog.html
How Debt-Asset Bubbles Implode: The Supernova Model of Financial Collapse
When debt-asset bubbles expand at rates far above the expansion of earnings and real-world productive wealth, their collapse is inevitable. The Supernova model of financial collapse is one way to understand this.
As I noted yesterday in Will the Crazy Global Debt Bubble Ever End?, I've used the Supernova analogy for years, but didn't properly explain why it illuminates the dynamics of financial bubbles imploding.
According to Wikipedia, "A supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star's life, whose dramatic and catastrophic destruction is marked by one final titanic explosion."
A key feature of a pre-supernova super-massive star is its rapid expansion. As the star consumes its available fuel via nuclear fusion, the star's outer layer expands. Once there is no longer enough fuel/fusion to resist the force of gravity, the star implodes as gravity takes over.
This collapse ejects much of the outer layers of the star in an event of unprecedented violence.
The financial analogy is easy to see: when rapidly expanding debt consumes a critical threshold of earnings (fuel), the equivalent of gravity (default, inability to service the enormous debt) triggers the collapse of the entire debt/leverage-dependent financial system.
As I explained yesterday, if earnings stagnate or decline while debt races higher, eventually earnings are insufficient to service the debt and default is inevitable. The other problem that arises as more and more of earned income goes to debt service is that there is less and less disposable income left to support consumer spending--the lifeblood of economies worldwide.
Once debt service absorbs a significant chunk of household earnings, recession is the inevitable result as spending collapses once more debt cannot be loaded on households. In other words, debt is limited by earnings. If earnings decline, or fall far behind the expansion of debt, eventually borrowers can no longer borrow more, or refuse to borrow more.
At that point, consumer spending falls and recession generates a self-reinforcing cycle of declining sales, profits, employment and wages. Recession further reduces the ability and appetite for more debt, and this acts as "gravity" in the super-massive debt-star.
Financial supernova collapse has two pathways which we call deflationary and inflationary. But the key point here is these are simply different pathways to the same result: the collapse of the financial system.
In a deflationary supernova, defaults--and the avoidance of additional debt--are the gravity that overwhelms the forces of expanding debt. Once the losses and risk are visible to all participants, the herd psychology changes, and participants no longer believe that central banks "are now the ultimate power in the Universe."
Central banks can create currency and credit, but they can't create earnings or productive real-world wealth. These are the limiting dynamics of any debt-dependent system.
The fantasy is that free money--limitless credit to corporations and Universal Basic Income to debt-serfs--will magically create earnings and expand productivity. But this FantasyLand exists only in overheated self-serving imagination: in the real world, free credit is used to buy back stocks and indulge in other financialization trickery, not invest in higher productivity.
And the debt-serfs scraping by on Universal Basic Income have no ability to borrow more and few means to generate meaningful productivity gains.
The other pathway to implosion is to print currency with sufficient abandon that debtors have enough money to service their debts. Emitting sufficient new free money to re-set all the unpayable debt destroys the purchasing power of the currency--a supernova implosion that is little different than the deflationary implosion. The inflationary pathway results in the destruction of the currency, impoverishing everyone holding the currency.
While the idea of debt jubilee is appealing to everyone who doesn't own debt-based assets (mortgages, auto loans, student loans,etc.), it is anathema to those who do own most of the debt-based assets--who just happen to be the wealthy and powerful who run our pay-to-play "democracy."
If history is any guide, the wealthy and powerful who run our pay-to-play "democracy" will never relinquish their wealth. Only a financial collapse can re-set the system.
The financial implosion triggers social and political upheavals. Recall that one person's debt is another entity's asset. When debt is blown off in either a deflationary or inflationary implosion, all the "wealth" represented by debt is also blown off.
So what survives a financial supernova? There are three classes of things that are still functioning after a debt/fiat-currency supernova: real-world tools/productive assets that were owned free and clear, and non-fiat-currency financial assets that are difficult for failed states and central banks to steal/expropriate.
The third class is human/social capital, i.e. the knowledge and experience in your head. Not only will my Skil 77 power saw still be around, so will my knowledge of how to be productive with this tool.
Proponents of precious metals and cryptocurrencies both see their favored assets as survivable assets that are difficult to steal/expropriate. It's difficult to predict just how desperate failing Status Quo institutions will get as their debt-fiat-currency dependent "wealth" and "power" implodes, but we are probably safe in assuming they will get fanatically zealous about stealing/expropriating everything they can get their self-serving hands on before the tides of History wash them away.
If they take my Skil 77 power saw, what are they going to do with it? Sell it for pennies to a crony of the central state? How will removing my ability to be productive help sustain their imploding regime? Removing productive capacity and suppressing my willingness to be productive will only hasten the collapse of their failed regime.
The Venezuelan Bolivar is the model of currency collapse: this is not some long-ago history--this is the present:
And how much did expanding debt boost productivity? Oops! Rapidly expanding financialized (i.e. unproductive) debt is Kryptonite to productivity.
Expanding credit has fixed everything! That's precisely what the Imperial managers think just before the debt supernova implodes.
Federal debt has tripled--no problem, let's triple it again, and then triple that. There is no upper limit on how much currency the Empire can borrow or print, right? "We are the ultimate power in the Universe now," etc.
Gravity eventually overpowers financial fakery. Central banks can add zeroes to currency and the super-wealthy can use their unlimited lines of credit to buy up everything in sight, but when the Empire collapses, the debt-assets of the super-wealthy are blown off in the supernova along with all the other artificial constructs of our corrupt, corrupting, rapacious, exploitive system.
How Debt-Asset Bubbles Implode: The Supernova Model of Financial Collapse
When debt-asset bubbles expand at rates far above the expansion of earnings and real-world productive wealth, their collapse is inevitable. The Supernova model of financial collapse is one way to understand this.
As I noted yesterday in Will the Crazy Global Debt Bubble Ever End?, I've used the Supernova analogy for years, but didn't properly explain why it illuminates the dynamics of financial bubbles imploding.
According to Wikipedia, "A supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star's life, whose dramatic and catastrophic destruction is marked by one final titanic explosion."
A key feature of a pre-supernova super-massive star is its rapid expansion. As the star consumes its available fuel via nuclear fusion, the star's outer layer expands. Once there is no longer enough fuel/fusion to resist the force of gravity, the star implodes as gravity takes over.
This collapse ejects much of the outer layers of the star in an event of unprecedented violence.
The financial analogy is easy to see: when rapidly expanding debt consumes a critical threshold of earnings (fuel), the equivalent of gravity (default, inability to service the enormous debt) triggers the collapse of the entire debt/leverage-dependent financial system.
As I explained yesterday, if earnings stagnate or decline while debt races higher, eventually earnings are insufficient to service the debt and default is inevitable. The other problem that arises as more and more of earned income goes to debt service is that there is less and less disposable income left to support consumer spending--the lifeblood of economies worldwide.
Once debt service absorbs a significant chunk of household earnings, recession is the inevitable result as spending collapses once more debt cannot be loaded on households. In other words, debt is limited by earnings. If earnings decline, or fall far behind the expansion of debt, eventually borrowers can no longer borrow more, or refuse to borrow more.
At that point, consumer spending falls and recession generates a self-reinforcing cycle of declining sales, profits, employment and wages. Recession further reduces the ability and appetite for more debt, and this acts as "gravity" in the super-massive debt-star.
Financial supernova collapse has two pathways which we call deflationary and inflationary. But the key point here is these are simply different pathways to the same result: the collapse of the financial system.
In a deflationary supernova, defaults--and the avoidance of additional debt--are the gravity that overwhelms the forces of expanding debt. Once the losses and risk are visible to all participants, the herd psychology changes, and participants no longer believe that central banks "are now the ultimate power in the Universe."
Central banks can create currency and credit, but they can't create earnings or productive real-world wealth. These are the limiting dynamics of any debt-dependent system.
The fantasy is that free money--limitless credit to corporations and Universal Basic Income to debt-serfs--will magically create earnings and expand productivity. But this FantasyLand exists only in overheated self-serving imagination: in the real world, free credit is used to buy back stocks and indulge in other financialization trickery, not invest in higher productivity.
And the debt-serfs scraping by on Universal Basic Income have no ability to borrow more and few means to generate meaningful productivity gains.
The other pathway to implosion is to print currency with sufficient abandon that debtors have enough money to service their debts. Emitting sufficient new free money to re-set all the unpayable debt destroys the purchasing power of the currency--a supernova implosion that is little different than the deflationary implosion. The inflationary pathway results in the destruction of the currency, impoverishing everyone holding the currency.
While the idea of debt jubilee is appealing to everyone who doesn't own debt-based assets (mortgages, auto loans, student loans,etc.), it is anathema to those who do own most of the debt-based assets--who just happen to be the wealthy and powerful who run our pay-to-play "democracy."
If history is any guide, the wealthy and powerful who run our pay-to-play "democracy" will never relinquish their wealth. Only a financial collapse can re-set the system.
