http://www.informationclearinghouse.info/50130.htm
Why US Imperialism Loves Afghan Quagmire
It may seem paradoxical that any American interest would seek to deliberately prolong the Afghan quagmire. Costing trillions of dollars to the national debt, one would think that US planners are anxious to wind down the war and cut their immense losses. Not so, it seems.
Like the classic 1960s satire film, Dr Strangelove, and how he came to “love the A-bomb”, there are present-day elements in the US military-security apparatus that seem to be just fine about being wedded to the mayhem in Afghanistan.
That war is officially the longest-ever war fought by US forces overseas, outlasting the Vietnam war (1964-75) by six years – and still counting.
After GW Bush launched the operation in October 2001, the war is now under the purview of its third consecutive president. What’s more, the 17-year campaign to date is unlikely to end for several more years to come, after President Donald Trump last year gave the Pentagon control over its conduct.
This week saw two developments which show that powerful elements within the US state have very different calculations concerning the Afghan war compared with most ordinary citizens.
First there was the rejection by Washington of an offer extended by Russia to join a peace summit scheduled for next month. The purpose of the Moscow conference is to bring together participants in the war, including the US-backed Afghan government of President Ashraf Ghani, as well as the Taliban militants who have been fighting against American military occupation.
Washington and its Afghan surrogate administration in Kabul said they would not be participating because, in their view, such a dialogue would be futile.
The US refusal to attend the Moscow event, after previously showing an apparent interest, drew an angry response from Russia. Russia’s foreign ministry said the “refusal to attend the Moscow meeting on Afghanistan shows Washington has no interest in launching a peace process.”
One suspects that US reluctance is partly due to not wanting to give Moscow any additional international standing since Russia’s successful military intervention in Syria and its leading role in mediating for peace there.
It also seems incongruous that only last week the US-backed Ghani administration offered to call a ceasefire with the Taliban to mark the Muslim religious festivities of Eid al-Arafat. If President Ghani can see fit to call a truce with the militants, then what is so objectionable about sitting down with them in Moscow?
Another, more sinister, development was the disclosure this week by the Russian foreign ministry that it had tracked large-scale weapons supplies to militant groups in Afghanistan’s northern region. The foreign ministry said the weapons were dropped off by unidentified military helicopters.
What’s more, the helicopters were apparently given flight clearance by the US military forces and their Afghan national army charges. There can be only one conclusion: the Pentagon or the CIA are complicit in arming insurgents whom they are supposed to be trying to defeat. This is not the first time that such clandestine trafficking of weapons by US forces in Afghanistan has been reported by the Russian foreign ministry.
Similar skulduggery involving US military with terror groups in Syria has also been documented.
Recall too an interview given at the end of last year by former Afghan President Hamid Karzai who said categorically that US military commanders were responsible for cultivating Islamic State (IS, ISIS or Daesh) terrorist networks in his country. These groups seem to be separate in intent from the Taliban factions.
Ironically, US commanders have recently accused Russia of supplying weapons to Taliban fighters. Moscow and the Taliban have both separately denied any such link.
Such claims by Washington seem more plausibly an attempt by the Pentagon to muddy the waters of their own complicity in arming illegal militant groups in Afghanistan.
The question is: why would US forces want to aid and abet militants and prolong a war that has cost the American taxpayer trillions of dollars? Why would Washington spurn an opportunity to participate in the Moscow-convened summit scheduled for September 4, which is aimed at finding a peaceful settlement to the conflict?
In short, what US interests are there in prolonging this appalling war?
While the occupation of Afghanistan by US troops is a deadweight for the American national economy and citizen-taxpayers – adding up to $5 trillion to the country’s total debt load of $21 trillion – we have to bear in mind that for weapons manufacturers and suppliers, the war is a boon. It keeps the military-industrial complex humming with super profitable business. Companies like Lockheed Martin and Raytheon, which are among the top lobbyists to Congress, using a coldly rational logic would not want this war to stop. Ever. Their corporate interests are starkly divergent from ordinary US citizens and foot-soldiers on the ground. So what if the nation is $21 trillion in debt when mega profits are being scooped up by executives and shareholders of the weapons companies?
It is also well-documented that the CIA depends on lawlessness in Afghanistan to run its trillion-dollar opium drugs racket. As with the notorious Golden Triangle in Southeast Asia during the Vietnam war, the CIA uses global drugs trafficking as a way to fund its “black operations” in others parts of the world, finances that are kept hidden from political oversight by Congressional lawmakers.
A third incentive for American imperial planners to keep Afghanistan in turmoil is that it allows the US to mobilize and weaponize proxy armies for the purpose of harrying Russia and Iran. Afghanistan has a border with Iran to its west and it is a spearhead into Russia’s southern flank. For the US, having a base for militants with which to penetrate and destabilize either Iran or Russia is a strategic asset, not at all a strategic loss. Especially now given that Iran and Russia have succeeded in routing the US-backed jihadist bases in Syria.
Indeed, Russia has already explicitly expressed the concern that a lawless Afghanistan presents a direct security threat to its national interests.
So, yes, by any normal reckoning, Afghanistan has been a catastrophe for US citizens, as well as of course for millions of Afghanis who have lost loved ones, homes, jobs, and livelihoods only to eke a subsistence in grinding poverty.
But in a more sinister reckoning, there are powerful American interests which view the suffering and calamity of Afghanistan as a lucrative, strategic venture that must be kept going.
Afghanistan may be a seething swamp of suffering. But it’s a swamp that is at the same time spawning immense advantages for a select few overseeing US imperialist interests. That makes the tragedy of the country more poignant. Heinously, crucial incentives are not to stop the war, but to keep it going.
Friday, August 31, 2018
SC171-15
http://www.informationclearinghouse.info/50141.htm
According to the New York Times Putin Rules America
When I first read this — I thought it was a caricature of fake news. Then I realized it was a New York Times article, and being fairly certain that the arrogant presstitute organization was not taking the piss out of itself, as it is one of the main purveyors of fake news, I found the conclusion unavoidable that Julian E. Barnes and Matthew Rosenberg were so tightly bound inside The Matrix that they might actually believe the nonsense that they wrote.
Here is an overview of the fantasy that the two presstitutes have penned in the New York Times:
US intelligence (sic) had “informants close to President Vladimir V. Putin and in the Kremiln” who provided “urgent and explicit warnings about Russia’s intentions to try to tip the [2016] American presidential election.” The NYT presstitutes do not say why nothing was done by US intelligence which had inside information from the Kremlin itself that Putin was about to steal for Trump the US election. Certainly CIA Director Brennan and FBI Director Comey, both of whom are Hillary’s allies, would not have approved of Putin stealing the election for Trump. But there is no criticism from the NY Times’ presstitutes for this massive intelligence failure to act to prevent Putin from stealing the election from Hillary. Brennan and Comey sat on their hands and permitted Putin to steal the election for Trump. So, who is really guilty of “Russiagate?”
Obviously, this NY Times article is a hoax written by imbeciles. The claim that the Putin/Trump conspiracy was leaked to US intelligence from inside the Kremlin is an invention to help to provide a background history in an effort to boost the credibility of the Russiagate orchestation that is directed against President Trump. The presstitutes in their effort to boost Russiagate’s credibility inadvertently portrayed US intelligence as negligent in its duty.
Barnes and Rosenberg say that Putin is continuing with his dirty tricks, but the Russian traitors inside the Kremlin within Putin’s close circles “have gone silent,” depriving us of information about how the Russians are going to steal the midterm elections. The presstitutes suggest that Washington’s informers inside Putin’s government have “gone to ground” to avoid being murdered “like the poisoning in March in Britain of a former Russian intelligence officer that utilized a rare Russian-made nerve agent.”
It is difficult to know what to make of presstitutes like Barnes and Rosenberg and the NYTimes who refuse to acknowledge the fact that there has been zero evidence produced that supports the alleged attack on the Skirpals, both of whom suvived a “deadly nerve agent.” There is no evidence whatsoever that the alleged deadly nerve agent was made in Russia, and there is no explanation why the deadly nerve agent was not deadly. The only possible conclusion from the total absence of any evidence is that no such attack occurred. It is just another propaganda hoax against Russia.
More proof that there was no such attack is provided by the refusal of the British government to share its investigation, if there actually was an investigation, with anyone, not even with the accused Russians. Accusations without a shred of evidence are not a good basis for a trusting relationship with a nuclear power.
Barnes and Rosenberg suggest that the House Intelligence Committee, encouraged by President Trump, chilled intelligence collection by “outing an FBI informant,” leaving Washington in the dark about Putin’s precise intentions.
No, this is not a conspiracy story from the National Inquirer, now a more reliable newspaper than the New York Times. This utter nonsense is published in the New York Times, “the newspaper of record.” What a false record historians are going to have.
What are the NYTimes’ sources for this fantasy? The presstitute organization cannot tell us. “American intelligence agencies have not been able to say precisely what are Mr. Putin’s intentions: He could be trying to tilt the midterm elections, simply sow chaos or generally undermine trust in the democratic process.” But the NYTimes knows that Putin is up to something, because “senior intelligence officials, including Dan Coats, the director of national intelligence, have warned that Russians are intent on subverting American democratic institutions.”
So here we have Trump’s own appointment, Dan Coats, undermining Trump’s effort to normalize relations with Russia. Who among Trump’s advisors advised him to appoint a Russiaphobic moron like Dan Coats? If Trump had any sense, he would fire both of them.
Washington routinely subverts democratic institutions in other countries, such as Honduras, Nicaguara, Venezuela, Iran, Ukraine, Indonesia. Read Stephen Kinser’s The Brothers for a number of examples:
Washington finances opposition candidates who are bought and paid for by Washington and uses various non-governmental organizations (NGOs) financed by the National Endowment for Democracy, George Soros, the International Republican Institute, and many other front groups for subversion of countries “uncooperative with Washington” in order to install a Washington puppet. Washington even has NGOs operating in Russia where they are even permitted by the Russian government to own newspapers. All anti-Putin protests are organized by Washington using the NGOs that Washington funds.
Russia, however, has no NGOs operating in the US, and, unlike Israel, does not own the US Congress and White House. So how exactly, Director of National Intelligence (sic) Dan Coats, are the Russians going to subvert “American democratic institutions?”
Don’t expect an answer.
Try to understand the insults to Trump voters of the charge that they are puppets at the end of Putin’s string: Trump voters are portrayed as morons who are not capable of thinking for themselves. If they were, they would have voted for Hillary so that America could demonstrate its escape from misogyny and male domination by electing its First Woman President on the heels of the First Half-Black President. Instead the minds of American voters were warped by Putin. The $100,000 dollars spent by a Russian Internet company trying to attract advertisers prevailed over the multi-billion dollars spent by the Democrats and Republicans and by American economic interests focused on capturing the government for their agendas. The Russian plot is so powerful that a dollar spent by Russia is thousands of times more powerful than a dollar spent by Wall Street, the military/security compex, George Soros, Sheldon Adelson, etc., and so on.
In the official story, no American voted for Trump because his/her job was sent to Asia or Mexico by global US corporations pursuing high monetary rewards for executives and shareholders at the expense of the American work force. The “Trump Deplorables” voted for Trump because they were brainwashed by a few Russian Internet ads directed at maximizing clicks in order to attract advertisers.
No one voted for Trump because their son and daughter, on whose education the family used up its savings, acquired student loan debts and possibly a second mortgage, can only find a job as a waitress and bartender because the jobs for which they prepared at great expense are handed over to lowly paid foreigners in order that shareholders can receive large capital gains and a handful of corporate executives can receive multimillion dollar bonuses for raising profits by closing down America’s vaunted “opportunity society. Today Americans have debts and no opportunities.
Assuming you have some sense and some ability to think independently of the lies that are fed to you daily, can you possibly believe that Americans voted for Trump because Putin tricked them with Internet ads that are unlikely to have been seen by as many as one percent of voters?
Can you possibly believe that the loss of Trump voters’ jobs, their prospects, their children’s prospects, their home, their declining living standards, the insults heaped upon Americans by Hillary’s Democratic Party—“Trump deplorables,” “white male oppressors,” “Russia’s Fifth Column,” “misogynists,” “racists,” “homophobic,” “gun nuts” —had no impact on why Americans voted for Trump? How could any sentient American believe that Putin is the source of their problems?
The NY Times pressitutes report without any evidence alleged efforts of Russia to create chaos in America. I could not stop laughing. There is no Russian National Endowment for Democracy operating in the US. There is no Russian funded George Soros operating in America. There are no Russian funded Non-Governmental Organizations operating in America. Yet Russia is full of Washington-funded organizations doing everything in their power to sow chaos in Russia.
Why isn’t this most obvious of all truths reported in the NY Times?
The answer is that no truth whatsoever, not even a tiny morsel, fits the fabricated explanations in which the insouciant Western peoples live. Everywhere in the Western World people are shielded from reality by controlled explanations handed down to them by the New York Times, Washington Post, CNN, MSNBC, NPR, BBC, et. al, and the UK, EU, Canadian, and Australian newspapers, every one of which is a propagandist for American hegemony.
A few years ago a famous philosopher concluded that the world lives in a constructed virtual reality. At the time I thought he was crazy, but I have learned that he is correct. The entire world—even the Russians and the Chinese and the Iranians—live in a world shaped by American propaganda. The truth is that a country, the USA, which endorses freedom of determination, is in fact determined to control the world and smother all self-determination. Every country, whether Russia, China, Syria, Iran, India, Turkey, North Korea, Venezuela, that resists Washington’s hegemony is declared by Washington to be “a threat to the international order.”
The “international order” is Washington’s order. The “International Order” is Washinton’s hegemony over the world. Russia, China, Iran, Syria, North Korea, Venezuela, and now Turkey and India are threats to “international order” because they do not accept Washington’s hegemony.
Barnes and Rosenberg report that Coats is concerned about Russia’s effort to “weaken and divide the United States.” There is no sign of Russia doing any such thing, and there is no explanation of how Putin conducts “a broad chaos campaign to undermine faith in American democracy.” If the Director of National Intelligence is concerned about the forces of division in America, he should turn his attention to the divisive consequences of the Democratic Party’s Identity Politics, to ANTIFA, to the divisive consequences of the fabricated attack on President Trump by the military/security complex and presstitute media. Indeed, the constant drumbeat of lies from the New York Times alone has caused far move divisiveness than anything Russia is alleged to have done.
Divisiveness is what happens when the military/security complex and its media pimps turn on a President for threatening their budget by proposing peace with the enemy that they have constructed in order to justify their power and profit. It is this divisiveness that the United States is experiencing.
According to the New York Times Putin Rules America
When I first read this — I thought it was a caricature of fake news. Then I realized it was a New York Times article, and being fairly certain that the arrogant presstitute organization was not taking the piss out of itself, as it is one of the main purveyors of fake news, I found the conclusion unavoidable that Julian E. Barnes and Matthew Rosenberg were so tightly bound inside The Matrix that they might actually believe the nonsense that they wrote.
Here is an overview of the fantasy that the two presstitutes have penned in the New York Times:
US intelligence (sic) had “informants close to President Vladimir V. Putin and in the Kremiln” who provided “urgent and explicit warnings about Russia’s intentions to try to tip the [2016] American presidential election.” The NYT presstitutes do not say why nothing was done by US intelligence which had inside information from the Kremlin itself that Putin was about to steal for Trump the US election. Certainly CIA Director Brennan and FBI Director Comey, both of whom are Hillary’s allies, would not have approved of Putin stealing the election for Trump. But there is no criticism from the NY Times’ presstitutes for this massive intelligence failure to act to prevent Putin from stealing the election from Hillary. Brennan and Comey sat on their hands and permitted Putin to steal the election for Trump. So, who is really guilty of “Russiagate?”