The financial implosion triggers social and political upheavals. Recall that one person's debt is another entity's asset. When debt is blown off in either a deflationary or inflationary implosion, all the "wealth" represented by debt is also blown off.
So what survives a financial supernova? There are three classes of things that are still functioning after a debt/fiat-currency supernova: real-world tools/productive assets that were owned free and clear, and non-fiat-currency financial assets that are difficult for failed states and central banks to steal/expropriate.
The third class is human/social capital, i.e. the knowledge and experience in your head. Not only will my Skil 77 power saw still be around, so will my knowledge of how to be productive with this tool.
Proponents of precious metals and cryptocurrencies both see their favored assets as survivable assets that are difficult to steal/expropriate. It's difficult to predict just how desperate failing Status Quo institutions will get as their debt-fiat-currency dependent "wealth" and "power" implodes, but we are probably safe in assuming they will get fanatically zealous about stealing/expropriating everything they can get their self-serving hands on before the tides of History wash them away.
If they take my Skil 77 power saw, what are they going to do with it? Sell it for pennies to a crony of the central state? How will removing my ability to be productive help sustain their imploding regime? Removing productive capacity and suppressing my willingness to be productive will only hasten the collapse of their failed regime.
The Venezuelan Bolivar is the model of currency collapse: this is not some long-ago history--this is the present:
And how much did expanding debt boost productivity? Oops! Rapidly expanding financialized (i.e. unproductive) debt is Kryptonite to productivity.
Expanding credit has fixed everything! That's precisely what the Imperial managers think just before the debt supernova implodes.
Federal debt has tripled--no problem, let's triple it again, and then triple that. There is no upper limit on how much currency the Empire can borrow or print, right? "We are the ultimate power in the Universe now," etc.
Gravity eventually overpowers financial fakery. Central banks can add zeroes to currency and the super-wealthy can use their unlimited lines of credit to buy up everything in sight, but when the Empire collapses, the debt-assets of the super-wealthy are blown off in the supernova along with all the other artificial constructs of our corrupt, corrupting, rapacious, exploitive system.
SC144-3
https://srsroccoreport.com/the-great-u-s-energy-debt-wall-its-going-to-get-very-ugly/
THE GREAT U.S. ENERGY DEBT WALL: It’s Going To Get Very Ugly….
While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL.
So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations.
As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast.
According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year:
As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.
Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt:
Shale Oil Production, Cost & Profit Estimates For 2018
REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion.
EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion.
If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion. However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.
Yes, it is true, I am not including all U.S. oil and gas production, but I am just trying to make a point here. We must remember, this debt is below investment grade and is likely more of the shale oil and gas producers. Furthermore, these shale oil and gas producers are using most of their free cash flow to drill more wells to produce more oil. So, in all reality, they would not take most all of their profits or free cash flow to pay down debt. They just wouldn’t have the funds to continue drilling.
The Bloomberg data on the U.S. oil and gas companies outstanding debt (bonds) came from the following chart:
I made my own chart (shown at the top of the article) by estimating Bloomberg’s debt figures (they did not provide actual figures) as it seemed more fitting to show U.S. energy debt in a BRIGHT RED color. Their chart seemed a tad boring, so I thought it would be nifty to jazz it up a bit. While I have reproduced their data in my own chart, I give them full credit for the figures.
That being said…. there is no way in hell the U.S. oil and gas companies are going to be able to pay back this debt. NO WAY…. NO HOW. So, we could either see a lot more bankruptcies, companies rolling over the debt to a later date, or Uncle Sam could come in and buy the debt. However, all these options won’t change the dire situation the U.S. energy sector will face as it becomes more difficult and less profitable to produce oil and gas in the future.
I would kindly like to remind all the precious metals investors as well as those who follow the alternative media…. ENERGY IS THE KEY PROBLEM…. not the debt. The debt is a symptom of the Falling EROI of energy. For some strange reason, a lot of people still don’t get that. We must remember the following:
DEBTS = UNBURNED ENERGY OBLIGATIONS
For example, a home mortgage is a debt owed by the homeowner. Energy must be burned every day, week, month and year(s) to create the economic activity that pays the homeowner a salary to pay off the home mortgage over the 20-30 year period. Thus…..
HOME MORTGAGE = UNBURNED ENERGY OBLIGATION
Now, I can go on and on by using other examples such as car loans, boat loans, RV loans, credit cards, second mortgages, company and public debt. All of these debts are “Unburned Energy Obligations.” When you can finally look at the market in the terms of “ENERGY”, and not “FIAT MONEY”, “ASSETS” or “DEBTS”, then you will finally understand why the debt is not the real problem.
Why? Because, even if we could wipe away all the debt, that would still not solve the Falling EROI – Energy Returned On Investment of our oil and gas sources or the declining net energy that is available to the market. The massive increase in debt has just postponed the inevitable a while longer....
While the article focuses on US energy companies, this situation of declining net energy is manifesting worldwide.
THE GREAT U.S. ENERGY DEBT WALL: It’s Going To Get Very Ugly….
While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL.
So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations.
As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast.
According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year:
As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.
Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt:
Shale Oil Production, Cost & Profit Estimates For 2018
REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion.
EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion.
If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion. However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.
Yes, it is true, I am not including all U.S. oil and gas production, but I am just trying to make a point here. We must remember, this debt is below investment grade and is likely more of the shale oil and gas producers. Furthermore, these shale oil and gas producers are using most of their free cash flow to drill more wells to produce more oil. So, in all reality, they would not take most all of their profits or free cash flow to pay down debt. They just wouldn’t have the funds to continue drilling.
The Bloomberg data on the U.S. oil and gas companies outstanding debt (bonds) came from the following chart:
I made my own chart (shown at the top of the article) by estimating Bloomberg’s debt figures (they did not provide actual figures) as it seemed more fitting to show U.S. energy debt in a BRIGHT RED color. Their chart seemed a tad boring, so I thought it would be nifty to jazz it up a bit. While I have reproduced their data in my own chart, I give them full credit for the figures.
That being said…. there is no way in hell the U.S. oil and gas companies are going to be able to pay back this debt. NO WAY…. NO HOW. So, we could either see a lot more bankruptcies, companies rolling over the debt to a later date, or Uncle Sam could come in and buy the debt. However, all these options won’t change the dire situation the U.S. energy sector will face as it becomes more difficult and less profitable to produce oil and gas in the future.
I would kindly like to remind all the precious metals investors as well as those who follow the alternative media…. ENERGY IS THE KEY PROBLEM…. not the debt. The debt is a symptom of the Falling EROI of energy. For some strange reason, a lot of people still don’t get that. We must remember the following:
DEBTS = UNBURNED ENERGY OBLIGATIONS
For example, a home mortgage is a debt owed by the homeowner. Energy must be burned every day, week, month and year(s) to create the economic activity that pays the homeowner a salary to pay off the home mortgage over the 20-30 year period. Thus…..
HOME MORTGAGE = UNBURNED ENERGY OBLIGATION
Now, I can go on and on by using other examples such as car loans, boat loans, RV loans, credit cards, second mortgages, company and public debt. All of these debts are “Unburned Energy Obligations.” When you can finally look at the market in the terms of “ENERGY”, and not “FIAT MONEY”, “ASSETS” or “DEBTS”, then you will finally understand why the debt is not the real problem.
Why? Because, even if we could wipe away all the debt, that would still not solve the Falling EROI – Energy Returned On Investment of our oil and gas sources or the declining net energy that is available to the market. The massive increase in debt has just postponed the inevitable a while longer....
While the article focuses on US energy companies, this situation of declining net energy is manifesting worldwide.
SC144-2
http://www.truthdig.com/report/item/the_death_of_the_republic_20170521
The Death of the Republic
The deep state’s decision in ancient Rome—dominated by a bloated military and a corrupt oligarchy, much like the United States of 2017—to strangle the vain and idiotic Emperor Commodus in his bath in the year 192 did not halt the growing chaos and precipitous decline of the Roman Empire.
Commodus, like a number of other late Roman emperors, and like President Trump, was incompetent and consumed by his own vanity. He commissioned innumerable statues of himself as Hercules and had little interest in governance. He used his position as head of state to make himself the star of his own ongoing public show. He fought victoriously as a gladiator in the arena in fixed bouts. Power for Commodus, as it is for Trump, was primarily about catering to his bottomless narcissism, hedonism and lust for wealth. He sold public offices so the ancient equivalents of Betsy DeVos and Steve Mnuchin could orchestrate a vast kleptocracy.
Commodus was replaced by the reformer Pertinax, the Bernie Sanders of his day, who attempted in vain to curb the power of the Praetorian Guards, the ancient version of the military-industrial complex. This effort saw the Praetorian Guards assassinate Pertinax after he was in power only three months. The Guards then auctioned off the office of emperor to the highest bidder. The next emperor, Didius Julianus, lasted 66 days. There would be five emperors in A.D. 193, the year after the assassination of Commodus. Trump and our decaying empire have ominous historical precedents. If the deep state replaces Trump, whose ineptitude and imbecility are embarrassing to the empire, that action will not restore our democracy any more than replacing Commodus restored democracy in Rome. Our republic is dead.
Societies that once were open and had democratic traditions are easy prey for the enemies of democracy. These demagogues pay deference to the patriotic ideals, rituals, practices and forms of the old democratic political system while dismantling it. When the Roman Emperor Augustus—he referred to himself as the “first citizen”—neutered the republic, he was careful to maintain the form of the old republic. Lenin and the Bolsheviks did the same when they seized and crushed the autonomous soviets. Even the Nazis and the Stalinists insisted they ruled democratic states. Thomas Paine wrote that despotic government is a fungus that grows out of a corrupt civil society. This is what happened to these older democracies. It is what happened to us.
Our constitutional rights—due process, habeas corpus, privacy, a fair trial, freedom from exploitation, fair elections and dissent—have been taken from us by judicial fiat. These rights exist only in name. The vast disconnect between the purported values of the state and reality renders political discourse absurd.
Corporations, cannibalizing the federal budget, legally empower themselves to exploit and pillage. It is impossible to vote against the interests of Goldman Sachs or ExxonMobil. The pharmaceutical and insurance industries can hold sick children hostage while their parents bankrupt themselves trying to save their sons or daughters. Those burdened by student loans can never wipe out the debt by declaring bankruptcy. In many states, those who attempt to publicize the conditions in the vast factory farms where diseased animals are warehoused for slaughter can be charged with a criminal offense. Corporations legally carry out tax boycotts. Companies have orchestrated free trade deals that destroy small farmers and businesses and deindustrialize the country. Labor unions and government agencies designed to protect the public from contaminated air, water and food and from usurious creditors and lenders have been defanged. The Supreme Court, in an inversion of rights worthy of George Orwell, defines unlimited corporate contributions to electoral campaigns as a right to petition the government or a form of free speech. Much of the press, owned by large corporations, is an echo chamber for the elites. State and city enterprises and utilities are sold to corporations that hike rates and deny services to the poor. The educational system is being slowly privatized and turned into a species of vocational training.
Wages are stagnant or have declined. Unemployment and underemployment—masked by falsified statistics—have thrust half the country into chronic poverty. Social services are abolished in the name of austerity. Culture and the arts have been replaced by sexual commodification, banal entertainment and graphic depictions of violence. The infrastructure, neglected and underfunded, is collapsing. Bankruptcies, foreclosures, arrests, food shortages and untreated illnesses that lead to early death plague a harried underclass. The desperate flee into an underground economy dominated by drugs, crime and human trafficking. The state, rather than address the economic misery, militarizes police departments and empowers them to use lethal force against unarmed civilians. It fills the prisons with 2.3 million citizens, only a tiny percentage of whom had a trial. One million prisoners work for corporations inside prisons as modern-day slaves.
The amendments of the Constitution, designed to protect the citizen from tyranny, are meaningless. The Fourth Amendment, for example, reads: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The reality is that our telephone calls, emails, texts and financial, judicial and medical records, along with every website we visit and our physical travels, are tracked, recorded and stored in perpetuity in government computer banks.
The state tortures, not only in black sites such as those at Bagram Air Base in Afghanistan or at Guantanamo Bay, but also in supermax ADX [administrative maximum] facilities such as the one at Florence, Colo., where inmates suffer psychological breakdowns from prolonged solitary confinement. Prisoners, although they are citizens, endure around-the-clock electronic monitoring and 23-hour-a-day lockdowns. They undergo extreme sensory deprivation. They endure beatings. They must shower and go to the bathroom on camera. They can write only one letter a week to one relative and cannot use more than three pieces of paper. They often have no access to fresh air and take their one hour of daily recreation in a huge cage that resembles a treadmill for hamsters.
The state uses “special administrative measures,” known as SAMs, to strip prisoners of their judicial rights. SAMs restrict prisoners’ communication with the outside world. They end calls, letters and visits with anyone except attorneys and sharply limit contact with family members. Prisoners under SAMs are not permitted to see most of the evidence against them because of a legal provision called the Classified Information Procedures Act, or CIPA. CIPA, begun under the Reagan administration, allows evidence in a trial to be classified and withheld from those being prosecuted. You can be tried and convicted, like Joseph K. in Franz Kafka’s “The Trial,” without ever seeing the evidence used to find you guilty. Under SAMs, it is against the law for those who have contact with an inmate—including attorneys—to speak about his or her physical and psychological conditions.
And when prisoners are released, they have lost the right to vote and receive public assistance and are burdened with fines that, if unpaid, will put them back behind bars. They are subject to arbitrary searches and arrests. They spend the rest of their lives marginalized as members of a vast criminal caste.
The executive branch of government has empowered itself to assassinate U.S. citizens. It can call the Army into the streets to quell civil unrest under Section 1021 of the National Defense Authorization Act, which ended a prohibition on the military acting as a domestic police force. The executive branch can order the military to seize U.S. citizens deemed to be terrorists or associated with terrorists. This is called “extraordinary rendition.” Those taken into custody by the military can be denied due process and habeas corpus rights and held indefinitely in military facilities. Activists and dissidents, whose rights were once protected under the First Amendment, can face indefinite incarceration.
Constitutionally protected statements, beliefs and associations are criminalized. The state assumed the power to detain and prosecute people not for what they have done, or even for what they are planning to do, but for holding religious or political beliefs that the state deems seditious. The first of those targeted have been observant Muslims, but they will not be the last.
The outward forms of democratic participation—voting, competing political parties, judicial oversight and legislation—are meaningless theater. No one who lives under constant surveillance, who is subject to detention anywhere at any time, whose conversations, messages, meetings, proclivities and habits are recorded, stored and analyzed, who is powerless in the face of corporate exploitation, can be described as free. The relationship between the state and the citizen who is watched constantly is one of master and slave. And the shackles will not be removed if Trump disappears.
The Death of the Republic
The deep state’s decision in ancient Rome—dominated by a bloated military and a corrupt oligarchy, much like the United States of 2017—to strangle the vain and idiotic Emperor Commodus in his bath in the year 192 did not halt the growing chaos and precipitous decline of the Roman Empire.
Commodus, like a number of other late Roman emperors, and like President Trump, was incompetent and consumed by his own vanity. He commissioned innumerable statues of himself as Hercules and had little interest in governance. He used his position as head of state to make himself the star of his own ongoing public show. He fought victoriously as a gladiator in the arena in fixed bouts. Power for Commodus, as it is for Trump, was primarily about catering to his bottomless narcissism, hedonism and lust for wealth. He sold public offices so the ancient equivalents of Betsy DeVos and Steve Mnuchin could orchestrate a vast kleptocracy.
Commodus was replaced by the reformer Pertinax, the Bernie Sanders of his day, who attempted in vain to curb the power of the Praetorian Guards, the ancient version of the military-industrial complex. This effort saw the Praetorian Guards assassinate Pertinax after he was in power only three months. The Guards then auctioned off the office of emperor to the highest bidder. The next emperor, Didius Julianus, lasted 66 days. There would be five emperors in A.D. 193, the year after the assassination of Commodus. Trump and our decaying empire have ominous historical precedents. If the deep state replaces Trump, whose ineptitude and imbecility are embarrassing to the empire, that action will not restore our democracy any more than replacing Commodus restored democracy in Rome. Our republic is dead.
Societies that once were open and had democratic traditions are easy prey for the enemies of democracy. These demagogues pay deference to the patriotic ideals, rituals, practices and forms of the old democratic political system while dismantling it. When the Roman Emperor Augustus—he referred to himself as the “first citizen”—neutered the republic, he was careful to maintain the form of the old republic. Lenin and the Bolsheviks did the same when they seized and crushed the autonomous soviets. Even the Nazis and the Stalinists insisted they ruled democratic states. Thomas Paine wrote that despotic government is a fungus that grows out of a corrupt civil society. This is what happened to these older democracies. It is what happened to us.
Our constitutional rights—due process, habeas corpus, privacy, a fair trial, freedom from exploitation, fair elections and dissent—have been taken from us by judicial fiat. These rights exist only in name. The vast disconnect between the purported values of the state and reality renders political discourse absurd.
Corporations, cannibalizing the federal budget, legally empower themselves to exploit and pillage. It is impossible to vote against the interests of Goldman Sachs or ExxonMobil. The pharmaceutical and insurance industries can hold sick children hostage while their parents bankrupt themselves trying to save their sons or daughters. Those burdened by student loans can never wipe out the debt by declaring bankruptcy. In many states, those who attempt to publicize the conditions in the vast factory farms where diseased animals are warehoused for slaughter can be charged with a criminal offense. Corporations legally carry out tax boycotts. Companies have orchestrated free trade deals that destroy small farmers and businesses and deindustrialize the country. Labor unions and government agencies designed to protect the public from contaminated air, water and food and from usurious creditors and lenders have been defanged. The Supreme Court, in an inversion of rights worthy of George Orwell, defines unlimited corporate contributions to electoral campaigns as a right to petition the government or a form of free speech. Much of the press, owned by large corporations, is an echo chamber for the elites. State and city enterprises and utilities are sold to corporations that hike rates and deny services to the poor. The educational system is being slowly privatized and turned into a species of vocational training.