Obviously, this NY Times article is a hoax written by imbeciles. The claim that the Putin/Trump conspiracy was leaked to US intelligence from inside the Kremlin is an invention to help to provide a background history in an effort to boost the credibility of the Russiagate orchestation that is directed against President Trump. The presstitutes in their effort to boost Russiagate’s credibility inadvertently portrayed US intelligence as negligent in its duty.
Barnes and Rosenberg say that Putin is continuing with his dirty tricks, but the Russian traitors inside the Kremlin within Putin’s close circles “have gone silent,” depriving us of information about how the Russians are going to steal the midterm elections. The presstitutes suggest that Washington’s informers inside Putin’s government have “gone to ground” to avoid being murdered “like the poisoning in March in Britain of a former Russian intelligence officer that utilized a rare Russian-made nerve agent.”
It is difficult to know what to make of presstitutes like Barnes and Rosenberg and the NYTimes who refuse to acknowledge the fact that there has been zero evidence produced that supports the alleged attack on the Skirpals, both of whom suvived a “deadly nerve agent.” There is no evidence whatsoever that the alleged deadly nerve agent was made in Russia, and there is no explanation why the deadly nerve agent was not deadly. The only possible conclusion from the total absence of any evidence is that no such attack occurred. It is just another propaganda hoax against Russia.
More proof that there was no such attack is provided by the refusal of the British government to share its investigation, if there actually was an investigation, with anyone, not even with the accused Russians. Accusations without a shred of evidence are not a good basis for a trusting relationship with a nuclear power.
Barnes and Rosenberg suggest that the House Intelligence Committee, encouraged by President Trump, chilled intelligence collection by “outing an FBI informant,” leaving Washington in the dark about Putin’s precise intentions.
No, this is not a conspiracy story from the National Inquirer, now a more reliable newspaper than the New York Times. This utter nonsense is published in the New York Times, “the newspaper of record.” What a false record historians are going to have.
What are the NYTimes’ sources for this fantasy? The presstitute organization cannot tell us. “American intelligence agencies have not been able to say precisely what are Mr. Putin’s intentions: He could be trying to tilt the midterm elections, simply sow chaos or generally undermine trust in the democratic process.” But the NYTimes knows that Putin is up to something, because “senior intelligence officials, including Dan Coats, the director of national intelligence, have warned that Russians are intent on subverting American democratic institutions.”
So here we have Trump’s own appointment, Dan Coats, undermining Trump’s effort to normalize relations with Russia. Who among Trump’s advisors advised him to appoint a Russiaphobic moron like Dan Coats? If Trump had any sense, he would fire both of them.
Washington routinely subverts democratic institutions in other countries, such as Honduras, Nicaguara, Venezuela, Iran, Ukraine, Indonesia. Read Stephen Kinser’s The Brothers for a number of examples:
Washington finances opposition candidates who are bought and paid for by Washington and uses various non-governmental organizations (NGOs) financed by the National Endowment for Democracy, George Soros, the International Republican Institute, and many other front groups for subversion of countries “uncooperative with Washington” in order to install a Washington puppet. Washington even has NGOs operating in Russia where they are even permitted by the Russian government to own newspapers. All anti-Putin protests are organized by Washington using the NGOs that Washington funds.
Russia, however, has no NGOs operating in the US, and, unlike Israel, does not own the US Congress and White House. So how exactly, Director of National Intelligence (sic) Dan Coats, are the Russians going to subvert “American democratic institutions?”
Don’t expect an answer.
Try to understand the insults to Trump voters of the charge that they are puppets at the end of Putin’s string: Trump voters are portrayed as morons who are not capable of thinking for themselves. If they were, they would have voted for Hillary so that America could demonstrate its escape from misogyny and male domination by electing its First Woman President on the heels of the First Half-Black President. Instead the minds of American voters were warped by Putin. The $100,000 dollars spent by a Russian Internet company trying to attract advertisers prevailed over the multi-billion dollars spent by the Democrats and Republicans and by American economic interests focused on capturing the government for their agendas. The Russian plot is so powerful that a dollar spent by Russia is thousands of times more powerful than a dollar spent by Wall Street, the military/security compex, George Soros, Sheldon Adelson, etc., and so on.
In the official story, no American voted for Trump because his/her job was sent to Asia or Mexico by global US corporations pursuing high monetary rewards for executives and shareholders at the expense of the American work force. The “Trump Deplorables” voted for Trump because they were brainwashed by a few Russian Internet ads directed at maximizing clicks in order to attract advertisers.
No one voted for Trump because their son and daughter, on whose education the family used up its savings, acquired student loan debts and possibly a second mortgage, can only find a job as a waitress and bartender because the jobs for which they prepared at great expense are handed over to lowly paid foreigners in order that shareholders can receive large capital gains and a handful of corporate executives can receive multimillion dollar bonuses for raising profits by closing down America’s vaunted “opportunity society. Today Americans have debts and no opportunities.
Assuming you have some sense and some ability to think independently of the lies that are fed to you daily, can you possibly believe that Americans voted for Trump because Putin tricked them with Internet ads that are unlikely to have been seen by as many as one percent of voters?
Can you possibly believe that the loss of Trump voters’ jobs, their prospects, their children’s prospects, their home, their declining living standards, the insults heaped upon Americans by Hillary’s Democratic Party—“Trump deplorables,” “white male oppressors,” “Russia’s Fifth Column,” “misogynists,” “racists,” “homophobic,” “gun nuts” —had no impact on why Americans voted for Trump? How could any sentient American believe that Putin is the source of their problems?
The NY Times pressitutes report without any evidence alleged efforts of Russia to create chaos in America. I could not stop laughing. There is no Russian National Endowment for Democracy operating in the US. There is no Russian funded George Soros operating in America. There are no Russian funded Non-Governmental Organizations operating in America. Yet Russia is full of Washington-funded organizations doing everything in their power to sow chaos in Russia.
Why isn’t this most obvious of all truths reported in the NY Times?
The answer is that no truth whatsoever, not even a tiny morsel, fits the fabricated explanations in which the insouciant Western peoples live. Everywhere in the Western World people are shielded from reality by controlled explanations handed down to them by the New York Times, Washington Post, CNN, MSNBC, NPR, BBC, et. al, and the UK, EU, Canadian, and Australian newspapers, every one of which is a propagandist for American hegemony.
A few years ago a famous philosopher concluded that the world lives in a constructed virtual reality. At the time I thought he was crazy, but I have learned that he is correct. The entire world—even the Russians and the Chinese and the Iranians—live in a world shaped by American propaganda. The truth is that a country, the USA, which endorses freedom of determination, is in fact determined to control the world and smother all self-determination. Every country, whether Russia, China, Syria, Iran, India, Turkey, North Korea, Venezuela, that resists Washington’s hegemony is declared by Washington to be “a threat to the international order.”
The “international order” is Washington’s order. The “International Order” is Washinton’s hegemony over the world. Russia, China, Iran, Syria, North Korea, Venezuela, and now Turkey and India are threats to “international order” because they do not accept Washington’s hegemony.
Barnes and Rosenberg report that Coats is concerned about Russia’s effort to “weaken and divide the United States.” There is no sign of Russia doing any such thing, and there is no explanation of how Putin conducts “a broad chaos campaign to undermine faith in American democracy.” If the Director of National Intelligence is concerned about the forces of division in America, he should turn his attention to the divisive consequences of the Democratic Party’s Identity Politics, to ANTIFA, to the divisive consequences of the fabricated attack on President Trump by the military/security complex and presstitute media. Indeed, the constant drumbeat of lies from the New York Times alone has caused far move divisiveness than anything Russia is alleged to have done.
Divisiveness is what happens when the military/security complex and its media pimps turn on a President for threatening their budget by proposing peace with the enemy that they have constructed in order to justify their power and profit. It is this divisiveness that the United States is experiencing.
SC171-14
http://www.informationclearinghouse.info/50145.htm
Death as a Good Career Move
The death of Senator John McCain has provoked the predictable outpouring of mawkish and mendacious “tributes” from across the American political and media establishment.
Invariably, McCain the "maverick", which was one of his monikers, is being hailed as a "war hero" and "patriot". A nationwide orchestration of public emotion is underway to elevate a dubious, mean-spirited politician into some kind of saintly statesman.
The New York Times trumpeted with its top story: ‘John McCain, War Hero, Senator, Presidential Contender, Dies at 81'.
American news channels, from CNN, CBS to ABC and the others, were wall-to-wall in broadcasting misty-eyed venerations of the Arizona senator.
McCain, who died from brain cancer at the weekend, was certainly a maverick figure, but hardly in a way that can be ascribed as valorous.
Like has-been pop stars whose record sales soar posthumously, so too McCain's passing proves the adage that "death can be a good career move". His tawdry, even reprehensible, biographical stock has suddenly become valuable political capital.
The former Republican senator was one of the most aggressive, warmongering politicians in the US, frequently calling for war or confrontation with Iran, Russia and other foreign nations. Yet this politician whose intemperate words violated international law for inciting war on multiple occasions is now being deified as some kind of honorable elder statesman and paragon of "American virtues".
Barack Obama, who won the presidency in 2008 against rival candidate McCain, led the official mourning and myth-making when he said: "we shared, for all our differences, a fidelity to something higher — the ideals for which generations of Americans and immigrants alike have fought, marched and sacrificed."
Another former president, George W Bush, described McCain as "a patriot of the highest order".
What utter balderdash. Two presidents who should be prosecuted for launching criminal wars — from Afghanistan, Iraq to Libya — have the audacity to proclaim McCain a figure of "American ideals".
Of course, the sycophantic American news media indulge this grotesque ritual of embalming a dead politician with lies and falsification.
The person they eulogize was a bomber pilot during the Vietnam War and who thus was complicit in the US genocide of millions of Vietnamese.
That was the war that GW Bush, like incumbent President Donald Trump, were too cowardly to fight in, both dodging the draft for imperial service.
Bush — who later waged war on Iraq killing over a million people — and his estimation of McCain as "a patriot of the highest order" have therefore no value whatsoever.
Besides when in 1967 McCain was shot down and imprisoned in Hanoi for six years, he reportedly collaborated with the North Vietnamese to reveal classified military information on his aircraft carrier and squadron members. McCain flew an attack bomber jet known as an A-4 Skyhawk. He may have been a hawk in the air above Vietnamese air defenses, but for his captors, he sang like a canary — admittedly after being tortured.
McCain was shot down during a bombing raid on a power plant in Hanoi, the North Vietnamese capital. That fact alone, targeting civilian infrastructure, is grounds for a war crime indictment. Not that such a legal nicety ever bothers American war planners and servicemen like McCain.
But, in the time-honored fashion of American myth-making, McCain's dubious record as a prisoner of war in Vietnam has been whitewashed by the US political and media establishment. He is roundly exalted as a "war hero".
That is partly why dying is a good career move for the likes of McCain. Through his death and all the official pious mourning, the long and vile record of American imperialist war crimes is magically transformed into a paean of noble patriotism.
McCain’s death is his last service to US imperialism in that it allows a preposterous re-writing of history. Instead of Vietnam and other subsequent wars that McCain supported as a politician being seen as they should be, as outrageously criminal, his media beatification becomes an opportunity to recast those wars as righteous acts of “American idealism”.
The other merit from McCain’s death is that it allows the US media to conjure up a supposed virtuous political image with which to attack the sitting Coward-in-Chief, President Trump.
Although they shared the same Republican party, McCain was often a critic of the Trump White House. His criticism was not based on any progressive argumentation, such as denouncing Trump over his pro-rich tax policies. McCain was mainly concerned to label Trump a “traitor” because of his willingness to engage normally with Russian leader Vladimir Putin, whom McCain often slandered without any substantiation as a “murderer” and “thug”.
By eulogizing McCain as a "patriot", the anti-Trump news media are trying to set up a standard by which to undermine the president. That standard is, of course, a travesty given McCain's record of endorsing war crimes.
For these reasons, we can expect the next few days to be one of hyper sentimentalism over John McCain. His abhorrent career as a war criminal and an inveterate warmonger is being laundered to reinforce American delusions about the heinous nature of US imperialist power and how it operates in the world. The outpouring of absurd praise is doubly intensified because it also serves as a vent for the obsessive political rivalry against Trump.
Dying is a good career move — RIP — for Revamping Imperialist Power.
Death as a Good Career Move
The death of Senator John McCain has provoked the predictable outpouring of mawkish and mendacious “tributes” from across the American political and media establishment.
Invariably, McCain the "maverick", which was one of his monikers, is being hailed as a "war hero" and "patriot". A nationwide orchestration of public emotion is underway to elevate a dubious, mean-spirited politician into some kind of saintly statesman.
The New York Times trumpeted with its top story: ‘John McCain, War Hero, Senator, Presidential Contender, Dies at 81'.
American news channels, from CNN, CBS to ABC and the others, were wall-to-wall in broadcasting misty-eyed venerations of the Arizona senator.
McCain, who died from brain cancer at the weekend, was certainly a maverick figure, but hardly in a way that can be ascribed as valorous.
Like has-been pop stars whose record sales soar posthumously, so too McCain's passing proves the adage that "death can be a good career move". His tawdry, even reprehensible, biographical stock has suddenly become valuable political capital.
The former Republican senator was one of the most aggressive, warmongering politicians in the US, frequently calling for war or confrontation with Iran, Russia and other foreign nations. Yet this politician whose intemperate words violated international law for inciting war on multiple occasions is now being deified as some kind of honorable elder statesman and paragon of "American virtues".
Barack Obama, who won the presidency in 2008 against rival candidate McCain, led the official mourning and myth-making when he said: "we shared, for all our differences, a fidelity to something higher — the ideals for which generations of Americans and immigrants alike have fought, marched and sacrificed."
Another former president, George W Bush, described McCain as "a patriot of the highest order".
What utter balderdash. Two presidents who should be prosecuted for launching criminal wars — from Afghanistan, Iraq to Libya — have the audacity to proclaim McCain a figure of "American ideals".
Of course, the sycophantic American news media indulge this grotesque ritual of embalming a dead politician with lies and falsification.
The person they eulogize was a bomber pilot during the Vietnam War and who thus was complicit in the US genocide of millions of Vietnamese.
That was the war that GW Bush, like incumbent President Donald Trump, were too cowardly to fight in, both dodging the draft for imperial service.
Bush — who later waged war on Iraq killing over a million people — and his estimation of McCain as "a patriot of the highest order" have therefore no value whatsoever.
Besides when in 1967 McCain was shot down and imprisoned in Hanoi for six years, he reportedly collaborated with the North Vietnamese to reveal classified military information on his aircraft carrier and squadron members. McCain flew an attack bomber jet known as an A-4 Skyhawk. He may have been a hawk in the air above Vietnamese air defenses, but for his captors, he sang like a canary — admittedly after being tortured.
McCain was shot down during a bombing raid on a power plant in Hanoi, the North Vietnamese capital. That fact alone, targeting civilian infrastructure, is grounds for a war crime indictment. Not that such a legal nicety ever bothers American war planners and servicemen like McCain.
But, in the time-honored fashion of American myth-making, McCain's dubious record as a prisoner of war in Vietnam has been whitewashed by the US political and media establishment. He is roundly exalted as a "war hero".
That is partly why dying is a good career move for the likes of McCain. Through his death and all the official pious mourning, the long and vile record of American imperialist war crimes is magically transformed into a paean of noble patriotism.
McCain’s death is his last service to US imperialism in that it allows a preposterous re-writing of history. Instead of Vietnam and other subsequent wars that McCain supported as a politician being seen as they should be, as outrageously criminal, his media beatification becomes an opportunity to recast those wars as righteous acts of “American idealism”.
The other merit from McCain’s death is that it allows the US media to conjure up a supposed virtuous political image with which to attack the sitting Coward-in-Chief, President Trump.
Although they shared the same Republican party, McCain was often a critic of the Trump White House. His criticism was not based on any progressive argumentation, such as denouncing Trump over his pro-rich tax policies. McCain was mainly concerned to label Trump a “traitor” because of his willingness to engage normally with Russian leader Vladimir Putin, whom McCain often slandered without any substantiation as a “murderer” and “thug”.
By eulogizing McCain as a "patriot", the anti-Trump news media are trying to set up a standard by which to undermine the president. That standard is, of course, a travesty given McCain's record of endorsing war crimes.
For these reasons, we can expect the next few days to be one of hyper sentimentalism over John McCain. His abhorrent career as a war criminal and an inveterate warmonger is being laundered to reinforce American delusions about the heinous nature of US imperialist power and how it operates in the world. The outpouring of absurd praise is doubly intensified because it also serves as a vent for the obsessive political rivalry against Trump.
Dying is a good career move — RIP — for Revamping Imperialist Power.
SC171-13
http://www.informationclearinghouse.info/50154.htm
Back in the (Great) Game: The Revenge of Eurasian Land Powers
What is left roaming our wilderness of mirrors depends on the mood swings of the Goddess of the Market. No wonder an effect of Eurasia integration will be a death blow to Bretton Woods and “democratic” neoliberalism, says Pepe Escobar.
Get ready for a major geopolitical chessboard rumble: from now on, every butterfly fluttering its wings and setting off a tornado directly connects to the battle between Eurasia integration and Western sanctions as foreign policy.
It is the paradigm shift of China’s New Silk Roads versus America’s Our Way or the Highway. We used to be under the illusion that history had ended. How did it come to this?
Hop in for some essential time travel. For centuries the Ancient Silk Road, run by mobile nomads, established the competitiveness standard for land-based trade connectivity; a web of trade routes linking Eurasia to the – dominant – Chinese market.
In the early 15th century, based on the tributary system, China had already established a Maritime Silk Road along the Indian Ocean all the way to the east coast of Africa, led by the legendary Admiral Zheng He. Yet it didn’t take much for imperial Beijing to conclude that China was self-sufficient enough – and that emphasis should be placed on land-based operations.
Deprived of a trade connection via a land corridor between Europe and China, Europeans went all-out for their own maritime silk roads. We are all familiar with the spectacular result: half a millennium of Western dominance.
Until quite recently the latest chapters of this Brave New World were conceptualized by the Mahan, Mackinder and Spykman trio.
The Heartland of the World
Halford Mackinder’s 1904 Heartland Theory – a product of the imperial Russia-Britain New Great Game – codified the supreme Anglo, and then Anglo-American, fear of a new emerging land power able to reconnect Eurasia to the detriment of maritime powers.
Nicholas Spykman’s 1942 Rimland Theory advocated that mobile maritime powers, such as the UK and the U.S., should aim for strategic offshore balancing. The key was to control the maritime edges of Eurasia—that is, Western Europe, the Middle East and East Asia—against any possible Eurasia unifier. When you don’t need to maintain a large Eurasia land-based army, you exercise control by dominating trade routes along the Eurasian periphery.
Even before Mackinder and Spykman, U.S. Navy Admiral Alfred Thayer Mahan had come up in the 1890s with his Influence of Sea Power Upon History – whereby the “island” U.S. should establish itself as a seaworthy giant, modeled on the British empire, to maintain a balance of power in Europe and Asia.
It was all about containing the maritime edges of Eurasia.
In fact, we lived in a mix of Heartland and Rimland. In 1952, then Secretary of State John Foster Dulles adopted the concept of an “island chain” (then expanded to three chains) alongside Japan, Australia and the Philippines to encircle and contain both China and the USSR in the Pacific. (Note the Trump administration’s attempt at revival via the Quad–U.S., Japan, Australia and India).
George Kennan, the architect of containing the USSR, was drunk on Spykman, while, in a parallel track, as late as 1988, President Ronald Reagan’s speechwriters were still drunk on Mackinder. Referring to U.S. competitors as having a shot at dominating the Eurasian landmass, Reagan gave away the plot: “We fought two world wars to prevent this from occurring,” he said.
Eurasia integration and connectivity is taking on many forms. The China-driven New Silk Roads, also known as Belt and Road Initiative (BRI); the Russia-driven Eurasia Economic Union (EAEU); the Asia Infrastructure Investment Bank (AIIB); the International North-South Transportation Corridor (INSTC), and myriad other mechanisms, are now leading us to a whole new game.
How delightful that the very concept of Eurasian “connectivity” actually comes from a 2007 World Bank report about competitiveness in global supply chains.
Also delightful is how the late Zbigniew “Grand Chessboard” Brzezinski was “inspired” by Mackinder after the fall of the USSR – advocating the partition of a then weak Russia into three separate regions; European, Siberian and Far Eastern.
All Nodes Covered
At the height of the unipolar moment, history did seem to have “ended.” Both the western and eastern peripheries of Eurasia were under tight Western control – in Germany and Japan, the two critical nodes in Europe and East Asia. There was also that extra node in the southern periphery of Eurasia, namely the energy-wealthy Middle East.
Washington had encouraged the development of a multilateral European Union that might eventually rival the U.S. in some tech domains, but most of all would enable the U.S. to contain Russia by proxy.
China was only a delocalized, low-cost manufacture base for the expansion of Western capitalism. Japan was not only for all practical purposes still occupied, but also instrumentalized via the Asian Development Bank (ADB), whose message was: We fund your projects only if you are politically correct.
The primary aim, once again, was to prevent any possible convergence of European and East Asian powers as rivals to the US.
The confluence between communism and the Cold War had been essential to prevent Eurasia integration. Washington configured a sort of benign tributary system – borrowing from imperial China – designed to ensure perpetual unipolarity. It was duly maintained by a formidable military, diplomatic, economic, and covert apparatus, with a star role for the Chalmers Johnson-defined Empire of Bases encircling, containing and dominating Eurasia.
Compare this recent idyllic past with Brzezinski’s – and Henry Kissinger’s – worst nightmare: what could be defined today as the “revenge of history”.
That features the Russia-China strategic partnership, from energy to trade: interpolating Russia-China geo-economics; the concerted drive to bypass the U.S. dollar; the AIIB and the BRICS’s New Development Bank involved in infrastructure financing; the tech upgrade inbuilt in Made in China 2025; the push towards an alternative banking clearance mechanism (a new SWIFT); massive stockpiling of gold reserves; and the expanded politico-economic role of the Shanghai Cooperation Organization (SCO).
As Glenn Diesen formulates in his brilliant book, Russia’s Geo-economic Strategy for a Greater Eurasia, “the foundations of an Eurasian core can create a gravitational pull to draw the rimland towards the centre.”
If the complex, long-term, multi-vector process of Eurasia integration could be resumed by just one formula, it would be something like this: the heartland progressively integrating; the rimlands mired in myriad battlefields and the power of the hegemon irretrievably dissolving. Mahan, Mackinder and Spykman to the rescue? It’s not enough.
Divide and Rule, Revisited
The same applies for the preeminent post-mod Delphic Oracle, also known as Henry Kissinger, simultaneously adorned by hagiography gold and despised as a war criminal.
Before the Trump inauguration, there was much debate in Washington about how Kissinger might engineer – for Trump – a “pivot to Russia” that he had envisioned 45 years ago. This is how I framed the shadow play at the time.
In the end, it’s always about variations of Divide and Rule – as in splitting Russia from China and vice-versa. In theory, Kissinger advised Trump to “rebalance” towards Russia to oppose the irresistible Chinese ascension. It won’t happen, not only because of the strength of the Russia-China strategic partnership, but because across the Beltway, neocons and humanitarian imperialists ganged up to veto it.
Brzezinski’s perpetual Cold War mindset still lords over a fuzzy mix of the Wolfowitz Doctrine and the Clash of Civilizations. The Russophobic Wolfowitz Doctrine – still fully classified – is code for Russia as the perennial top existential threat to the U.S. The Clash, for its part, codifies another variant of Cold War 2.0: East (as in China) vs. West.
Kissinger is trying some rebalancing/hedging himself, noting that the mistake the West (and NATO) is making “is to think that there is a sort of historic evolution that will march across Eurasia – and not to understand that somewhere on that march it will encounter something very different to a Westphalian entity.”
Both Eurasianist Russia and civilization-state China are already on post-Westphalian mode. The redesign goes deep. It includes a key treaty signed in 2001, only a few weeks before 9/11, stressing that both nations renounce any territorial designs on one another’s territory. This happens to concern, crucially, the Primorsky Territory in the Russian Far East along the Amur River, which was ruled by the Ming and Qing empires.
Moreover, Russia and China commit never to do deals with any third party, or allow a third country to use its territory to harm the other’s sovereignty, security and territorial integrity.
So much for turning Russia against China. Instead, what will develop 24/7 are variations of U.S. military and economic containment against Russia, China and Iran – the key nodes of Eurasia integration – in a geo-strategic spectrum. It will include intersections of heartland and rimland across Syria, Ukraine, Afghanistan and the South China Sea. That will proceed in parallel to the Fed weaponizing the U.S. dollar at will.
Heraclitus Defies Voltaire
Alastair Crooke took a great shot at deconstructing why Western global elites are terrified of the Russian conceptualization of Eurasia. It’s because “they ‘scent’…a stealth reversion to the old, pre-Socratic values: for the Ancients … the very notion of ‘man’, in that way, did not exist. There were only men: Greeks, Romans, barbarians, Syrians, and so on. This stands in obvious opposition to universal, cosmopolitan ‘man’.”
So it’s Heraclitus versus Voltaire – even as “humanism” as we inherited it from the Enlightenment, is de facto over. Whatever is left roaming our wilderness of mirrors depends on the irascible mood swings of the Goddess of the Market. No wonder one of the side effects of progressive Eurasia integration will be not only a death blow to Bretton Woods but also to “democratic” neoliberalism.
What we have now is also a remastered version of sea power versus land powers. Relentless Russophobia is paired with supreme fear of a Russia-Germany rapprochement – as Bismarck wanted, and as Putin and Merkel recently hinted at. The supreme nightmare for the U.S. is in fact a truly Eurasian Beijing-Berlin-Moscow partnership.
The Belt and Road Initiative (BRI) has not even begun; according to the official Beijing timetable, we’re still in the planning phase. Implementation starts next year. The horizon is 2039.
This is China playing a long-distance game of go on steroids, incrementally making the best strategic decisions (allowing for margins of error, of course) to render the opponent powerless as he does not even realize he is under attack.
The New Silk Roads were launched by Xi Jinping five years ago, in Astana (the Silk Road Economic Belt) and Jakarta (the Maritime Silk Road). It took Washington almost half a decade to come up with a response. And that amounts to an avalanche of sanctions and tariffs. Not good enough.
Russia for its part was forced to publicly announce a show of mesmerizing weaponry to dissuade the proverbial War Party adventurers probably for good – while heralding Moscow’s role as co-driver of a brand new game.
On sprawling, superimposed levels, the Russia-China partnership is on a roll; recent examples include summits in Singapore, Astana and St. Petersburg; the SCO summit in Qingdao; and the BRICS Plus summit.
Were the European peninsula of Asia to fully integrate before mid-century – via high-speed rail, fiber optics, pipelines – into the heart of massive, sprawling Eurasia, it’s game over. No wonder Exceptionalistan elites are starting to get the feeling of a silk rope drawn ever so softly, squeezing their gentle throats.
Back in the (Great) Game: The Revenge of Eurasian Land Powers
What is left roaming our wilderness of mirrors depends on the mood swings of the Goddess of the Market. No wonder an effect of Eurasia integration will be a death blow to Bretton Woods and “democratic” neoliberalism, says Pepe Escobar.
Get ready for a major geopolitical chessboard rumble: from now on, every butterfly fluttering its wings and setting off a tornado directly connects to the battle between Eurasia integration and Western sanctions as foreign policy.
It is the paradigm shift of China’s New Silk Roads versus America’s Our Way or the Highway. We used to be under the illusion that history had ended. How did it come to this?
Hop in for some essential time travel. For centuries the Ancient Silk Road, run by mobile nomads, established the competitiveness standard for land-based trade connectivity; a web of trade routes linking Eurasia to the – dominant – Chinese market.
In the early 15th century, based on the tributary system, China had already established a Maritime Silk Road along the Indian Ocean all the way to the east coast of Africa, led by the legendary Admiral Zheng He. Yet it didn’t take much for imperial Beijing to conclude that China was self-sufficient enough – and that emphasis should be placed on land-based operations.
Deprived of a trade connection via a land corridor between Europe and China, Europeans went all-out for their own maritime silk roads. We are all familiar with the spectacular result: half a millennium of Western dominance.
Until quite recently the latest chapters of this Brave New World were conceptualized by the Mahan, Mackinder and Spykman trio.
The Heartland of the World
Halford Mackinder’s 1904 Heartland Theory – a product of the imperial Russia-Britain New Great Game – codified the supreme Anglo, and then Anglo-American, fear of a new emerging land power able to reconnect Eurasia to the detriment of maritime powers.
Nicholas Spykman’s 1942 Rimland Theory advocated that mobile maritime powers, such as the UK and the U.S., should aim for strategic offshore balancing. The key was to control the maritime edges of Eurasia—that is, Western Europe, the Middle East and East Asia—against any possible Eurasia unifier. When you don’t need to maintain a large Eurasia land-based army, you exercise control by dominating trade routes along the Eurasian periphery.
Even before Mackinder and Spykman, U.S. Navy Admiral Alfred Thayer Mahan had come up in the 1890s with his Influence of Sea Power Upon History – whereby the “island” U.S. should establish itself as a seaworthy giant, modeled on the British empire, to maintain a balance of power in Europe and Asia.
It was all about containing the maritime edges of Eurasia.
In fact, we lived in a mix of Heartland and Rimland. In 1952, then Secretary of State John Foster Dulles adopted the concept of an “island chain” (then expanded to three chains) alongside Japan, Australia and the Philippines to encircle and contain both China and the USSR in the Pacific. (Note the Trump administration’s attempt at revival via the Quad–U.S., Japan, Australia and India).
George Kennan, the architect of containing the USSR, was drunk on Spykman, while, in a parallel track, as late as 1988, President Ronald Reagan’s speechwriters were still drunk on Mackinder. Referring to U.S. competitors as having a shot at dominating the Eurasian landmass, Reagan gave away the plot: “We fought two world wars to prevent this from occurring,” he said.
Eurasia integration and connectivity is taking on many forms. The China-driven New Silk Roads, also known as Belt and Road Initiative (BRI); the Russia-driven Eurasia Economic Union (EAEU); the Asia Infrastructure Investment Bank (AIIB); the International North-South Transportation Corridor (INSTC), and myriad other mechanisms, are now leading us to a whole new game.