Wages are stagnant or have declined. Unemployment and underemployment—masked by falsified statistics—have thrust half the country into chronic poverty. Social services are abolished in the name of austerity. Culture and the arts have been replaced by sexual commodification, banal entertainment and graphic depictions of violence. The infrastructure, neglected and underfunded, is collapsing. Bankruptcies, foreclosures, arrests, food shortages and untreated illnesses that lead to early death plague a harried underclass. The desperate flee into an underground economy dominated by drugs, crime and human trafficking. The state, rather than address the economic misery, militarizes police departments and empowers them to use lethal force against unarmed civilians. It fills the prisons with 2.3 million citizens, only a tiny percentage of whom had a trial. One million prisoners work for corporations inside prisons as modern-day slaves.
The amendments of the Constitution, designed to protect the citizen from tyranny, are meaningless. The Fourth Amendment, for example, reads: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The reality is that our telephone calls, emails, texts and financial, judicial and medical records, along with every website we visit and our physical travels, are tracked, recorded and stored in perpetuity in government computer banks.
The state tortures, not only in black sites such as those at Bagram Air Base in Afghanistan or at Guantanamo Bay, but also in supermax ADX [administrative maximum] facilities such as the one at Florence, Colo., where inmates suffer psychological breakdowns from prolonged solitary confinement. Prisoners, although they are citizens, endure around-the-clock electronic monitoring and 23-hour-a-day lockdowns. They undergo extreme sensory deprivation. They endure beatings. They must shower and go to the bathroom on camera. They can write only one letter a week to one relative and cannot use more than three pieces of paper. They often have no access to fresh air and take their one hour of daily recreation in a huge cage that resembles a treadmill for hamsters.
The state uses “special administrative measures,” known as SAMs, to strip prisoners of their judicial rights. SAMs restrict prisoners’ communication with the outside world. They end calls, letters and visits with anyone except attorneys and sharply limit contact with family members. Prisoners under SAMs are not permitted to see most of the evidence against them because of a legal provision called the Classified Information Procedures Act, or CIPA. CIPA, begun under the Reagan administration, allows evidence in a trial to be classified and withheld from those being prosecuted. You can be tried and convicted, like Joseph K. in Franz Kafka’s “The Trial,” without ever seeing the evidence used to find you guilty. Under SAMs, it is against the law for those who have contact with an inmate—including attorneys—to speak about his or her physical and psychological conditions.
And when prisoners are released, they have lost the right to vote and receive public assistance and are burdened with fines that, if unpaid, will put them back behind bars. They are subject to arbitrary searches and arrests. They spend the rest of their lives marginalized as members of a vast criminal caste.
The executive branch of government has empowered itself to assassinate U.S. citizens. It can call the Army into the streets to quell civil unrest under Section 1021 of the National Defense Authorization Act, which ended a prohibition on the military acting as a domestic police force. The executive branch can order the military to seize U.S. citizens deemed to be terrorists or associated with terrorists. This is called “extraordinary rendition.” Those taken into custody by the military can be denied due process and habeas corpus rights and held indefinitely in military facilities. Activists and dissidents, whose rights were once protected under the First Amendment, can face indefinite incarceration.
Constitutionally protected statements, beliefs and associations are criminalized. The state assumed the power to detain and prosecute people not for what they have done, or even for what they are planning to do, but for holding religious or political beliefs that the state deems seditious. The first of those targeted have been observant Muslims, but they will not be the last.
The outward forms of democratic participation—voting, competing political parties, judicial oversight and legislation—are meaningless theater. No one who lives under constant surveillance, who is subject to detention anywhere at any time, whose conversations, messages, meetings, proclivities and habits are recorded, stored and analyzed, who is powerless in the face of corporate exploitation, can be described as free. The relationship between the state and the citizen who is watched constantly is one of master and slave. And the shackles will not be removed if Trump disappears.
Monday, May 15, 2017
SC144-1
http://www.oftwominds.com/blog.html
State of Denial: The Economy No Longer Works As It Did in the Past
If there is one reality that is denied or obscured by the Status Quo, it is that the economy no longer works as it did in the past. This is the fundamental economic context of our current slide into political-social disintegration.
The Status Quo narrative is: the policies that worked for the past 70 years are still working today. Boiled down to its Keynesian state-corporate essence, the Status Quo economic narrative is simple:
All we need to do to escape a "soft patch" (recession) is for governments to borrow and spend more money to temporarily boost incomes and demand until the private sector gets back on its feet and starts borrowing and spending more.
To help the private sector, central banks lower interest rates so it's cheaper to borrow and spend.
As soon as the private-sector borrowing and spending rises, we can raise interest rates and trim state fiscal stimulus (i.e. governments borrowing and spending trillions more than they did before the recession).
But the inconvenient reality is these Keynesian policies no longer work. Fiscal stimulus (governments borrowing and spending trillions more than they did before the recession) has continued for a decade--or in Japan's case, almost three decades.
The Keynesian gods have failed, but the worshippers of these false idols have no other form of black magic to turn to.
Why is fiscal stimulus now a permanent policy? The answer is uncomfortable: if fiscal stimulus is withdrawn (or even trimmed), the economy immediately goes into a self-reinforcing contraction.
As for near-zero interest rates: after 10 years of supposed "recovery," central banks are terrified of pushing rates higher by quarter-point baby-steps, for the same reason that fiscal stimulus cannot be withdrawn: raising interest rates to historic norms would immediately send the economy into contraction.
So "emergency" temporary measures are now permanent life-support, lest the comatose patient expire once life support is removed. If unprecedented "emergency" measures are now permanent props required to keep stagnation from imploding into depression, then what policies are left to deal with the next (inevitable) downturn?
The problem with zero-interest rate policy (ZIRP) and fiscal stimulus is neither are remotely connected to real wealth creation, i.e. increased productivity. Printing /borrowing more money into existence does not create wealth; all the new money only increases future claims on existing productive assets.
Real wealth is generated by increasing the output of goods and services with fewer assets, less energy and less labor.
Corporations have foregone investment in favor of stock buy-backs. Much of the borrowed money has gone into unproductive housing and other asset bubbles.
As Gail Tverberg has explained, there is a collar on oil prices: if they're too low, producers lose money and shut down higher-cost wells, crimping supply; if they're too high, low and moderate-income households can no longer support the consumption the economy needs to keep expanding: Why We Should Be Concerned About Low Oil Prices (Our Finite World).
Cheap, abundant energy is required for expansion of borrowing, consumption and payrolls; as energy costs notch up, wages and consumption stagnate.
In effect, the conventional state/central bank policies reduce down to one simple directive: borrow from the future until "organic" (i.e. not dependent on state stimulus, self-sustaining) growth of the private sector returns.
But since productivity and average wages have declined, self-sustaining expansion is no longer the norm. Instead, every sector is borrowing from the future just to maintain the illusion of solvency and expansion. Corporations, states, central banks and households are all living off money borrowed from future earnings and taxes, or spending the gains from unsustainable asset bubbles.
The economy no longer works, and the Status Quo has no Plan B. All the Status Quo has is policies that no longer work: lowering interest rates (10 years and counting), fiscal stimulus (10 years and counting) and monetary easing/stimulus (10 years and counting).
We sense the economy is no longer working as it did in the past, but we're too terrified to even admit this. Since there's no conventional fix, our "leadership" acts as if everything is just fine, and authorities "adjust" measures of stagnation to appear healthy to support the illusion of solvency and expansion.
Productivity: stagnating, declining:
Personal income: stagnating, declining:
Federal debt (borrow and spend from future taxpayers)--through the roof:
Private-sector bank credit--through the roof:
Wealth inequality--through the roof:
There's no Plan B for a state-corporate form of central-planning capitalism that is no longer functioning. The only policies available are the "emergency" ones that are now permanent life-support systems of our failed global economies.
State of Denial: The Economy No Longer Works As It Did in the Past
If there is one reality that is denied or obscured by the Status Quo, it is that the economy no longer works as it did in the past. This is the fundamental economic context of our current slide into political-social disintegration.
The Status Quo narrative is: the policies that worked for the past 70 years are still working today. Boiled down to its Keynesian state-corporate essence, the Status Quo economic narrative is simple:
All we need to do to escape a "soft patch" (recession) is for governments to borrow and spend more money to temporarily boost incomes and demand until the private sector gets back on its feet and starts borrowing and spending more.
To help the private sector, central banks lower interest rates so it's cheaper to borrow and spend.