How delightful that the very concept of Eurasian “connectivity” actually comes from a 2007 World Bank report about competitiveness in global supply chains.
Also delightful is how the late Zbigniew “Grand Chessboard” Brzezinski was “inspired” by Mackinder after the fall of the USSR – advocating the partition of a then weak Russia into three separate regions; European, Siberian and Far Eastern.
All Nodes Covered
At the height of the unipolar moment, history did seem to have “ended.” Both the western and eastern peripheries of Eurasia were under tight Western control – in Germany and Japan, the two critical nodes in Europe and East Asia. There was also that extra node in the southern periphery of Eurasia, namely the energy-wealthy Middle East.
Washington had encouraged the development of a multilateral European Union that might eventually rival the U.S. in some tech domains, but most of all would enable the U.S. to contain Russia by proxy.
China was only a delocalized, low-cost manufacture base for the expansion of Western capitalism. Japan was not only for all practical purposes still occupied, but also instrumentalized via the Asian Development Bank (ADB), whose message was: We fund your projects only if you are politically correct.
The primary aim, once again, was to prevent any possible convergence of European and East Asian powers as rivals to the US.
The confluence between communism and the Cold War had been essential to prevent Eurasia integration. Washington configured a sort of benign tributary system – borrowing from imperial China – designed to ensure perpetual unipolarity. It was duly maintained by a formidable military, diplomatic, economic, and covert apparatus, with a star role for the Chalmers Johnson-defined Empire of Bases encircling, containing and dominating Eurasia.
Compare this recent idyllic past with Brzezinski’s – and Henry Kissinger’s – worst nightmare: what could be defined today as the “revenge of history”.
That features the Russia-China strategic partnership, from energy to trade: interpolating Russia-China geo-economics; the concerted drive to bypass the U.S. dollar; the AIIB and the BRICS’s New Development Bank involved in infrastructure financing; the tech upgrade inbuilt in Made in China 2025; the push towards an alternative banking clearance mechanism (a new SWIFT); massive stockpiling of gold reserves; and the expanded politico-economic role of the Shanghai Cooperation Organization (SCO).
As Glenn Diesen formulates in his brilliant book, Russia’s Geo-economic Strategy for a Greater Eurasia, “the foundations of an Eurasian core can create a gravitational pull to draw the rimland towards the centre.”
If the complex, long-term, multi-vector process of Eurasia integration could be resumed by just one formula, it would be something like this: the heartland progressively integrating; the rimlands mired in myriad battlefields and the power of the hegemon irretrievably dissolving. Mahan, Mackinder and Spykman to the rescue? It’s not enough.
Divide and Rule, Revisited
The same applies for the preeminent post-mod Delphic Oracle, also known as Henry Kissinger, simultaneously adorned by hagiography gold and despised as a war criminal.
Before the Trump inauguration, there was much debate in Washington about how Kissinger might engineer – for Trump – a “pivot to Russia” that he had envisioned 45 years ago. This is how I framed the shadow play at the time.
In the end, it’s always about variations of Divide and Rule – as in splitting Russia from China and vice-versa. In theory, Kissinger advised Trump to “rebalance” towards Russia to oppose the irresistible Chinese ascension. It won’t happen, not only because of the strength of the Russia-China strategic partnership, but because across the Beltway, neocons and humanitarian imperialists ganged up to veto it.
Brzezinski’s perpetual Cold War mindset still lords over a fuzzy mix of the Wolfowitz Doctrine and the Clash of Civilizations. The Russophobic Wolfowitz Doctrine – still fully classified – is code for Russia as the perennial top existential threat to the U.S. The Clash, for its part, codifies another variant of Cold War 2.0: East (as in China) vs. West.
Kissinger is trying some rebalancing/hedging himself, noting that the mistake the West (and NATO) is making “is to think that there is a sort of historic evolution that will march across Eurasia – and not to understand that somewhere on that march it will encounter something very different to a Westphalian entity.”
Both Eurasianist Russia and civilization-state China are already on post-Westphalian mode. The redesign goes deep. It includes a key treaty signed in 2001, only a few weeks before 9/11, stressing that both nations renounce any territorial designs on one another’s territory. This happens to concern, crucially, the Primorsky Territory in the Russian Far East along the Amur River, which was ruled by the Ming and Qing empires.
Moreover, Russia and China commit never to do deals with any third party, or allow a third country to use its territory to harm the other’s sovereignty, security and territorial integrity.
So much for turning Russia against China. Instead, what will develop 24/7 are variations of U.S. military and economic containment against Russia, China and Iran – the key nodes of Eurasia integration – in a geo-strategic spectrum. It will include intersections of heartland and rimland across Syria, Ukraine, Afghanistan and the South China Sea. That will proceed in parallel to the Fed weaponizing the U.S. dollar at will.
Heraclitus Defies Voltaire
Alastair Crooke took a great shot at deconstructing why Western global elites are terrified of the Russian conceptualization of Eurasia. It’s because “they ‘scent’…a stealth reversion to the old, pre-Socratic values: for the Ancients … the very notion of ‘man’, in that way, did not exist. There were only men: Greeks, Romans, barbarians, Syrians, and so on. This stands in obvious opposition to universal, cosmopolitan ‘man’.”
So it’s Heraclitus versus Voltaire – even as “humanism” as we inherited it from the Enlightenment, is de facto over. Whatever is left roaming our wilderness of mirrors depends on the irascible mood swings of the Goddess of the Market. No wonder one of the side effects of progressive Eurasia integration will be not only a death blow to Bretton Woods but also to “democratic” neoliberalism.
What we have now is also a remastered version of sea power versus land powers. Relentless Russophobia is paired with supreme fear of a Russia-Germany rapprochement – as Bismarck wanted, and as Putin and Merkel recently hinted at. The supreme nightmare for the U.S. is in fact a truly Eurasian Beijing-Berlin-Moscow partnership.
The Belt and Road Initiative (BRI) has not even begun; according to the official Beijing timetable, we’re still in the planning phase. Implementation starts next year. The horizon is 2039.
This is China playing a long-distance game of go on steroids, incrementally making the best strategic decisions (allowing for margins of error, of course) to render the opponent powerless as he does not even realize he is under attack.
The New Silk Roads were launched by Xi Jinping five years ago, in Astana (the Silk Road Economic Belt) and Jakarta (the Maritime Silk Road). It took Washington almost half a decade to come up with a response. And that amounts to an avalanche of sanctions and tariffs. Not good enough.
Russia for its part was forced to publicly announce a show of mesmerizing weaponry to dissuade the proverbial War Party adventurers probably for good – while heralding Moscow’s role as co-driver of a brand new game.
On sprawling, superimposed levels, the Russia-China partnership is on a roll; recent examples include summits in Singapore, Astana and St. Petersburg; the SCO summit in Qingdao; and the BRICS Plus summit.
Were the European peninsula of Asia to fully integrate before mid-century – via high-speed rail, fiber optics, pipelines – into the heart of massive, sprawling Eurasia, it’s game over. No wonder Exceptionalistan elites are starting to get the feeling of a silk rope drawn ever so softly, squeezing their gentle throats.
Wednesday, August 29, 2018
SC171-12
https://ourfiniteworld.com/2018/08/27/how-energy-shortages-really-affect-the-economy/
How energy shortages really affect the economy
Many people expect energy shortages to lead to high prices. This is based on their view of what “running out” of oil might do to the economy.
In this post, I look at historical data surrounding inadequate energy supply. I also consider some of the physics associated with the situation. I see a strange coincidence between when coal production peaked (hit its maximum production before declining) in the United Kingdom and when World War I broke out. There was an equally strange coincidence between when the highest quality coal peaked in Germany and when World War II broke out. A good case can be made that inadequate energy supply is associated with conflict and fighting because leaders recognize how important an adequate energy supply is.
Some of my previous analysis has shown that if we view energy in terms of average energy supply per person, the world as a whole may be again entering into a period of inadequate energy supply. If my view is correct that inadequate energy supply leads to increased conflict, the recent discord that we have been seeing among world leaders may be related to today’s low supply of energy. (My energy analysis considers the combined energy supply available per person from fossil fuels, nuclear, and renewables. It is not simply an oil-based analysis.)
The physics of the low energy situation may be trying to “freeze out” the less efficient portions of the economy. If successful, the outcome might be analogous to the collapse of the central government of the Soviet Union in 1991, after oil prices had been low for several years. Total energy consumption of countries involved in the collapse dropped by close to 40%, on average. The rest of the world benefitted from lower oil prices (resulting from lower total demand). It also benefitted from the oil that remained in the ground and consequently was available for extraction in recent years, when we really needed it.
The idea that oil prices can rise very high seems to be based on the oil price increases of the 1970s and of the early 2000s. While oil prices can temporarily rise very high, it is hard to make a case that they can remain high for an extended period. For one thing, high oil prices tend to cause recessions and lower employment. In such an environment, affordability of energy products is lower, and oil prices tend to fall. For another, it is easy for the Federal Reserve to get oil prices back down by raising interest rates. In fact, the Federal Reserve is raising interest rates right now.
In my opinion, we should be more concerned about low oil prices than high because we live in a world economy with huge debt bubbles. Debt bubbles are part of what enable today’s high employment. Debt bubbles support employers that are close to the edge financially; they also support buyers who would not be able afford automobiles or college educations, if loans were to become more expensive because of higher interest rates. Employment in the affected industries would be cut back, leading to recession.
Because of these issues, pricking the debt bubble is likely to lead to a major recession and, indirectly, lower energy prices, as in late 2008 (Figure 12). These lower prices are not good news because energy providers of all kinds need fairly high energy prices to survive–probably equivalent to oil at $80 per barrel or higher. If energy prices stay persistently low, the world is likely to see much lower oil supply, in part because oil exporters need the tax revenue that they obtain from high-priced oil to fund their programs.
A Self-Organizing Economy Needs Energy to Fulfill Its Promises
The problem that has arisen many times in the past is that energy supply becomes inadequate, relative to what the economy needs to operate. This energy shortfall is virtually never explained to the public. It is only apparent to the occasional researcher who realizes that this might be the issue.
The amount of energy that a networked economy needs to operate depends on:
The number of people alive at the time,
The industry that has been put in place, and
The promises, such as retirement promises, that have been made to citizens.
Adequate energy supply is important for jobs and their pay levels. A rising supply of energy per capita tends to add jobs. The Asian countries shown in Figure 1 are some examples of countries where rising energy supply has given rise to more non-agricultural jobs.
Figure 1. Energy consumption per capita based on BP Statistical Review of World Energy 2018 total energy consumption data and UN 2017 Population Estimates of three selected countries. Energy consumption includes oil, natural gas, coal, and many smaller types of energy consumption, including wind and solar.
The jobs added rarely pay high salaries compared to those in the developed world, but they have helped raise the standard of living of those who have obtained them.
A falling supply of energy consumption per capita tends to make jobs that are high-paying more difficult to obtain. If energy per capita falls, there may still be a reasonable number of jobs, but many of them won’t pay well. High energy jobs such as building new schools and resurfacing roads tend to disappear, while jobs requiring little energy consumption, such as waitress and bartender, are added. Figure 2 gives some examples of European countries that have seen declines in energy consumption per capita in recent years.
Figure 2. Energy consumption per capita based on BP Statistical Review of World Energy 2018 total energy consumption data and UN 2017 Population Estimates of three selected countries. Energy consumption includes oil, natural gas, coal, and many smaller types of energy consumption, including wind and solar.
When jobs that pay well become more difficult to find, a significant share of the population starts believing that there is no room for additional immigrants, regardless of how needy they may be. This seems to be part of the dynamic many countries have been encountering recently.
If growth in energy supply is inadequate, other physics-related issues also arise:
Inadequate economic growth, because it takes energy to create goods and services
A tendency toward debt defaults, and the resulting deflation of asset bubbles
Downward pressure on wages, in situations where machines or lower-paid workers can be substituted for somewhat routine work
Difficulty collecting adequate tax revenue
A tendency toward aggressive behavior between countries and actual wars
Physicist François Roddier has examined how economies allocate resources when there is a problem with scarcity. He finds that when there is inadequate total energy supply, this shortage is reflected in growing wage and wealth disparity. Thus, the goods and services made possible by energy supplies are disproportionately allocated to a small proportion of individuals at the top of the economic hierarchy, while those at the bottom receive a falling share.
He likens the increasing share of wages/wealth going to the top to steam rising. At the same time, he sees the falling share of energy consumption going to those at the bottom of the hierarchy as freezing out those who are contributing the least to the economy. Using this approach, some portion of the economy can be maintained in a period of temporary energy scarcity, even if the most vulnerable parts are lost.
How a Few Past Low-Energy Problems Resolved
First Low-Energy Consumption Period: Following Peak Coal in the United Kingdom, 1913
Figure 3. United Kingdom coal production since 1855, in a figure by David Strahan. First published in New Scientist, 17 January 2008.
The UK problem in the 1914 time-period was a coal problem. The coal whose delivered cost was lowest had been produced first. It was near the surface and geographically close to where it was ultimately to be used. Many types of costs rose as the easy-to-extract and deliver coal was exhausted. For example, more worker-hours were needed per ton of coal extracted.
If the costs of extracting and delivering coal rose, a person might think that these higher costs would be passed on to consumers as higher prices. (This is the hypothesis behind the ever-rising oil price theory.) Thus, a person might expect that coal prices would rise because coal companies needed more revenue to handle what was becoming an increasingly inefficient mining and delivery process.
This wasn’t the way it really worked, though, because customers couldn’t afford the higher costs. The wages of most citizens didn’t rise because the amount of goods and services the economy could produce depended upon the quantity of coal that was produced and delivered. If the economy were to take workers from outside the coal industry to compensate for the industry’s higher need for labor, it would further act to reduce the economy’s total output, because the new coal workers would no longer be performing their previous jobs.
Mining companies (sort of) solved their wage problem by paying miners an increasingly inadequate wage. Strikes by workers and lockouts by employers became an increasing problem in the 1910 to 1914 period. Probably not coincidentally, World War I started in 1914, just after UK coal production hit its peak in 1913. The war provided jobs for miners and others who could not otherwise find jobs that paid a living wage. Workers leaving for the war effort left fewer for mining.
Ultimately, World War I worked out well for the UK. The fact that it was on the winning side allowed the UK to remain the dominant world power until 1945, despite its declining coal production. Being dominant, the British pound sterling remained as the world reserve currency. This status made it easier for the UK to borrow, allowing it to import coal, even when it otherwise lacked funds to pay for it.
Second Low-Energy Consumption Period: 1920 to World War II, in the United States
The situation here seems to be more complex. The low energy problem that underlay World War I hadn’t really been resolved; it had mostly been moved elsewhere. Also, Germany, which was the other major European coal producer besides the UK, was reaching a peak in its predominant type of coal production, hard coal (Figure 4). Because of the these issues, European demand for imported goods from the US dropped dramatically. In particular, the US had been a big supplier of food to Europe during World War I, but this source of demand disappeared after 1918, when soldiers returned to their fields.
Figure 4. Hard coal production in Germany 1792 to 2002. Chart by BGR.
With respect to US demand for coal, the big issue besides low demand from Europe was internal US demand. Mechanization was starting to replace unskilled workers, both on farms and in factories. Mechanization of farming created a double problem: it added more food than was really needed, and it created a combination of winners and losers. The winners were those with the new mechanization who could produce food cheaply; the losers were those who still used processes that required much more manual labor. Available food prices fell far below the non-mechanized cost of food production. City dwellers were also winners thanks to the lower food prices.
Wage disparity became an increasingly serious problem in the 1920s (Figure 5). Workers with low wages could not afford to buy many goods and services. The laws of physics requires energy consumption (“dissipation”) whenever heat or motion are produced. Thus, physics requires that energy products be used in the manufacturing and delivery of goods and services. Following this logic through, the low wages of workers displaced by mechanization further acted to reduce demand for US energy supplies, over and above European coal problems.
Figure 5. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.
Debt levels grew in the Roaring 20s, partly driven by the apparent advantages of the new mechanization. In 1929, the debt bubble began to collapse, showing the underlying weakness of the economy.
The problems of the late 1920s to 1930 bore a striking resemblance to those of today. Wage disparity had become a major issue because of displacement of many workers mechanization and immigration. In response, tariffs were added: the Fordney-McCumber Tariff of 1922 and the Smoot-Hawley Tariff of 1930. Limits were also set on the number of immigrants, in the hope that reduced competition from immigration would help raise the wages of unskilled workers.
Eventually, the low-demand-for-energy problem was solved with World War II. The extra demand of World War II added many women to the work force for the first time. US energy consumption grew thanks to the war effort. The large wage increase about this time (Figure 6) primarily reflects the addition of many more workers to the labor force.
Figure 6. Three-year average growth in wages and in average personal income, based on data of the Bureau of Economic Analysis. Disposable personal income includes transfer payments such as Social Security and Unemployment Insurance. It also is net of taxes. The denominator in this calculation is total US population, so the changes reflect the effect of adding a larger share of the population to the workforce.
World War II was a winning strategy economically for the United States. Wages rose rapidly during the early 1940s, as did “Disposable Personal Income,” which is closely related. In addition, the US dollar took over as the reserve currency from the British pound in 1945. This gave the United States the power to import more goods and services (including oil) than it would have been able to if it had been more limited in its ability to borrow.
If we analyze US coal production, we see the interplay between geological limits and demand (really, what is affordable by consumers). With respect to geological limits, US anthracite coal hit an apparently geologically limited production peak in 1918. It hit when there was a fall-off in demand for imported food from Europe, so coal prices were almost certainly falling (Figure 7).
Figure 7. US coal production by type, in Wikipedia exhibit by contributor Plazak.
The US production of the second-highest quality coal, bituminous coal, rose rapidly between 1870 and 1918, when its production path suddenly changed to a jagged plateau, which lasted until about 1930. Coal production then dropped precipitously, as the economy sank, and did not rise again until the time of World War II. This pattern very much follows the “demand” pattern expected based on the earlier discussion. The wage disparity of the 1920s seems to have led to flattening production, with a steep drop with the problems of the 1930s. Looking out at 1990 on Figure 7, bituminous coal may have hit a geological production peak. Energy prices are this time were low (Figure 10), again pointing to low prices being associated with peaks in the production of a type of energy supply, not high prices.
Production of the two lowest qualities of coal (sub-bituminous and lignite) coal did not begin until 1970. The rapid ramp-up of coal supplies helped cushion the peak in oil production in the United States, which occurred (coincidentally or not) the same year, 1970. We see a shift toward ever-lower quality of energy resources, but we do not see a pattern of spiking of prices associated with peak demand. Instead, low prices seem to be associated with peaks in production.
Third Low Energy Consumption Period: Dip from 1980 – 1984, Related to High Interest Rates
A person might expect the peaking of US oil production in 1970 to have had a major impact on US energy consumption, but a much larger drop in energy consumption occurred in the 1980 to 1983 period, when the US raised interest rates to a high level, causing recession.
Figure 8. Chart produced by the Federal Reserve of St. Louis (FRED) showing a comparison of 10-year Treasury interest rates and the annual change in GDP rates (where GDP growth includes inflation).
The resulting dip in oil consumption sent oil prices from an average inflation-adjusted price of $110 per barrel in 1980, down to $32 per barrel in 1986. At such low energy prices, energy exporters have difficulty collecting enough tax revenue and obtaining enough funds for new wells. Only the sturdier exporting nations could survive.
The energy exporter that did not survive was the Soviet Union. It took until 1991 for the financial strains of low oil prices to collapse the central government of the Soviet Union. With its collapse, much of the industry of the Soviet Union permanently was destroyed, reducing energy consumption by close to 40%. Even thirty years later, the per capita energy consumption of the former Soviet nations remains far below its mid-1980s plateau level (Figure 9).
Figure 9. Per Capita Energy Consumption by Part of the World, based on data of BP Statistical Review of World Energy 2018 and 2017 UN Medium Population Estimates. The Russia+ grouping is the Commonwealth of Independent States, shown in BP Statistical Review of World Energy 2018. It is slightly smaller than the former Soviet Union.
Analysis
Looking at these situations, there is little evidence with respect to UK and German coal production that geological peaks in production are associated with high prices. Instead, they seem to be associated with conflict among nations.
Apart from conflict, the other issue associated with peaks in coal production seems to be falling demand, and thus falling prices. The reason for geological peaks is likely to be inadequate profitability. Inadequate profitability occurs because rising costs of production and transport can no longer be recouped with higher prices. A person might say that the limit on rising coal production is the affordable price. It is reasonable to expect that the same is true for oil.
There is also little evidence that energy scarcity causes high prices, if energy scarcity is defined as low energy consumption per capita for all types of energy products combined. Instead, energy scarcity tends to cause wage disparity. Energy scarcity is also a concern for government leaders because they can see the need for an adequate supply of inexpensive energy, if they are to be able to compete in the world marketplace. Goods made with an expensive energy mix tend to be high-priced, and thus they tend to be noncompetitive in the world market.
Local customers are also unlikely to be able to afford goods made with expensive energy products, because the additional wages are being used to support what is essentially a less efficient type of production. There are many ways that energy costs can rise, including:
Need for more human labor
Higher wages for labor, perhaps because of more education or location
Need for the use of more energy products in the making of new energy products
Need for more debt financing
Higher interest rates
More machinery, including pollution-control equipment
Need to lease land at higher cost
Higher taxes
Regardless of where the extra costs come from, they don’t actually produce more of the energy products that are essential to making the economy operate as it should. The higher costs are simply a drag on the economy, which must be hidden in some way. Approaches for hiding the problem include reducing interest rates, outsourcing manufacturing to low-wage countries, and replacing some unskilled workers with computers or robots.
Prices seem to be tied more to what customers can afford than to the cost of production. Note that when energy supplies were low in the 1920 to 1930 period, oil prices declined. This pattern occurred because growing wage disparity led to more people who could not afford very many goods and services made with oil products.
Figure 10. Historical inflation-adjusted oil prices, based on inflation adjusted Brent-equivalent oil prices shown in BP Statistical Review of World Energy 2018.
Looking at Figure 11 below, we see a situation where US average wages seem to rise only if oil prices are low. If oil prices are high, it becomes more economic to send manufacturing to countries using cheaper energy products and offering lower wages. Such substitution leads to fewer US jobs and recession.
Figure 11. Average wages in 2017$ compared to Brent oil price, also in 2017$. Oil prices in 2017$ are from BP Statistical Review of World Energy 2018. Average wages are total wages based on BEA data adjusted by the GDP price deflator, divided by total population. Thus, they reflect changes in the proportion of population employed as well as changes in wage levels.
The Federal Reserve is very much aware of the fact that high oil prices lead to high food prices, and thus are a problem for the economy. It may also be aware of other issues related to high oil prices, such as loss of competitiveness in the world market.
The Federal Reserve has a powerful tool for fixing the problem of high oil prices–its Open Market Committee can raise short-term interest rates, and thereby make loans more expensive. For example, if interest rates can be changed so that auto loan interest rates rise from 5% to 6%, this makes automobile monthly payments more expensive, and thus reduces demand for cars. Indirectly, this reduces demand for oil, both for manufacturing them and for operating them.
In fact, the Federal Reserve seems to have been a major contributor to the Great Recession of 2007-2009. It first lowered interest rates in the early 2000s and helped create a debt bubble, particularly in sub-prime housing. It later raised interest rates. The higher interest rates plus high oil prices popped the debt bubble.
Quantitative Easing (QE) is a program that was added in recent years to adjust interest rates, over and above the impacts available from changes to short-term interest rates. Figure 12 shows that these interest rate changes seem to have had a close correspondence to turning points in oil prices. QE was added in late 2008 to reduce interest rates, and thus raise oil prices. Removing QE seems to have had the opposite impact.
Figure 12. Monthly average spot Brent oil prices based on US Energy Information Agency data, together with dates when the US began and ended Quantitative Easing.
What we are facing going forward is a debt bubble made possible by a long period of very low interest rates. The Federal Reserve now seems to be intent on popping this bubble by raising short-term interest rates and selling Quantitative Easing securities at the same time. If the Federal Reserve does succeed in popping the debt bubble, oil prices (as well as other energy prices) could fall very low again. If I am right, we can expect another major recession. It will be characterized by low demand, low commodity prices and layoffs in many industries.
Conclusion
The more a person looks at the story of how rising oil prices might allow oil extraction indefinitely, the less reasonable it seems. If the story about oil prices rising endlessly were true, we would have seen coal prices rise endlessly in Europe a century ago, when it was the dominant form of supplemental energy available. It didn’t happen.
Instead, what we need to be concerned about is the possibility of rising conflict. The energy situation may become increasingly like a game of musical chairs, if the amount available from sellers at an affordable price falls too low. The winners will attempt to obtain an adequate supply for themselves. It is not clear that this strategy can have winners, but perhaps I have not considered all of the possible outcomes.
One of the issues with inadequate energy supplies is the difficulty in obtaining adequate tax revenue. If tax revenue is an issue, there is likely to be a push to reduce donations to organizations that act to bring countries together, such as the European Union and the United Nations. Subsidies of all types are likely to be on the chopping block. Government services of all types are also likely to be reduced or eliminated, from bridge repairs to retirement programs for the elderly.
Most of us have never been taught about resource wars. The wide availability of fossil fuels eliminated the need to even think about a possible lack of energy resources, or other limited resources such as fresh water. Unfortunately, resource conflict may be back in some new 21st century version in the not too distant future.
Needless to say, I am not advocating conflict and cutting programs. It is just that energy problems and financial problems are very closely linked. This is the way that things seem to work out.
How energy shortages really affect the economy
Many people expect energy shortages to lead to high prices. This is based on their view of what “running out” of oil might do to the economy.
In this post, I look at historical data surrounding inadequate energy supply. I also consider some of the physics associated with the situation. I see a strange coincidence between when coal production peaked (hit its maximum production before declining) in the United Kingdom and when World War I broke out. There was an equally strange coincidence between when the highest quality coal peaked in Germany and when World War II broke out. A good case can be made that inadequate energy supply is associated with conflict and fighting because leaders recognize how important an adequate energy supply is.
Some of my previous analysis has shown that if we view energy in terms of average energy supply per person, the world as a whole may be again entering into a period of inadequate energy supply. If my view is correct that inadequate energy supply leads to increased conflict, the recent discord that we have been seeing among world leaders may be related to today’s low supply of energy. (My energy analysis considers the combined energy supply available per person from fossil fuels, nuclear, and renewables. It is not simply an oil-based analysis.)
The physics of the low energy situation may be trying to “freeze out” the less efficient portions of the economy. If successful, the outcome might be analogous to the collapse of the central government of the Soviet Union in 1991, after oil prices had been low for several years. Total energy consumption of countries involved in the collapse dropped by close to 40%, on average. The rest of the world benefitted from lower oil prices (resulting from lower total demand). It also benefitted from the oil that remained in the ground and consequently was available for extraction in recent years, when we really needed it.
The idea that oil prices can rise very high seems to be based on the oil price increases of the 1970s and of the early 2000s. While oil prices can temporarily rise very high, it is hard to make a case that they can remain high for an extended period. For one thing, high oil prices tend to cause recessions and lower employment. In such an environment, affordability of energy products is lower, and oil prices tend to fall. For another, it is easy for the Federal Reserve to get oil prices back down by raising interest rates. In fact, the Federal Reserve is raising interest rates right now.
In my opinion, we should be more concerned about low oil prices than high because we live in a world economy with huge debt bubbles. Debt bubbles are part of what enable today’s high employment. Debt bubbles support employers that are close to the edge financially; they also support buyers who would not be able afford automobiles or college educations, if loans were to become more expensive because of higher interest rates. Employment in the affected industries would be cut back, leading to recession.
Because of these issues, pricking the debt bubble is likely to lead to a major recession and, indirectly, lower energy prices, as in late 2008 (Figure 12). These lower prices are not good news because energy providers of all kinds need fairly high energy prices to survive–probably equivalent to oil at $80 per barrel or higher. If energy prices stay persistently low, the world is likely to see much lower oil supply, in part because oil exporters need the tax revenue that they obtain from high-priced oil to fund their programs.
A Self-Organizing Economy Needs Energy to Fulfill Its Promises
The problem that has arisen many times in the past is that energy supply becomes inadequate, relative to what the economy needs to operate. This energy shortfall is virtually never explained to the public. It is only apparent to the occasional researcher who realizes that this might be the issue.
The amount of energy that a networked economy needs to operate depends on:
The number of people alive at the time,
The industry that has been put in place, and
The promises, such as retirement promises, that have been made to citizens.
Adequate energy supply is important for jobs and their pay levels. A rising supply of energy per capita tends to add jobs. The Asian countries shown in Figure 1 are some examples of countries where rising energy supply has given rise to more non-agricultural jobs.
Figure 1. Energy consumption per capita based on BP Statistical Review of World Energy 2018 total energy consumption data and UN 2017 Population Estimates of three selected countries. Energy consumption includes oil, natural gas, coal, and many smaller types of energy consumption, including wind and solar.
The jobs added rarely pay high salaries compared to those in the developed world, but they have helped raise the standard of living of those who have obtained them.
A falling supply of energy consumption per capita tends to make jobs that are high-paying more difficult to obtain. If energy per capita falls, there may still be a reasonable number of jobs, but many of them won’t pay well. High energy jobs such as building new schools and resurfacing roads tend to disappear, while jobs requiring little energy consumption, such as waitress and bartender, are added. Figure 2 gives some examples of European countries that have seen declines in energy consumption per capita in recent years.
Figure 2. Energy consumption per capita based on BP Statistical Review of World Energy 2018 total energy consumption data and UN 2017 Population Estimates of three selected countries. Energy consumption includes oil, natural gas, coal, and many smaller types of energy consumption, including wind and solar.
When jobs that pay well become more difficult to find, a significant share of the population starts believing that there is no room for additional immigrants, regardless of how needy they may be. This seems to be part of the dynamic many countries have been encountering recently.
If growth in energy supply is inadequate, other physics-related issues also arise:
Inadequate economic growth, because it takes energy to create goods and services
A tendency toward debt defaults, and the resulting deflation of asset bubbles
Downward pressure on wages, in situations where machines or lower-paid workers can be substituted for somewhat routine work
Difficulty collecting adequate tax revenue
A tendency toward aggressive behavior between countries and actual wars
Physicist François Roddier has examined how economies allocate resources when there is a problem with scarcity. He finds that when there is inadequate total energy supply, this shortage is reflected in growing wage and wealth disparity. Thus, the goods and services made possible by energy supplies are disproportionately allocated to a small proportion of individuals at the top of the economic hierarchy, while those at the bottom receive a falling share.