As soon as the private-sector borrowing and spending rises, we can raise interest rates and trim state fiscal stimulus (i.e. governments borrowing and spending trillions more than they did before the recession).
But the inconvenient reality is these Keynesian policies no longer work. Fiscal stimulus (governments borrowing and spending trillions more than they did before the recession) has continued for a decade--or in Japan's case, almost three decades.
The Keynesian gods have failed, but the worshippers of these false idols have no other form of black magic to turn to.
Why is fiscal stimulus now a permanent policy? The answer is uncomfortable: if fiscal stimulus is withdrawn (or even trimmed), the economy immediately goes into a self-reinforcing contraction.
As for near-zero interest rates: after 10 years of supposed "recovery," central banks are terrified of pushing rates higher by quarter-point baby-steps, for the same reason that fiscal stimulus cannot be withdrawn: raising interest rates to historic norms would immediately send the economy into contraction.
So "emergency" temporary measures are now permanent life-support, lest the comatose patient expire once life support is removed. If unprecedented "emergency" measures are now permanent props required to keep stagnation from imploding into depression, then what policies are left to deal with the next (inevitable) downturn?
The problem with zero-interest rate policy (ZIRP) and fiscal stimulus is neither are remotely connected to real wealth creation, i.e. increased productivity. Printing /borrowing more money into existence does not create wealth; all the new money only increases future claims on existing productive assets.
Real wealth is generated by increasing the output of goods and services with fewer assets, less energy and less labor.
Corporations have foregone investment in favor of stock buy-backs. Much of the borrowed money has gone into unproductive housing and other asset bubbles.
As Gail Tverberg has explained, there is a collar on oil prices: if they're too low, producers lose money and shut down higher-cost wells, crimping supply; if they're too high, low and moderate-income households can no longer support the consumption the economy needs to keep expanding: Why We Should Be Concerned About Low Oil Prices (Our Finite World).
Cheap, abundant energy is required for expansion of borrowing, consumption and payrolls; as energy costs notch up, wages and consumption stagnate.
In effect, the conventional state/central bank policies reduce down to one simple directive: borrow from the future until "organic" (i.e. not dependent on state stimulus, self-sustaining) growth of the private sector returns.
But since productivity and average wages have declined, self-sustaining expansion is no longer the norm. Instead, every sector is borrowing from the future just to maintain the illusion of solvency and expansion. Corporations, states, central banks and households are all living off money borrowed from future earnings and taxes, or spending the gains from unsustainable asset bubbles.
The economy no longer works, and the Status Quo has no Plan B. All the Status Quo has is policies that no longer work: lowering interest rates (10 years and counting), fiscal stimulus (10 years and counting) and monetary easing/stimulus (10 years and counting).
We sense the economy is no longer working as it did in the past, but we're too terrified to even admit this. Since there's no conventional fix, our "leadership" acts as if everything is just fine, and authorities "adjust" measures of stagnation to appear healthy to support the illusion of solvency and expansion.
Productivity: stagnating, declining:
Personal income: stagnating, declining:
Federal debt (borrow and spend from future taxpayers)--through the roof:
Private-sector bank credit--through the roof:
Wealth inequality--through the roof:
There's no Plan B for a state-corporate form of central-planning capitalism that is no longer functioning. The only policies available are the "emergency" ones that are now permanent life-support systems of our failed global economies.
Wednesday, May 10, 2017
SC143-15
http://theeconomiccollapseblog.com/archives/former-reagan-administration-official-is-warning-of-a-financial-collapse-some-time-between-august-and-november
Former Reagan Administration Official Is Warning Of A Financial Collapse Some Time ‘Between August And November’
If a former Reagan administration official is correct, we are likely to see the next major financial collapse by the end of 2017. According to Wikipedia, David Stockman “is an author, former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.” He has been frequently interviewed by mainstream news outlets such as CNBC, Bloomberg and PBS, and he is a highly respected voice in the financial community. Like other analysts, Stockman believes that the U.S. economy is in dire shape, and he told Greg Hunter during a recent interview that he is convinced that the S&P 500 could soon crash “by 40% or even more”…
The market is pricing itself for perfection for all of eternity. This is crazy. . . . I think the market could easily drop to 1,600 or 1,300. It could drop by 40% or even more once the fantasy ends. When the government shows its true colors, that it’s headed for a fiscal blood bath when this crazy notion that there is going to be some Trump fiscal stimulus is put to rest once and for all. I mean it’s not going to happen. They can’t pass a tax cut that big without a budget resolution that incorporated $10 trillion or $15 trillion in debt over the next decade. It’s just not going to pass Congress. . . . I think this is the greatest sucker’s rally we have ever seen.”
But even more alarming is what Stockman had to say about the potential timing of such a financial crash. According to Stockman, if he were to pick a time for the next major stock market plunge he would “target sometime between August and November”…
The S&P 500 is going to drop by hundreds and hundreds of points sometime over the next few months as we drift into this unexpected crisis. . . . I would target sometime between August and November because that’s when the rubber is going to meet the road on a debt ceiling increase when they are out of cash. Washington is going to end up in vicious political conflict over what to do about the debt ceiling. . . . It is going to be one giant fiscal bloodbath the likes of which we have never seen.
That really got my attention, because those are the exact months during which the events that I portrayed in The Beginning Of The End play out.
Without a doubt, the U.S. financial system is living on borrowed time, and we cannot keep going into so much debt indefinitely. In 2017, interest on the national debt will be more than half a trillion dollars for the first time ever, and it will be even higher next year because we are likely to add at least another trillion dollars to the debt during this fiscal year.
Meanwhile, the financial markets just keep becoming more absurd with each passing day.
Just look at Tesla. This is a company that somehow managed to lose 620 million dollars during the first quarter of 2017, and it has been consistently losing hundreds of millions of dollars quarter after quarter.
And yet somehow the market values Tesla at a staggering 48 billion dollars.
It is almost as if we are living in an “opposite world” where the more money you lose the more valuable investors think that you are. Companies like Tesla, Netflix and Twitter are burning through gigantic mountains of investor cash without ever making a profit, and nobody seems to care.
Commercial mortgage-backed securities are another red flag that is starting to get a lot of attention…
The percentage of commercial mortgage-backed security (MBS) loans in special servicing hit 6.6% to close April, Commercial Mortgage Alert reported, citing Trepp data. The five basis point move higher from March came as the past-due rate on Fitch-rated commercial mortgage-backed securities (CMBS) climbed by nine basis points to end April at to 3.5%.
Both MBS and CMBS rates hit their highest levels since 2015.
During the crisis of 2008, regular mortgage-backed securities played a major role, and this time around it looks like securities that are backed by commercial mortgages could cause quite a bit of havoc.
One of the reasons for this is because mall owners are having such tremendous difficulties. The number of retail store closings in 2017 is on pace to shatter the all-time record by more than 20 percent, and Bloomberg is projecting that about a billion square feet of retail space will eventually close or be used for another purpose.
So needless to say this is putting an enormous amount of strain on those that are trying to rent space to retailers, and a lot of their debts are starting to go bad.
In 2007 and early 2008, a lot of the analysts that were loudly warning about mortgage-backed securities, a major stock market crash and an imminent recession were being mocked. People kept asking them when “the crisis” was finally going to arrive, and leaders such as Federal Reserve Chairman Ben Bernanke confidently assured the public that the U.S. economy was not going to experience a recession.
But of course then we got to the fall of 2008 and all hell broke loose. Investors suddenly lost trillions of dollars, millions of jobs were lost, and the U.S. economy plunged into the worst recession since the Great Depression of the 1930s.
Now we stand poised on the brink of an even worse disaster. The U.S. national debt has almost doubled since the last crisis, corporate debt has more than doubled, and all of our long-term economic fundamentals have continued to deteriorate.
The only thing that has saved us is our ability to go into enormous amounts of debt, and once that debt bubble finally bursts it will be the biggest standard of living adjustment that Americans have ever seen.
So I don’t know if Stockman’s timing will be 100% accurate or not, but that is not what is important.
What is important is that decades of exceedingly foolish decisions have made the greatest economic crisis in American history inevitable, and when it fully erupts the pain is going to be absolutely off the charts.
Former Reagan Administration Official Is Warning Of A Financial Collapse Some Time ‘Between August And November’
If a former Reagan administration official is correct, we are likely to see the next major financial collapse by the end of 2017. According to Wikipedia, David Stockman “is an author, former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.” He has been frequently interviewed by mainstream news outlets such as CNBC, Bloomberg and PBS, and he is a highly respected voice in the financial community. Like other analysts, Stockman believes that the U.S. economy is in dire shape, and he told Greg Hunter during a recent interview that he is convinced that the S&P 500 could soon crash “by 40% or even more”…
The market is pricing itself for perfection for all of eternity. This is crazy. . . . I think the market could easily drop to 1,600 or 1,300. It could drop by 40% or even more once the fantasy ends. When the government shows its true colors, that it’s headed for a fiscal blood bath when this crazy notion that there is going to be some Trump fiscal stimulus is put to rest once and for all. I mean it’s not going to happen. They can’t pass a tax cut that big without a budget resolution that incorporated $10 trillion or $15 trillion in debt over the next decade. It’s just not going to pass Congress. . . . I think this is the greatest sucker’s rally we have ever seen.”
But even more alarming is what Stockman had to say about the potential timing of such a financial crash. According to Stockman, if he were to pick a time for the next major stock market plunge he would “target sometime between August and November”…
The S&P 500 is going to drop by hundreds and hundreds of points sometime over the next few months as we drift into this unexpected crisis. . . . I would target sometime between August and November because that’s when the rubber is going to meet the road on a debt ceiling increase when they are out of cash. Washington is going to end up in vicious political conflict over what to do about the debt ceiling. . . . It is going to be one giant fiscal bloodbath the likes of which we have never seen.
That really got my attention, because those are the exact months during which the events that I portrayed in The Beginning Of The End play out.
Without a doubt, the U.S. financial system is living on borrowed time, and we cannot keep going into so much debt indefinitely. In 2017, interest on the national debt will be more than half a trillion dollars for the first time ever, and it will be even higher next year because we are likely to add at least another trillion dollars to the debt during this fiscal year.
Meanwhile, the financial markets just keep becoming more absurd with each passing day.
Just look at Tesla. This is a company that somehow managed to lose 620 million dollars during the first quarter of 2017, and it has been consistently losing hundreds of millions of dollars quarter after quarter.
And yet somehow the market values Tesla at a staggering 48 billion dollars.
It is almost as if we are living in an “opposite world” where the more money you lose the more valuable investors think that you are. Companies like Tesla, Netflix and Twitter are burning through gigantic mountains of investor cash without ever making a profit, and nobody seems to care.
Commercial mortgage-backed securities are another red flag that is starting to get a lot of attention…
The percentage of commercial mortgage-backed security (MBS) loans in special servicing hit 6.6% to close April, Commercial Mortgage Alert reported, citing Trepp data. The five basis point move higher from March came as the past-due rate on Fitch-rated commercial mortgage-backed securities (CMBS) climbed by nine basis points to end April at to 3.5%.
Both MBS and CMBS rates hit their highest levels since 2015.
During the crisis of 2008, regular mortgage-backed securities played a major role, and this time around it looks like securities that are backed by commercial mortgages could cause quite a bit of havoc.
One of the reasons for this is because mall owners are having such tremendous difficulties. The number of retail store closings in 2017 is on pace to shatter the all-time record by more than 20 percent, and Bloomberg is projecting that about a billion square feet of retail space will eventually close or be used for another purpose.
So needless to say this is putting an enormous amount of strain on those that are trying to rent space to retailers, and a lot of their debts are starting to go bad.
In 2007 and early 2008, a lot of the analysts that were loudly warning about mortgage-backed securities, a major stock market crash and an imminent recession were being mocked. People kept asking them when “the crisis” was finally going to arrive, and leaders such as Federal Reserve Chairman Ben Bernanke confidently assured the public that the U.S. economy was not going to experience a recession.
But of course then we got to the fall of 2008 and all hell broke loose. Investors suddenly lost trillions of dollars, millions of jobs were lost, and the U.S. economy plunged into the worst recession since the Great Depression of the 1930s.
Now we stand poised on the brink of an even worse disaster. The U.S. national debt has almost doubled since the last crisis, corporate debt has more than doubled, and all of our long-term economic fundamentals have continued to deteriorate.
The only thing that has saved us is our ability to go into enormous amounts of debt, and once that debt bubble finally bursts it will be the biggest standard of living adjustment that Americans have ever seen.
So I don’t know if Stockman’s timing will be 100% accurate or not, but that is not what is important.
What is important is that decades of exceedingly foolish decisions have made the greatest economic crisis in American history inevitable, and when it fully erupts the pain is going to be absolutely off the charts.
Monday, May 8, 2017
SC143-14
http://kunstler.com/clusterfuck-nation/paris-afterparty/
Paris Afterparty
First mistake: Emmanuel Macron’s handlers played Beethoven’s “Ode to Joy” instead of the French national anthem at the winner’s election rally. Well, at least they didn’t play “Deutschland Über Alles.” The tensions in the Euroland situation remain: the 20 percent-plus youth unemployment, the papered-over insolvency of the European banks, and the implacable contraction of economic activity, especially at the southern rim of the EU.
The clash of civilizations brought on by the EU’s self-induced refugee glut still hangs over the continent like a hijab. That there was no Islamic terror violence around the election should not be reassuring. The interests of the jihadists probably lie in the continued squishiness of the status quo, with its sentimental multiculture fantasies — can’t we all just get along? — so En Marche was their best bet. LePen might have pushed back hard. Macron looks to bathe France’s Islamic antagonists in a nutrient-medium of Hollandaise lite.
The sclerosis of Europe is assured for now. But events are in charge, not elected officials so much, and Europe’s economic fate may be determined by forces far away and beyond its power to control, namely in China, where the phony-baloney banking system is likely to be the first to implode in a global daisy-chain of financial uncontrolled demolition. Much of that depends on the continuing stability of currencies.
The trouble is they are all pegged to fatally unrealistic expectations of economic expansion. Without it, the repayment of interest on monumental outstanding debt becomes an impossibility. And the game of issuing more new debt to pay the interest on the old debt completely falls apart. Once again, the dynamic relationship between real capital creation and the quandaries of the oil industry lurks behind these failures of economy. In a crisis of debt repayment, governments will not know what else to do except “print” more money, and this time they are liable to destroy faith in the value of “money” the world over.
I put “money” in quotation marks because the dollars, euros, yuan, and yen are only worth what people believe them to be, subject to measurement against increasingly fictional indexes of value, such as interest rates, stock and bond markets, government-issued employment and GDP stats, and other benchmarks so egregiously gamed by the issuing authorities that Ole Karl Marx’s hoary warning finally comes to pass and everything solid melts into air.
For the record, I’m not in favor of political chaos and economic anarchy, but that seems to be the only route that Deep Staters ‘round the world want to go down. The convenient protocols of finance in the industrial era which allowed routine borrowing from the future to get today’s enterprise up and running have lost their mojo. The short and practical theory of history applies to this: things happen because they seem like a good idea at the time.
Revolving credit seemed like a good idea through the 20th century, and it sure worked to build an economic matrix based on cheap energy, which is, alas, no more. What remains is the wishful pretense that the old familiar protocols can still work their magic. The disappointment will be epic, and the result next time may be political figures even worse than LePen and Trump. Consider, though, that what you take for the drumbeat of nationalism is actually just a stair-step down on a much-longer journey out of the globally financialized economy. Because the ultimate destination down this stairway is a form of local autarky that the current mandarins of the status quo can’t even imagine.
That journey has already begun, though neither the public nor its elected leaders, have begun to apprehend it. The first spark of recognition will come in the months ahead when the current cover story on markets, “money,” and growth falls away and political leaders can only stand by in wonder and nausea that the world has the impertinence to change without their permission.
Paris Afterparty
First mistake: Emmanuel Macron’s handlers played Beethoven’s “Ode to Joy” instead of the French national anthem at the winner’s election rally. Well, at least they didn’t play “Deutschland Über Alles.” The tensions in the Euroland situation remain: the 20 percent-plus youth unemployment, the papered-over insolvency of the European banks, and the implacable contraction of economic activity, especially at the southern rim of the EU.
The clash of civilizations brought on by the EU’s self-induced refugee glut still hangs over the continent like a hijab. That there was no Islamic terror violence around the election should not be reassuring. The interests of the jihadists probably lie in the continued squishiness of the status quo, with its sentimental multiculture fantasies — can’t we all just get along? — so En Marche was their best bet. LePen might have pushed back hard. Macron looks to bathe France’s Islamic antagonists in a nutrient-medium of Hollandaise lite.
The sclerosis of Europe is assured for now. But events are in charge, not elected officials so much, and Europe’s economic fate may be determined by forces far away and beyond its power to control, namely in China, where the phony-baloney banking system is likely to be the first to implode in a global daisy-chain of financial uncontrolled demolition. Much of that depends on the continuing stability of currencies.
The trouble is they are all pegged to fatally unrealistic expectations of economic expansion. Without it, the repayment of interest on monumental outstanding debt becomes an impossibility. And the game of issuing more new debt to pay the interest on the old debt completely falls apart. Once again, the dynamic relationship between real capital creation and the quandaries of the oil industry lurks behind these failures of economy. In a crisis of debt repayment, governments will not know what else to do except “print” more money, and this time they are liable to destroy faith in the value of “money” the world over.
I put “money” in quotation marks because the dollars, euros, yuan, and yen are only worth what people believe them to be, subject to measurement against increasingly fictional indexes of value, such as interest rates, stock and bond markets, government-issued employment and GDP stats, and other benchmarks so egregiously gamed by the issuing authorities that Ole Karl Marx’s hoary warning finally comes to pass and everything solid melts into air.