He likens the increasing share of wages/wealth going to the top to steam rising. At the same time, he sees the falling share of energy consumption going to those at the bottom of the hierarchy as freezing out those who are contributing the least to the economy. Using this approach, some portion of the economy can be maintained in a period of temporary energy scarcity, even if the most vulnerable parts are lost.
How a Few Past Low-Energy Problems Resolved
First Low-Energy Consumption Period: Following Peak Coal in the United Kingdom, 1913
Figure 3. United Kingdom coal production since 1855, in a figure by David Strahan. First published in New Scientist, 17 January 2008.
The UK problem in the 1914 time-period was a coal problem. The coal whose delivered cost was lowest had been produced first. It was near the surface and geographically close to where it was ultimately to be used. Many types of costs rose as the easy-to-extract and deliver coal was exhausted. For example, more worker-hours were needed per ton of coal extracted.
If the costs of extracting and delivering coal rose, a person might think that these higher costs would be passed on to consumers as higher prices. (This is the hypothesis behind the ever-rising oil price theory.) Thus, a person might expect that coal prices would rise because coal companies needed more revenue to handle what was becoming an increasingly inefficient mining and delivery process.
This wasn’t the way it really worked, though, because customers couldn’t afford the higher costs. The wages of most citizens didn’t rise because the amount of goods and services the economy could produce depended upon the quantity of coal that was produced and delivered. If the economy were to take workers from outside the coal industry to compensate for the industry’s higher need for labor, it would further act to reduce the economy’s total output, because the new coal workers would no longer be performing their previous jobs.
Mining companies (sort of) solved their wage problem by paying miners an increasingly inadequate wage. Strikes by workers and lockouts by employers became an increasing problem in the 1910 to 1914 period. Probably not coincidentally, World War I started in 1914, just after UK coal production hit its peak in 1913. The war provided jobs for miners and others who could not otherwise find jobs that paid a living wage. Workers leaving for the war effort left fewer for mining.
Ultimately, World War I worked out well for the UK. The fact that it was on the winning side allowed the UK to remain the dominant world power until 1945, despite its declining coal production. Being dominant, the British pound sterling remained as the world reserve currency. This status made it easier for the UK to borrow, allowing it to import coal, even when it otherwise lacked funds to pay for it.
Second Low-Energy Consumption Period: 1920 to World War II, in the United States
The situation here seems to be more complex. The low energy problem that underlay World War I hadn’t really been resolved; it had mostly been moved elsewhere. Also, Germany, which was the other major European coal producer besides the UK, was reaching a peak in its predominant type of coal production, hard coal (Figure 4). Because of the these issues, European demand for imported goods from the US dropped dramatically. In particular, the US had been a big supplier of food to Europe during World War I, but this source of demand disappeared after 1918, when soldiers returned to their fields.
Figure 4. Hard coal production in Germany 1792 to 2002. Chart by BGR.
With respect to US demand for coal, the big issue besides low demand from Europe was internal US demand. Mechanization was starting to replace unskilled workers, both on farms and in factories. Mechanization of farming created a double problem: it added more food than was really needed, and it created a combination of winners and losers. The winners were those with the new mechanization who could produce food cheaply; the losers were those who still used processes that required much more manual labor. Available food prices fell far below the non-mechanized cost of food production. City dwellers were also winners thanks to the lower food prices.
Wage disparity became an increasingly serious problem in the 1920s (Figure 5). Workers with low wages could not afford to buy many goods and services. The laws of physics requires energy consumption (“dissipation”) whenever heat or motion are produced. Thus, physics requires that energy products be used in the manufacturing and delivery of goods and services. Following this logic through, the low wages of workers displaced by mechanization further acted to reduce demand for US energy supplies, over and above European coal problems.
Figure 5. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.
Debt levels grew in the Roaring 20s, partly driven by the apparent advantages of the new mechanization. In 1929, the debt bubble began to collapse, showing the underlying weakness of the economy.
The problems of the late 1920s to 1930 bore a striking resemblance to those of today. Wage disparity had become a major issue because of displacement of many workers mechanization and immigration. In response, tariffs were added: the Fordney-McCumber Tariff of 1922 and the Smoot-Hawley Tariff of 1930. Limits were also set on the number of immigrants, in the hope that reduced competition from immigration would help raise the wages of unskilled workers.
Eventually, the low-demand-for-energy problem was solved with World War II. The extra demand of World War II added many women to the work force for the first time. US energy consumption grew thanks to the war effort. The large wage increase about this time (Figure 6) primarily reflects the addition of many more workers to the labor force.
Figure 6. Three-year average growth in wages and in average personal income, based on data of the Bureau of Economic Analysis. Disposable personal income includes transfer payments such as Social Security and Unemployment Insurance. It also is net of taxes. The denominator in this calculation is total US population, so the changes reflect the effect of adding a larger share of the population to the workforce.
World War II was a winning strategy economically for the United States. Wages rose rapidly during the early 1940s, as did “Disposable Personal Income,” which is closely related. In addition, the US dollar took over as the reserve currency from the British pound in 1945. This gave the United States the power to import more goods and services (including oil) than it would have been able to if it had been more limited in its ability to borrow.
If we analyze US coal production, we see the interplay between geological limits and demand (really, what is affordable by consumers). With respect to geological limits, US anthracite coal hit an apparently geologically limited production peak in 1918. It hit when there was a fall-off in demand for imported food from Europe, so coal prices were almost certainly falling (Figure 7).
Figure 7. US coal production by type, in Wikipedia exhibit by contributor Plazak.
The US production of the second-highest quality coal, bituminous coal, rose rapidly between 1870 and 1918, when its production path suddenly changed to a jagged plateau, which lasted until about 1930. Coal production then dropped precipitously, as the economy sank, and did not rise again until the time of World War II. This pattern very much follows the “demand” pattern expected based on the earlier discussion. The wage disparity of the 1920s seems to have led to flattening production, with a steep drop with the problems of the 1930s. Looking out at 1990 on Figure 7, bituminous coal may have hit a geological production peak. Energy prices are this time were low (Figure 10), again pointing to low prices being associated with peaks in the production of a type of energy supply, not high prices.
Production of the two lowest qualities of coal (sub-bituminous and lignite) coal did not begin until 1970. The rapid ramp-up of coal supplies helped cushion the peak in oil production in the United States, which occurred (coincidentally or not) the same year, 1970. We see a shift toward ever-lower quality of energy resources, but we do not see a pattern of spiking of prices associated with peak demand. Instead, low prices seem to be associated with peaks in production.
Third Low Energy Consumption Period: Dip from 1980 – 1984, Related to High Interest Rates
A person might expect the peaking of US oil production in 1970 to have had a major impact on US energy consumption, but a much larger drop in energy consumption occurred in the 1980 to 1983 period, when the US raised interest rates to a high level, causing recession.
Figure 8. Chart produced by the Federal Reserve of St. Louis (FRED) showing a comparison of 10-year Treasury interest rates and the annual change in GDP rates (where GDP growth includes inflation).
The resulting dip in oil consumption sent oil prices from an average inflation-adjusted price of $110 per barrel in 1980, down to $32 per barrel in 1986. At such low energy prices, energy exporters have difficulty collecting enough tax revenue and obtaining enough funds for new wells. Only the sturdier exporting nations could survive.
The energy exporter that did not survive was the Soviet Union. It took until 1991 for the financial strains of low oil prices to collapse the central government of the Soviet Union. With its collapse, much of the industry of the Soviet Union permanently was destroyed, reducing energy consumption by close to 40%. Even thirty years later, the per capita energy consumption of the former Soviet nations remains far below its mid-1980s plateau level (Figure 9).
Figure 9. Per Capita Energy Consumption by Part of the World, based on data of BP Statistical Review of World Energy 2018 and 2017 UN Medium Population Estimates. The Russia+ grouping is the Commonwealth of Independent States, shown in BP Statistical Review of World Energy 2018. It is slightly smaller than the former Soviet Union.
Analysis
Looking at these situations, there is little evidence with respect to UK and German coal production that geological peaks in production are associated with high prices. Instead, they seem to be associated with conflict among nations.
Apart from conflict, the other issue associated with peaks in coal production seems to be falling demand, and thus falling prices. The reason for geological peaks is likely to be inadequate profitability. Inadequate profitability occurs because rising costs of production and transport can no longer be recouped with higher prices. A person might say that the limit on rising coal production is the affordable price. It is reasonable to expect that the same is true for oil.
There is also little evidence that energy scarcity causes high prices, if energy scarcity is defined as low energy consumption per capita for all types of energy products combined. Instead, energy scarcity tends to cause wage disparity. Energy scarcity is also a concern for government leaders because they can see the need for an adequate supply of inexpensive energy, if they are to be able to compete in the world marketplace. Goods made with an expensive energy mix tend to be high-priced, and thus they tend to be noncompetitive in the world market.
Local customers are also unlikely to be able to afford goods made with expensive energy products, because the additional wages are being used to support what is essentially a less efficient type of production. There are many ways that energy costs can rise, including:
Need for more human labor
Higher wages for labor, perhaps because of more education or location
Need for the use of more energy products in the making of new energy products
Need for more debt financing
Higher interest rates
More machinery, including pollution-control equipment
Need to lease land at higher cost
Higher taxes
Regardless of where the extra costs come from, they don’t actually produce more of the energy products that are essential to making the economy operate as it should. The higher costs are simply a drag on the economy, which must be hidden in some way. Approaches for hiding the problem include reducing interest rates, outsourcing manufacturing to low-wage countries, and replacing some unskilled workers with computers or robots.
Prices seem to be tied more to what customers can afford than to the cost of production. Note that when energy supplies were low in the 1920 to 1930 period, oil prices declined. This pattern occurred because growing wage disparity led to more people who could not afford very many goods and services made with oil products.
Figure 10. Historical inflation-adjusted oil prices, based on inflation adjusted Brent-equivalent oil prices shown in BP Statistical Review of World Energy 2018.
Looking at Figure 11 below, we see a situation where US average wages seem to rise only if oil prices are low. If oil prices are high, it becomes more economic to send manufacturing to countries using cheaper energy products and offering lower wages. Such substitution leads to fewer US jobs and recession.
Figure 11. Average wages in 2017$ compared to Brent oil price, also in 2017$. Oil prices in 2017$ are from BP Statistical Review of World Energy 2018. Average wages are total wages based on BEA data adjusted by the GDP price deflator, divided by total population. Thus, they reflect changes in the proportion of population employed as well as changes in wage levels.
The Federal Reserve is very much aware of the fact that high oil prices lead to high food prices, and thus are a problem for the economy. It may also be aware of other issues related to high oil prices, such as loss of competitiveness in the world market.
The Federal Reserve has a powerful tool for fixing the problem of high oil prices–its Open Market Committee can raise short-term interest rates, and thereby make loans more expensive. For example, if interest rates can be changed so that auto loan interest rates rise from 5% to 6%, this makes automobile monthly payments more expensive, and thus reduces demand for cars. Indirectly, this reduces demand for oil, both for manufacturing them and for operating them.
In fact, the Federal Reserve seems to have been a major contributor to the Great Recession of 2007-2009. It first lowered interest rates in the early 2000s and helped create a debt bubble, particularly in sub-prime housing. It later raised interest rates. The higher interest rates plus high oil prices popped the debt bubble.
Quantitative Easing (QE) is a program that was added in recent years to adjust interest rates, over and above the impacts available from changes to short-term interest rates. Figure 12 shows that these interest rate changes seem to have had a close correspondence to turning points in oil prices. QE was added in late 2008 to reduce interest rates, and thus raise oil prices. Removing QE seems to have had the opposite impact.
Figure 12. Monthly average spot Brent oil prices based on US Energy Information Agency data, together with dates when the US began and ended Quantitative Easing.
What we are facing going forward is a debt bubble made possible by a long period of very low interest rates. The Federal Reserve now seems to be intent on popping this bubble by raising short-term interest rates and selling Quantitative Easing securities at the same time. If the Federal Reserve does succeed in popping the debt bubble, oil prices (as well as other energy prices) could fall very low again. If I am right, we can expect another major recession. It will be characterized by low demand, low commodity prices and layoffs in many industries.
Conclusion
The more a person looks at the story of how rising oil prices might allow oil extraction indefinitely, the less reasonable it seems. If the story about oil prices rising endlessly were true, we would have seen coal prices rise endlessly in Europe a century ago, when it was the dominant form of supplemental energy available. It didn’t happen.
Instead, what we need to be concerned about is the possibility of rising conflict. The energy situation may become increasingly like a game of musical chairs, if the amount available from sellers at an affordable price falls too low. The winners will attempt to obtain an adequate supply for themselves. It is not clear that this strategy can have winners, but perhaps I have not considered all of the possible outcomes.
One of the issues with inadequate energy supplies is the difficulty in obtaining adequate tax revenue. If tax revenue is an issue, there is likely to be a push to reduce donations to organizations that act to bring countries together, such as the European Union and the United Nations. Subsidies of all types are likely to be on the chopping block. Government services of all types are also likely to be reduced or eliminated, from bridge repairs to retirement programs for the elderly.
Most of us have never been taught about resource wars. The wide availability of fossil fuels eliminated the need to even think about a possible lack of energy resources, or other limited resources such as fresh water. Unfortunately, resource conflict may be back in some new 21st century version in the not too distant future.
Needless to say, I am not advocating conflict and cutting programs. It is just that energy problems and financial problems are very closely linked. This is the way that things seem to work out.
SC171-11
https://libertyblitzkrieg.com/2018/08/27/the-tectonic-plates-of-geopolitics-are-starting-to-shift/
The Tectonic Plates of Geopolitics Are Starting to Shift
The United States is currently waging economic warfare against one tenth of the world’s countries with cumulative population of nearly 2 billion people and combined gross domestic product (GDP) of more than $15 trillion.
These include Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea and others on which Washington has imposed sanctions over the years, but also countries like China, Pakistan and Turkey which are not under full sanctions but rather targets of other punitive economic measures.
In addition, thousands of individuals from scores of countries are included in the Treasury Department’s list of Specially Designated Nationals who are effectively blocked from the U.S.-dominated global financial system. Many of those designated are either part of or closely linked to their countries’ leadership…
But in recent months it seems that America’s unwavering commitment to fight all of the world’s scourges has brought all those governments and the wealthy individuals who support them to a critical mass, joining forces to create a parallel financial system which would be out of reach of America’s long arm. Should they succeed, the impact on America’s global posture would be transformational.
– From the recent article: The Anti-Dollar Awakening Could Be Ruder and Sooner Than Most Economists Predict
The peak of American empire has already come and gone, a reality not yet widely appreciated due to the continued dominance of the global financial system by the U.S. dollar, still the world’s preeminent reserve currency. U.S. leaders have always used the USD as a weapon, but it’s only in recent years that geopolitical rivals and long-standing allies alike have started to come to an increasingly vocal understanding that the unipolar role played by the U.S. in the world’s centralized financial system is well past its expiration date.
I think history will show Trump’s decision to unilaterally scrap the Iran deal (JCPOA) was the catalyst that caused much of rest of the world to get serious about creating alternative financial rails on which to conduct global business. Nation-states the world over are coming to the obvious conclusion that it’s virtually impossible to execute independent foreign policy in the context of a global financial system so completely dominated by the U.S.
European countries that entered the Iran deal wish to remain in it, but this has been complicated by the Trump administration’s decision to use the global financial system as a weapon. Although this angered leaders across the pond back in May when it first went down, it was unclear whether they’d just roll over as usual. Months later, it appears perhaps not.
First, we saw comments last week from Germany’s foreign minister Heiko Maas. Here are a few excerpts from his widely read column published last week at Handelsblatt.
Via Business Insider:
The US monopoly over the global payments infrastructure has been challenged by Germany’s foreign minister, Heiko Maas, who has suggested that the European Union should set up its own payment system that would give Brussels independence from Washington.
Maas wrote in the German daily Handelsblatt on Tuesday that the EU should “strengthen European autonomy by creating payment channels that are independent of the United States – a European Monetary Fund and an independent SWIFT system.”
“Europe should not allow the U.S. to act over our heads and at our expense,” Maas wrote.
Maas called for a “balanced partnership” with the U.S., in which Europe would fill gaps in the world left by the American withdrawal. He said Europe must “form a counterweight when the U.S. crosses red lines.”
“It is high time to re-evaluate our partnership…The Europeans must become a mainstay of the international order, a partner for all who are committed to this order,” Maas wrote.
Those are strong words, words that have not been walked back since. In fact, other historic U.S. allies feel emboldened to echo similar sentiments. As reported by Bloomberg earlier today:
“With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions,” French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF. “I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist.”
“We have to react and strengthen Europe’s autonomy and sovereignty in trade, economic and finance policy,” Maas said in a speech in Berlin. Canadian Foreign Minister Chrystia Freeland also spoke at the event and said that her nation shares the goal of preserving a multilateral world order.
If this sort of talk was merely limited to a couple of European nations expressing frustration with SWIFT, I probably wouldn’t have written this post. Where it gets really interesting is when you compare the sentiments highlighted above with the extraordinary statement made by Pakistan’s recently elected Prime Minster Imran Khan in the clip below.
But that’s not all. Take a look at the following excerpts from an article written by Daniel Sneider, Lecturer in East Asian Studies at Stanford University, in Tokyo Business Daily.
Inside the national security bureaucracy, there is growing alarm over relations with South Korea. On the surface, President Moon and his government continue to support U.S. diplomacy and reinforce its messages to Pyongyang. But things are starting to shift, with Seoul telling administration officials that the nuclear issue is basically between the U.S. and North Korea and that they want to separate their engagement with the North from progress on that issue.
“We have a big problem coming with South Korea,” a senior official involved in the talks told me. “It has reached the point where the South Koreans are determined to press ahead. They no longer feel the need to act in parallel with us.”
Moon is planning a visit next month to Pyongyang. He is eager to proceed with projects such as rail and pipe lines that will run from South, through the North, to Russia and China, as he outlined in a recent address.
Taken together, we can see a big picture starting to emerge. Countries around the world, including many longstanding U.S. allies, are starting to very publicly express frustration with U.S. imperial bullying, as well as deep concern with the limits placed on national sovereignty by a unipolar world centralized in Washington D.C.
We’re beginning to see the emergence of a global consensus related to two crucial geopolitical perspectives:
A growing understanding that a world unilaterally controlled by an imperial U.S. which demands all other nations accept vassal status is no longer tenable.
Recognition that a more multi-polar world cannot truly come into being without displacing, or at the very least creating, a viable alternative(s) to the USD-centric global financial system.
These developments have not been lost on many in the beltway, which is precisely why U.S. tech giants are being rapidly weaponized in a struggle to maintain imperial dominance. While the seemingly coordinated deplatforming of Alex Jones was the canary in the coal mine, the tech giants have also moved against several countries seen as problematic when it comes to achieving full spectrum dominance of the U.S. empire, including Venezuela, Iran and of course Russia.
As I tweeted last week: " Notice how the tech giants are only really targeting imperial America's geopolitical rivals.
Make no mistake about it, these companies are working on behalf of military industrial complex agendas and nothing else. "
It’s really undeniable at this point. U.S. tech giants are merely extensions of the U.S. shadow government — complicit organs of the imperial state masquerading as private companies.
While unquestionably disturbing, I see recent moves by the tech giants as part of a desperate response to the huge cracks developing beneath the post-World War II geopolitical paradigm. A status quo confident in its position or role in the world would never resort to such blatant attempts at censorship. This is all rooted in fear, insecurity and a futile desire to hold onto a world that is vanishing.
I’ve discussed these themes continually over the years, but it’s nevertheless extraordinary to see it begin to play out. The tectonic plates of geopolitics are finally starting to shift. Slowly at first, rapidly later, and I expect the world to be entirely different in structure by around 2025.
The Tectonic Plates of Geopolitics Are Starting to Shift
The United States is currently waging economic warfare against one tenth of the world’s countries with cumulative population of nearly 2 billion people and combined gross domestic product (GDP) of more than $15 trillion.
These include Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea and others on which Washington has imposed sanctions over the years, but also countries like China, Pakistan and Turkey which are not under full sanctions but rather targets of other punitive economic measures.
In addition, thousands of individuals from scores of countries are included in the Treasury Department’s list of Specially Designated Nationals who are effectively blocked from the U.S.-dominated global financial system. Many of those designated are either part of or closely linked to their countries’ leadership…
But in recent months it seems that America’s unwavering commitment to fight all of the world’s scourges has brought all those governments and the wealthy individuals who support them to a critical mass, joining forces to create a parallel financial system which would be out of reach of America’s long arm. Should they succeed, the impact on America’s global posture would be transformational.
– From the recent article: The Anti-Dollar Awakening Could Be Ruder and Sooner Than Most Economists Predict
The peak of American empire has already come and gone, a reality not yet widely appreciated due to the continued dominance of the global financial system by the U.S. dollar, still the world’s preeminent reserve currency. U.S. leaders have always used the USD as a weapon, but it’s only in recent years that geopolitical rivals and long-standing allies alike have started to come to an increasingly vocal understanding that the unipolar role played by the U.S. in the world’s centralized financial system is well past its expiration date.
I think history will show Trump’s decision to unilaterally scrap the Iran deal (JCPOA) was the catalyst that caused much of rest of the world to get serious about creating alternative financial rails on which to conduct global business. Nation-states the world over are coming to the obvious conclusion that it’s virtually impossible to execute independent foreign policy in the context of a global financial system so completely dominated by the U.S.
European countries that entered the Iran deal wish to remain in it, but this has been complicated by the Trump administration’s decision to use the global financial system as a weapon. Although this angered leaders across the pond back in May when it first went down, it was unclear whether they’d just roll over as usual. Months later, it appears perhaps not.
First, we saw comments last week from Germany’s foreign minister Heiko Maas. Here are a few excerpts from his widely read column published last week at Handelsblatt.
Via Business Insider:
The US monopoly over the global payments infrastructure has been challenged by Germany’s foreign minister, Heiko Maas, who has suggested that the European Union should set up its own payment system that would give Brussels independence from Washington.
Maas wrote in the German daily Handelsblatt on Tuesday that the EU should “strengthen European autonomy by creating payment channels that are independent of the United States – a European Monetary Fund and an independent SWIFT system.”
“Europe should not allow the U.S. to act over our heads and at our expense,” Maas wrote.
Maas called for a “balanced partnership” with the U.S., in which Europe would fill gaps in the world left by the American withdrawal. He said Europe must “form a counterweight when the U.S. crosses red lines.”
“It is high time to re-evaluate our partnership…The Europeans must become a mainstay of the international order, a partner for all who are committed to this order,” Maas wrote.
Those are strong words, words that have not been walked back since. In fact, other historic U.S. allies feel emboldened to echo similar sentiments. As reported by Bloomberg earlier today:
“With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions,” French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF. “I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist.”
“We have to react and strengthen Europe’s autonomy and sovereignty in trade, economic and finance policy,” Maas said in a speech in Berlin. Canadian Foreign Minister Chrystia Freeland also spoke at the event and said that her nation shares the goal of preserving a multilateral world order.
If this sort of talk was merely limited to a couple of European nations expressing frustration with SWIFT, I probably wouldn’t have written this post. Where it gets really interesting is when you compare the sentiments highlighted above with the extraordinary statement made by Pakistan’s recently elected Prime Minster Imran Khan in the clip below.
But that’s not all. Take a look at the following excerpts from an article written by Daniel Sneider, Lecturer in East Asian Studies at Stanford University, in Tokyo Business Daily.
Inside the national security bureaucracy, there is growing alarm over relations with South Korea. On the surface, President Moon and his government continue to support U.S. diplomacy and reinforce its messages to Pyongyang. But things are starting to shift, with Seoul telling administration officials that the nuclear issue is basically between the U.S. and North Korea and that they want to separate their engagement with the North from progress on that issue.
“We have a big problem coming with South Korea,” a senior official involved in the talks told me. “It has reached the point where the South Koreans are determined to press ahead. They no longer feel the need to act in parallel with us.”
Moon is planning a visit next month to Pyongyang. He is eager to proceed with projects such as rail and pipe lines that will run from South, through the North, to Russia and China, as he outlined in a recent address.
Taken together, we can see a big picture starting to emerge. Countries around the world, including many longstanding U.S. allies, are starting to very publicly express frustration with U.S. imperial bullying, as well as deep concern with the limits placed on national sovereignty by a unipolar world centralized in Washington D.C.
We’re beginning to see the emergence of a global consensus related to two crucial geopolitical perspectives:
A growing understanding that a world unilaterally controlled by an imperial U.S. which demands all other nations accept vassal status is no longer tenable.
Recognition that a more multi-polar world cannot truly come into being without displacing, or at the very least creating, a viable alternative(s) to the USD-centric global financial system.
These developments have not been lost on many in the beltway, which is precisely why U.S. tech giants are being rapidly weaponized in a struggle to maintain imperial dominance. While the seemingly coordinated deplatforming of Alex Jones was the canary in the coal mine, the tech giants have also moved against several countries seen as problematic when it comes to achieving full spectrum dominance of the U.S. empire, including Venezuela, Iran and of course Russia.
As I tweeted last week: " Notice how the tech giants are only really targeting imperial America's geopolitical rivals.
Make no mistake about it, these companies are working on behalf of military industrial complex agendas and nothing else. "
It’s really undeniable at this point. U.S. tech giants are merely extensions of the U.S. shadow government — complicit organs of the imperial state masquerading as private companies.
While unquestionably disturbing, I see recent moves by the tech giants as part of a desperate response to the huge cracks developing beneath the post-World War II geopolitical paradigm. A status quo confident in its position or role in the world would never resort to such blatant attempts at censorship. This is all rooted in fear, insecurity and a futile desire to hold onto a world that is vanishing.
I’ve discussed these themes continually over the years, but it’s nevertheless extraordinary to see it begin to play out. The tectonic plates of geopolitics are finally starting to shift. Slowly at first, rapidly later, and I expect the world to be entirely different in structure by around 2025.
SC171-10
http://woodpilereport.com/
#543
" These are the last of the good times. How bad will it get? No one can know. How bad can it get? Now we're on better ground. Let's speculate.
We live in the darkening foreshadow of a world catastrophe to be remembered for millennia to come. When it comes apart it will happen with no more warning than we have now. Each step down will be a disaster in itself, followed by worse, then worse yet, until many years later civilization becomes a fading memory told to disbelieving children. The wholly unprepared have no more than a single-digit percent chance of long term survival.
Most have chosen their fate. Few have chosen wisely.
Big city dwellers who believe potable water and their daily bread is "a human right', whose lives rely on contracts and connections and persuasion, who take the weather personally, who hold leisure class values even as they're being swindled into penury, who can't prepare a real meal at home and hire an illegal to change a light bulb—they won't survive.
Those who live far from cities and lines of drift, who have a circle of reliable relatives and friends at a good level of self-sufficency, who have experienced scarcity or even poverty, who are experienced and well situated to hunt and fish and garden, or are already practicing homesteaders, who value self reliance, who know their home ground intimately and have prepared realistically—they may survive.
We can't know how events will unfold. It's likely the first post-apocalyptic months will seem to be, if not be, the most cataclysmic. The incompetent, the deluded, the resolutely unprepared and other self-selected victims will be winnowed in huge numbers. Add to them the chronically ill and elderly, the wholly dependent tribalists of the inner city and their feral broods, and the plain unlucky.
Old vendettas will be settled, chains of revenge for revenge will begin. City utilities will fail, sewage and garbage and corpses will contribute to unchecked disease . An exposed light at night will be worth your life. Enclaves will attack enclaves no less destitute than themselves. The naturally homicidal, suddenly unconstrained, will prey singly and in groups. Some uniformed enforcers of defunct martial law will go rogue.
Long time readers know survivalism is summed up in my Most Excellent and Inviolable Rule One: Stay away from crowds. There's nothing in this for the survivalist. Serial gunfights and derring-do are not the key to survival. The survivalist removes himself from this pointless maelstrom, ready to defend himself and others, but aware the hard work of preparation is not over. The long term is still ahead and there's plenty of room for things to get worse. And worse they will get. "
#543
" These are the last of the good times. How bad will it get? No one can know. How bad can it get? Now we're on better ground. Let's speculate.
We live in the darkening foreshadow of a world catastrophe to be remembered for millennia to come. When it comes apart it will happen with no more warning than we have now. Each step down will be a disaster in itself, followed by worse, then worse yet, until many years later civilization becomes a fading memory told to disbelieving children. The wholly unprepared have no more than a single-digit percent chance of long term survival.
Most have chosen their fate. Few have chosen wisely.
Big city dwellers who believe potable water and their daily bread is "a human right', whose lives rely on contracts and connections and persuasion, who take the weather personally, who hold leisure class values even as they're being swindled into penury, who can't prepare a real meal at home and hire an illegal to change a light bulb—they won't survive.
Those who live far from cities and lines of drift, who have a circle of reliable relatives and friends at a good level of self-sufficency, who have experienced scarcity or even poverty, who are experienced and well situated to hunt and fish and garden, or are already practicing homesteaders, who value self reliance, who know their home ground intimately and have prepared realistically—they may survive.
We can't know how events will unfold. It's likely the first post-apocalyptic months will seem to be, if not be, the most cataclysmic. The incompetent, the deluded, the resolutely unprepared and other self-selected victims will be winnowed in huge numbers. Add to them the chronically ill and elderly, the wholly dependent tribalists of the inner city and their feral broods, and the plain unlucky.
Old vendettas will be settled, chains of revenge for revenge will begin. City utilities will fail, sewage and garbage and corpses will contribute to unchecked disease . An exposed light at night will be worth your life. Enclaves will attack enclaves no less destitute than themselves. The naturally homicidal, suddenly unconstrained, will prey singly and in groups. Some uniformed enforcers of defunct martial law will go rogue.
Long time readers know survivalism is summed up in my Most Excellent and Inviolable Rule One: Stay away from crowds. There's nothing in this for the survivalist. Serial gunfights and derring-do are not the key to survival. The survivalist removes himself from this pointless maelstrom, ready to defend himself and others, but aware the hard work of preparation is not over. The long term is still ahead and there's plenty of room for things to get worse. And worse they will get. "
SC171-9
http://kunstler.com/clusterfuck-nation/the-dogs-of-vengeance/
The Dogs of Vengeance
History has a velocity of its own, and its implacable forces will drag the good, the bad, the clueless, the clever, the guilty, the innocent, the avid, and the unwilling to a certain fate. One can easily see a convergence of vectors shoving the nation toward political criticality this autumn.