For the record, I’m not in favor of political chaos and economic anarchy, but that seems to be the only route that Deep Staters ‘round the world want to go down. The convenient protocols of finance in the industrial era which allowed routine borrowing from the future to get today’s enterprise up and running have lost their mojo. The short and practical theory of history applies to this: things happen because they seem like a good idea at the time.
Revolving credit seemed like a good idea through the 20th century, and it sure worked to build an economic matrix based on cheap energy, which is, alas, no more. What remains is the wishful pretense that the old familiar protocols can still work their magic. The disappointment will be epic, and the result next time may be political figures even worse than LePen and Trump. Consider, though, that what you take for the drumbeat of nationalism is actually just a stair-step down on a much-longer journey out of the globally financialized economy. Because the ultimate destination down this stairway is a form of local autarky that the current mandarins of the status quo can’t even imagine.
That journey has already begun, though neither the public nor its elected leaders, have begun to apprehend it. The first spark of recognition will come in the months ahead when the current cover story on markets, “money,” and growth falls away and political leaders can only stand by in wonder and nausea that the world has the impertinence to change without their permission.
Wednesday, May 3, 2017
SC143-13
https://srsroccoreport.com/future-world-economic-growth-in-big-trouble-as-oil-discoveries-fall-to-historic-lows/
Future World Economic Growth In Big Trouble As Oil Discoveries Fall To Historic Lows
Future global economic growth is in serious trouble as oil discoveries fell to historic lows last year. The International Energy Agency (IEA) reported that the sharp downturn in capital spending by the conventional oil sector was due to extremely low oil prices.
As the oil price fell to $30 in 2016, oil companies cut their exploration and capital expenditures by 25-40%. For example, ExxonMobil, the largest oil company in the United States, cut their capital expenditures by 26% in 2016, from $26 billion in 2015 to $16 billion last year. This had a profound impact on new oil discoveries.
According to the IEA report:
Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.
By taking the IEA’s oil discovery data and comparing it to the total amount of conventional oil consumed by the world in 2016, here is the following chart:
The world consumed 69 million barrels per day of conventional oil last year, which equaled a total of 25 billion barrels (source: IEA report above). Which means, conventional global oil discoveries of 2.4 billion barrels were less than 10% of total world conventional oil consumption. This is extremely bad news.
To understand the breakdown in the different oil types, the IEA provided the following data:
Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.
Global Conventional oil production was 69 million barrels per day (mbd) of the total 85 mbd, which included natural gas plant liquids and other unconventional sources such as shale oil (U.S.), heavy oil and tar sands. Typically, conventional oil is the higher quality, cheaper to produce oil.
Now, what is even more alarming, is that global oil discoveries have been much lower than production for quite some time. The IEA also stated that the amount of world conventional oil discoveries averaged about 9 billion barrels for the past 15 years. If we assume that the world was producing 65 mbd of “conventional oil” for the past 15 years (it was likely higher), the world was only replacing about 38% of its annual oil consumption.
Here are the oil figures:
65 mbd X 365 = 24 billion barrels
9 billion average annual barrels oil discovery / 24 billion barrels consumed = 38%
So, not only did the world only discover 10% of the conventional oil it consumed last year, it has only been replacing a little more than a third of what it has been consuming for in the past 15 years. This is extremely bad news and it is starting to catch up to us.
I will be writing more energy articles showing how the situation is becoming more dire for the U.S. and global oil industries. I am waiting for the top U.S. oil companies to release their detailed SEC quarterly results in a week to provide more information, but they have already released some results.
For example, ExxonMobil cut its capital expenditures another 19% during Q1 2017 versus the same period last year. Falling exploration and capital expenditures will grind to a halt future oil discoveries. Investors need to understand that this will impact global economic growth quite negatively in the future.
Future World Economic Growth In Big Trouble As Oil Discoveries Fall To Historic Lows
Future global economic growth is in serious trouble as oil discoveries fell to historic lows last year. The International Energy Agency (IEA) reported that the sharp downturn in capital spending by the conventional oil sector was due to extremely low oil prices.
As the oil price fell to $30 in 2016, oil companies cut their exploration and capital expenditures by 25-40%. For example, ExxonMobil, the largest oil company in the United States, cut their capital expenditures by 26% in 2016, from $26 billion in 2015 to $16 billion last year. This had a profound impact on new oil discoveries.
According to the IEA report:
Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.
By taking the IEA’s oil discovery data and comparing it to the total amount of conventional oil consumed by the world in 2016, here is the following chart:
The world consumed 69 million barrels per day of conventional oil last year, which equaled a total of 25 billion barrels (source: IEA report above). Which means, conventional global oil discoveries of 2.4 billion barrels were less than 10% of total world conventional oil consumption. This is extremely bad news.
To understand the breakdown in the different oil types, the IEA provided the following data:
Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.
Global Conventional oil production was 69 million barrels per day (mbd) of the total 85 mbd, which included natural gas plant liquids and other unconventional sources such as shale oil (U.S.), heavy oil and tar sands. Typically, conventional oil is the higher quality, cheaper to produce oil.
Now, what is even more alarming, is that global oil discoveries have been much lower than production for quite some time. The IEA also stated that the amount of world conventional oil discoveries averaged about 9 billion barrels for the past 15 years. If we assume that the world was producing 65 mbd of “conventional oil” for the past 15 years (it was likely higher), the world was only replacing about 38% of its annual oil consumption.
Here are the oil figures:
65 mbd X 365 = 24 billion barrels
9 billion average annual barrels oil discovery / 24 billion barrels consumed = 38%
So, not only did the world only discover 10% of the conventional oil it consumed last year, it has only been replacing a little more than a third of what it has been consuming for in the past 15 years. This is extremely bad news and it is starting to catch up to us.
I will be writing more energy articles showing how the situation is becoming more dire for the U.S. and global oil industries. I am waiting for the top U.S. oil companies to release their detailed SEC quarterly results in a week to provide more information, but they have already released some results.
For example, ExxonMobil cut its capital expenditures another 19% during Q1 2017 versus the same period last year. Falling exploration and capital expenditures will grind to a halt future oil discoveries. Investors need to understand that this will impact global economic growth quite negatively in the future.
Monday, May 1, 2017
SC143-12
http://www.truthdig.com/report/item/reign_of_idiots_20170430
Reign of Idiots
The idiots take over in the final days of crumbling civilizations. Idiot generals wage endless, unwinnable wars that bankrupt the nation. Idiot economists call for reducing taxes for the rich and cutting social service programs for the poor, and project economic growth on the basis of myth. Idiot industrialists poison the water, the soil and the air, slash jobs and depress wages. Idiot bankers gamble on self-created financial bubbles and impose crippling debt peonage on the citizens. Idiot journalists and public intellectuals pretend despotism is democracy. Idiot intelligence operatives orchestrate the overthrow of foreign governments to create lawless enclaves that give rise to enraged fanatics. Idiot professors, “experts” and “specialists” busy themselves with unintelligible jargon and arcane theory that buttresses the policies of the rulers. Idiot entertainers and producers create lurid spectacles of sex, gore and fantasy.
There is a familiar checklist for extinction. We are ticking off every item on it.
The idiots know only one word—“more.” They are unencumbered by common sense. They hoard wealth and resources until workers cannot make a living and the infrastructure collapses. They live in privileged compounds where they eat chocolate cake and order missile strikes. They see the state as a projection of their vanity. The Roman, Mayan, French, Habsburg, Ottoman, Romanov, Wilhelmine, Pahlavi and Soviet dynasties crumbled because the whims and obsessions of ruling idiots were law.
Donald Trump is the face of our collective idiocy. He is what lies behind the mask of our professed civility and rationality—a sputtering, narcissistic, bloodthirsty megalomaniac. He wields armies and fleets against the wretched of the earth, blithely ignores the catastrophic human misery caused by global warming, pillages on behalf of global oligarchs and at night sits slack-jawed in front of a television set before opening his “beautiful” Twitter account. He is our version of the Roman emperor Nero, who allocated vast state expenditures to attain magical powers, the Chinese emperor Qin Shi Huang, who funded repeated expeditions to a mythical island of immortals to bring back the potion that would give him eternal life, and a decayed Russian royalty that sat around reading tarot cards and attending séances as their nation was decimated by war and revolution brewed in the streets.
This moment in history marks the end of a long, sad tale of greed and murder by the white races. It is inevitable that for the final show we vomited a grotesque figure like Trump. Europeans and Americans have spent five centuries conquering, plundering, exploiting and polluting the earth in the name of human progress. They used their technological superiority to create the most efficient killing machines on the planet, directed against anyone and anything, especially indigenous cultures, that stood in their way. They stole and hoarded the planet’s wealth and resources. They believed that this orgy of blood and gold would never end, and they still believe it. They do not understand that the dark ethic of ceaseless capitalist and imperialist expansion is dooming the exploiters as well as the exploited. But even as we stand on the cusp of extinction we lack the intelligence and imagination to break free from our evolutionary past.
The more the warning signs are palpable—rising temperatures, global financial meltdowns, mass human migrations, endless wars, poisoned ecosystems, rampant corruption among the ruling class—the more we turn to those who chant, either through idiocy or cynicism, the mantra that what worked in the past will work in the future, that progress is inevitable. Factual evidence, since it is an impediment to what we desire, is banished. The taxes of corporations and the rich, who have deindustrialized the country and turned many of our cities into wastelands, are cut, and regulations are slashed to bring back the supposed golden era of the 1950s for white American workers. Public lands are opened up to the oil and gas industry as rising carbon emissions doom our species. Declining crop yields stemming from heat waves and droughts are ignored. War is the principal business of the kleptocratic state.
Walter Benjamin wrote in 1940 amid the rise of European fascism and looming world war:
" A Klee painting named Angelus Novus shows an angel looking as though he is about to move away from something he is fixedly contemplating. His eyes are staring, his mouth is open, his wings are spread. This is how one pictures the angel of history. His face is turned towards the past. Where we perceive a chain of events, he sees one single catastrophe, which keeps piling wreckage upon wreckage and hurls it in front of his feet. The angel would like to stay, awaken the dead, and make whole what has been smashed. But a storm is blowing from Paradise; it has got caught in his wings with such violence that the angel can no longer close them. The storm irresistibly propels him into the future to which his back is turned, while the pile of debris before him grows skyward. This storm is what we call progress."
Magical thinking is not limited to the beliefs and practices of pre-modern cultures. It defines the ideology of capitalism. Quotas and projected sales can always be met. Profits can always be raised. Growth is inevitable. The impossible is always possible. Human societies, if they bow before the dictates of the marketplace, will be ushered into capitalist paradise. It is only a question of having the right attitude and the right technique. When capitalism thrives, we are assured, we thrive. The merging of the self with the capitalist collective has robbed us of our agency, creativity, capacity for self-reflection and moral autonomy. We define our worth not by our independence or our character but by the material standards set by capitalism—personal wealth, brands, status and career advancement. We are molded into a compliant and repressed collective. This mass conformity is characteristic of totalitarian and authoritarian states. It is the Disneyfication of America, the land of eternally happy thoughts and positive attitudes. And when magical thinking does not work, we are told, and often accept, that we are the problem. We must have more faith. We must envision what we want. We must try harder. The system is never to blame. We failed it. It did not fail us.
All of our systems of information, from self-help gurus and Hollywood to political monstrosities such as Trump, sell us this snake oil. We blind ourselves to impending collapse. Our retreat into self-delusion is a career opportunity for charlatans who tell us what we want to hear. The magical thinking they espouse is a form of infantilism. It discredits facts and realities that defy the glowing cant of slogans such as “Make America great again.” Reality is banished for relentless and baseless optimism.
Half the country may live in poverty, our civil liberties may be taken from us, militarized police may murder unarmed citizens in the streets and we may run the world’s largest prison system and murderous war machine, but all these truths are studiously ignored. Trump embodies the essence of this decayed, intellectually bankrupt and immoral world. He is its natural expression. He is the king of the idiots. We are his victims.
Reign of Idiots
The idiots take over in the final days of crumbling civilizations. Idiot generals wage endless, unwinnable wars that bankrupt the nation. Idiot economists call for reducing taxes for the rich and cutting social service programs for the poor, and project economic growth on the basis of myth. Idiot industrialists poison the water, the soil and the air, slash jobs and depress wages. Idiot bankers gamble on self-created financial bubbles and impose crippling debt peonage on the citizens. Idiot journalists and public intellectuals pretend despotism is democracy. Idiot intelligence operatives orchestrate the overthrow of foreign governments to create lawless enclaves that give rise to enraged fanatics. Idiot professors, “experts” and “specialists” busy themselves with unintelligible jargon and arcane theory that buttresses the policies of the rulers. Idiot entertainers and producers create lurid spectacles of sex, gore and fantasy.
There is a familiar checklist for extinction. We are ticking off every item on it.
The idiots know only one word—“more.” They are unencumbered by common sense. They hoard wealth and resources until workers cannot make a living and the infrastructure collapses. They live in privileged compounds where they eat chocolate cake and order missile strikes. They see the state as a projection of their vanity. The Roman, Mayan, French, Habsburg, Ottoman, Romanov, Wilhelmine, Pahlavi and Soviet dynasties crumbled because the whims and obsessions of ruling idiots were law.
Donald Trump is the face of our collective idiocy. He is what lies behind the mask of our professed civility and rationality—a sputtering, narcissistic, bloodthirsty megalomaniac. He wields armies and fleets against the wretched of the earth, blithely ignores the catastrophic human misery caused by global warming, pillages on behalf of global oligarchs and at night sits slack-jawed in front of a television set before opening his “beautiful” Twitter account. He is our version of the Roman emperor Nero, who allocated vast state expenditures to attain magical powers, the Chinese emperor Qin Shi Huang, who funded repeated expeditions to a mythical island of immortals to bring back the potion that would give him eternal life, and a decayed Russian royalty that sat around reading tarot cards and attending séances as their nation was decimated by war and revolution brewed in the streets.
This moment in history marks the end of a long, sad tale of greed and murder by the white races. It is inevitable that for the final show we vomited a grotesque figure like Trump. Europeans and Americans have spent five centuries conquering, plundering, exploiting and polluting the earth in the name of human progress. They used their technological superiority to create the most efficient killing machines on the planet, directed against anyone and anything, especially indigenous cultures, that stood in their way. They stole and hoarded the planet’s wealth and resources. They believed that this orgy of blood and gold would never end, and they still believe it. They do not understand that the dark ethic of ceaseless capitalist and imperialist expansion is dooming the exploiters as well as the exploited. But even as we stand on the cusp of extinction we lack the intelligence and imagination to break free from our evolutionary past.
The more the warning signs are palpable—rising temperatures, global financial meltdowns, mass human migrations, endless wars, poisoned ecosystems, rampant corruption among the ruling class—the more we turn to those who chant, either through idiocy or cynicism, the mantra that what worked in the past will work in the future, that progress is inevitable. Factual evidence, since it is an impediment to what we desire, is banished. The taxes of corporations and the rich, who have deindustrialized the country and turned many of our cities into wastelands, are cut, and regulations are slashed to bring back the supposed golden era of the 1950s for white American workers. Public lands are opened up to the oil and gas industry as rising carbon emissions doom our species. Declining crop yields stemming from heat waves and droughts are ignored. War is the principal business of the kleptocratic state.
Walter Benjamin wrote in 1940 amid the rise of European fascism and looming world war:
" A Klee painting named Angelus Novus shows an angel looking as though he is about to move away from something he is fixedly contemplating. His eyes are staring, his mouth is open, his wings are spread. This is how one pictures the angel of history. His face is turned towards the past. Where we perceive a chain of events, he sees one single catastrophe, which keeps piling wreckage upon wreckage and hurls it in front of his feet. The angel would like to stay, awaken the dead, and make whole what has been smashed. But a storm is blowing from Paradise; it has got caught in his wings with such violence that the angel can no longer close them. The storm irresistibly propels him into the future to which his back is turned, while the pile of debris before him grows skyward. This storm is what we call progress."
Magical thinking is not limited to the beliefs and practices of pre-modern cultures. It defines the ideology of capitalism. Quotas and projected sales can always be met. Profits can always be raised. Growth is inevitable. The impossible is always possible. Human societies, if they bow before the dictates of the marketplace, will be ushered into capitalist paradise. It is only a question of having the right attitude and the right technique. When capitalism thrives, we are assured, we thrive. The merging of the self with the capitalist collective has robbed us of our agency, creativity, capacity for self-reflection and moral autonomy. We define our worth not by our independence or our character but by the material standards set by capitalism—personal wealth, brands, status and career advancement. We are molded into a compliant and repressed collective. This mass conformity is characteristic of totalitarian and authoritarian states. It is the Disneyfication of America, the land of eternally happy thoughts and positive attitudes. And when magical thinking does not work, we are told, and often accept, that we are the problem. We must have more faith. We must envision what we want. We must try harder. The system is never to blame. We failed it. It did not fail us.
All of our systems of information, from self-help gurus and Hollywood to political monstrosities such as Trump, sell us this snake oil. We blind ourselves to impending collapse. Our retreat into self-delusion is a career opportunity for charlatans who tell us what we want to hear. The magical thinking they espouse is a form of infantilism. It discredits facts and realities that defy the glowing cant of slogans such as “Make America great again.” Reality is banished for relentless and baseless optimism.
Half the country may live in poverty, our civil liberties may be taken from us, militarized police may murder unarmed citizens in the streets and we may run the world’s largest prison system and murderous war machine, but all these truths are studiously ignored. Trump embodies the essence of this decayed, intellectually bankrupt and immoral world. He is its natural expression. He is the king of the idiots. We are his victims.
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