Mr. Trump is like some unfortunate dumb brute of the ancient Teutonic forests with a bulldog clamped to his nose, the rest of the pack close behind snapping at his hamstrings and soft, swaying underbelly. His desperate bellowing goes unanswered by the indifference of the trees in forest, the cold moon above, and all the other furnishings of his tragic reality.
As these things tend to happen, it looks like the exertions of Robert Mueller have turned from the alleged grave offenses of a foreign enemy to the sequela of consort with a floozie. Down goes Mr. Trump’s private attorney, Michael Cohen, in his personal swamp of incriminating files and audio recordings. Enter, stage left, one David Pecker, publisher of the venerable National Enquirer — the newspaper of wreckage — on his slime-trail of induced testimony. And there is your impeachable offense: an illegal campaign contribution.
One way or another, as Blondie used to sing, I’m gonna getcha, getcha, getcha.
Some in this greatest of all possible republics may be asking themselves if this is quite fair play, given the hundreds of millions of dollars washed-and-rinsed through the laundromat known as the Clinton Foundation, and related suspicious doings in that camp of darkness. But remember, another president, Jimmy Carter, once declared to the shock of official Washington that “life is unfair.”
What I wonder is what these dogs of vengeance reckon will happen when they achieve their goal of bringing down the bellowing bull and pulling his guts out. Perhaps a few moments of tribal satisfaction, one last war dance around the fire, and when the fire dies out, they will find themselves under the same cold indifferent moon with blood on their snouts and an ill wind blowing in the tree tops.
After two years of fomenting hysteria, the “winners” will discern the reality behind all the melodrama: the financialization rackets that replaced what used to be the economy have come unglued, and institutions begin to fail left and right: banks, pension funds, corporations, state and municipal governments, federal promises to pay this and that, and, in general, the ability of the USA to carry on anything approximating what might be considered normal life.
It will be interesting to see how the impeachment of Donald Trump plays as all this goes down. My guess is that the people warning about a second civil war are not far off the mark. The final consequence of a political-economy based on the proposition that anything goes and nothing matters will be the rueful discovery that consequences actually exist, and consequently that anything can’t go and some things really do matter: like whether or not money is actually worth what it says it’s worth.
That issue will surely be determined by whether the borrowers of money can possibly pay back what they owe. The discovery that it’s impossible will coincide with whatever the legal fate of Donald Trump’s presidency might be. The result of all this is apt to be a political nightmare of bankruptcy and bloodshed that makes the first civil war (1861-1865) look like a tale of knighthood in flower.
Our national living arrangements are far too fragile. The players on both sides of this dire game must assume that the trappings of American life are sturdy, and they are quite wrong about that. Personalities are not in control anymore. Murphy’s law rules, and we’re about to find out how that law differs from the federal election statutes and the humdrum business of indicting ham sandwiches just because they’re out there on the table.
The Dogs of Vengeance
History has a velocity of its own, and its implacable forces will drag the good, the bad, the clueless, the clever, the guilty, the innocent, the avid, and the unwilling to a certain fate. One can easily see a convergence of vectors shoving the nation toward political criticality this autumn.
Mr. Trump is like some unfortunate dumb brute of the ancient Teutonic forests with a bulldog clamped to his nose, the rest of the pack close behind snapping at his hamstrings and soft, swaying underbelly. His desperate bellowing goes unanswered by the indifference of the trees in forest, the cold moon above, and all the other furnishings of his tragic reality.
As these things tend to happen, it looks like the exertions of Robert Mueller have turned from the alleged grave offenses of a foreign enemy to the sequela of consort with a floozie. Down goes Mr. Trump’s private attorney, Michael Cohen, in his personal swamp of incriminating files and audio recordings. Enter, stage left, one David Pecker, publisher of the venerable National Enquirer — the newspaper of wreckage — on his slime-trail of induced testimony. And there is your impeachable offense: an illegal campaign contribution.
One way or another, as Blondie used to sing, I’m gonna getcha, getcha, getcha.
Some in this greatest of all possible republics may be asking themselves if this is quite fair play, given the hundreds of millions of dollars washed-and-rinsed through the laundromat known as the Clinton Foundation, and related suspicious doings in that camp of darkness. But remember, another president, Jimmy Carter, once declared to the shock of official Washington that “life is unfair.”
What I wonder is what these dogs of vengeance reckon will happen when they achieve their goal of bringing down the bellowing bull and pulling his guts out. Perhaps a few moments of tribal satisfaction, one last war dance around the fire, and when the fire dies out, they will find themselves under the same cold indifferent moon with blood on their snouts and an ill wind blowing in the tree tops.
After two years of fomenting hysteria, the “winners” will discern the reality behind all the melodrama: the financialization rackets that replaced what used to be the economy have come unglued, and institutions begin to fail left and right: banks, pension funds, corporations, state and municipal governments, federal promises to pay this and that, and, in general, the ability of the USA to carry on anything approximating what might be considered normal life.
It will be interesting to see how the impeachment of Donald Trump plays as all this goes down. My guess is that the people warning about a second civil war are not far off the mark. The final consequence of a political-economy based on the proposition that anything goes and nothing matters will be the rueful discovery that consequences actually exist, and consequently that anything can’t go and some things really do matter: like whether or not money is actually worth what it says it’s worth.
That issue will surely be determined by whether the borrowers of money can possibly pay back what they owe. The discovery that it’s impossible will coincide with whatever the legal fate of Donald Trump’s presidency might be. The result of all this is apt to be a political nightmare of bankruptcy and bloodshed that makes the first civil war (1861-1865) look like a tale of knighthood in flower.
Our national living arrangements are far too fragile. The players on both sides of this dire game must assume that the trappings of American life are sturdy, and they are quite wrong about that. Personalities are not in control anymore. Murphy’s law rules, and we’re about to find out how that law differs from the federal election statutes and the humdrum business of indicting ham sandwiches just because they’re out there on the table.
SC171-8
https://www.truthdig.com/articles/becoming-serfs/
Becoming Serfs
You know the statistics. Income inequality in the United States has not been this pronounced in over a century. The top 10 percent has 50 percent of the country’s income, and the upper 1 percent has 20 percent of the country’s income. A quarter of American workers struggle on wages of less than $10 an hour, putting them below the poverty line, while the income of the average CEO of a major corporation is more than 300 times the pay of his or her average worker, a massive increase given that in the 1950s the average CEO made 20 times what his or her worker made. This income inequality is global. The richest 1 percent of the world’s population controls 40 percent of the world’s wealth. And it is getting worse.
What will the consequences of this inequality be economically and politically? How much worse will it get with the imposition of austerity programs and a new tax code that slashes rates for corporations, allowing companies to hoard money or buy back their own stock rather than invest in the economy? How will we endure as health care insurance premiums steadily rise and social and public welfare programs such as Medicaid, Pell Grants and food stamps are cut? And under the tax code revision signed by President Trump in December, rates will increase over the long term for the working class. Over the next decade, the revision will cost the nation roughly $1.5 trillion. Where will this end?
We live in a new feudalism. We have been stripped of political power. Workers are trapped in menial jobs, forced into crippling debt and paid stagnant or declining wages. Chronic poverty and exploitative working conditions in many parts of the world, and increasingly in the United States, replicate the hell endured by industrial workers at the end of the 19th century. The complete capture of ruling institutions by corporations and their oligarchic elites, including the two dominant political parties, the courts and the press, means there is no mechanism left by which we can reform the system or protect ourselves from mounting abuse. We will revolt or become 21st-century serfs, forced to live in misery and brutally oppressed by militarized police and the most sophisticated security and surveillance system in human history while the ruling oligarchs continue to wallow in unimagined wealth and opulence.
“The new tax code is explosive excess,” the economist Richard Wolff said when we spoke in New York. “We’ve had 30 or 40 years where corporations paid less taxes than they ever did. They made more money than they ever did. They have been able to keep wages stagnant while the productivity of labor rose. This is the last moment historically they need another big gift, let alone at the expense of the very people whose wages have been stagnant. To give them a tax bust of this sort, basically reducing from 35 percent to 20 percent, is a 40 percent cut. This kind of crazy excess reminds you of the [kings] of France before the French Revolution when the level of excess reached an explosive social dimension. That’s where we are.”
When capitalism collapsed in the 1930s, the response of the working class was to form unions, strike and protest. The workers pitted power against power. They forced the oligarchs to respond with the New Deal, which created 12 million government-funded jobs, Social Security, the minimum wage and unemployment compensation. The country’s infrastructure was modernized and maintained. The Civilian Conservation Corps (CCC) alone employed 300,000 workers to form and maintain national parks.
“The message of the organized working class was unequivocal,” Wolff said. “Either you help us through this Depression or there will be a revolution.”
The New Deal programs were paid for by taxing the rich. Even in the 1950s, during the Eisenhower presidency, the top marginal rate was 91 percent.
The rich, enraged, mounted a war to undo these programs and restore the social inequality that makes them wealthy at our expense. We have come full circle. Dissidents, radicals and critics of capitalism are once again branded as agents of foreign powers and purged from universities and the airwaves. The labor movement has been dismantled, including through so-called right-to-work laws that prohibit agreements between unions and employers. The last remaining regulations to thwart corporate pillage and pollution are removed. Although government is the only mechanism we have to protect ourselves from predatory oligarchs and corporations, the rich tell us that government is the problem, not the solution. Austerity and a bloated and out-of-control military budget, along with the privatization of public services and institutions such as utilities and public education, we are assured, are the way to economic growth. And presiding over this assault and unchecked kleptocracy are the con artist in chief and his billionaire friends from the fossil fuel and war industries and elsewhere on Wall Street.
The elites cook statistics to lie about a recovery from the 2008 global financial crash. To gather unemployment statistics, for example, government agents ask people two questions: Are you working? If they answer “yes” they are counted as employed even if they have a temporary job in which they work only an hour a week. If they say “no” they are asked if they have been looking for work. If they have not looked for work in the last four weeks they are magically erased from the unemployment rolls. And then there is the long list of those not counted as unemployed, such as prisoners, the retired, stay-at-home spouses and high school and college students who want jobs. Alternative facts did not begin with Donald Trump.
“You don’t have to be a statistical genius to understand that over the last 10 years, a significant number of people gave up looking because it’s too disgusting,” Wolff said. “The jobs they were offered were inferior to what they had before or so insecure that it made their family life impossible. They went back to school, went into the illegal economy or began to live off their friends, relatives and neighbors.”
“The quality of the jobs, the security, the benefits and the impact on physical and mental health have been cascading downward as the wages remain stagnant,” he went on. “We’re not in a recovery. We’re in an ongoing decline, which, by the way, is why Mr. Trump got elected. This is happening to capitalism in Western Europe, Japan and the United States. This is why an angry working class is looking for ways to express and change its circumstances.”
“Society has a responsibility to itself,” Wolff said. “If the private sector can’t or won’t manage that, then the public sector has to step in. It’s what [Franklin] Roosevelt said when he came on the radio: ‘If there are millions of Americans who ask for nothing other than a job, and the private sector can’t provide it, then it’s up to me. Who else is going to do it?’ If we cut back on welfare we are making people depend on the private sector. What happens to people thrown on a private capital sector that cannot and will not function in a socially acceptable way?”
“Instead of creating a middle class, it polarizes everything,” he said of the inequality. “It allows the top executives to go completely crazy with their pay packages. They are paid beyond what’s reasonable, beyond what their fellow capitalists receive in other parts of the world. There is a collapse of the ability to buy things. A company that saves all this money through a tax cut from Mr. Trump is not going to spend its money hiring people, buying machines, producing more. They’re having trouble selling what they already produce. They’re impoverishing the very people they sell to. What do they do with the money? They take it and pay themselves. They give themselves higher pay packages. They buy back their own stock, which they’re legally allowed to do. It pushes the price of the stock up. Their [personal] compensation is connected to how well the price of the stock does. No jobs are created. No growth is created. The price of stock is going up even though the viability of the enterprise—because of the [company’s] collapsing market—is shrinking.”
“Capitalism is hollowing itself out,” he said. “The capitalists refuse to face this because they are making money, for a while. That’s the same logic as the monarchs before the French Revolution building the fantastic Versailles without understanding they were digging their own graves in those lovely gardens.”
The elites divert attention from their pillage by blaming foreign countries such as China or undocumented workers for the economic demise of the working class.
“It’s a classic ploy of crooked politicians stuck with a problem of their own making, blaming somebody else,” Wolff said. “We take the poor 10 or 11 million immigrants in this country with questionable legal status and we demonize them. We scapegoat them. They couldn’t possibly account for the difficulties in this economy. Throwing them out does not fundamentally change the dynamics of the economy. It’s childishly easy to show this. But it’s good theater. ‘I am smiting the foreigner.’ ”
“Tariffs are another way to smite the foreigner,” Wolff went on. “The tariff is a punishment of others. These days, the bugaboo is China. They are the bad ones. They are doing this. I’d like to remind people two or three things about these tariffs. One: Historically, they don’t work very well. It’s very easy to evade. For example, we put a tariff on steel from China. What do the Chinese do? They cut a deal with the Canadians or the Mexicans or the Koreans or the Europeans. Sell it to them, who resell it here. It’s on the same ship coming here. It just has a different flag at the back. This is childish. It’s well known.”
“Number two: It’s political theater,” he said. “It doesn’t change very much. For example, a good half of the goods that come from China come from subsidiaries of American corporations that went to China over the last 30 years to produce for the American market. You are smiting them by closing off their market. They’re going to be angry. They’re going to lose their investments. They’re going to take corrective action. All of this is negative for the American economy. It’s bizarre.”
“Finally, the Chinese, their politicians being not that different from ours, will have to posture in return and retaliate,” he said. “They’re already targeting our farm products. It is chaos. The United States, when we were a young country, was accused by the British and the Europeans of stealing their technology and intellectual property. Never before has it been easier to communicate intellectual property than it is today. The Chinese have been doing their share of this as an up-and-coming economy. It’s not new. It’s not frightening. It’s a part of how capitalism works. To suddenly get people outraged as if something special is going on, that’s just dishonest.”
There is no discussion in the corporate-controlled media of the effects of our out-of-control corporate capitalism. Workers struggling under massive debts, unable to pay for ever-rising health care and other basic costs, trapped in low-wage jobs that make life one long emergency, are rendered invisible by a media that entertains us with court gossip from porn actresses and reality television stars and focuses on celebrity culture. We ignore reality at our peril.
“We’ve given a free pass to a capitalist system because we’ve been afraid to debate it,” Wolff said. “When you give a free pass to any institution, you create the conditions for it to rot right behind the facade. That’s what is happening.”
Becoming Serfs
You know the statistics. Income inequality in the United States has not been this pronounced in over a century. The top 10 percent has 50 percent of the country’s income, and the upper 1 percent has 20 percent of the country’s income. A quarter of American workers struggle on wages of less than $10 an hour, putting them below the poverty line, while the income of the average CEO of a major corporation is more than 300 times the pay of his or her average worker, a massive increase given that in the 1950s the average CEO made 20 times what his or her worker made. This income inequality is global. The richest 1 percent of the world’s population controls 40 percent of the world’s wealth. And it is getting worse.
What will the consequences of this inequality be economically and politically? How much worse will it get with the imposition of austerity programs and a new tax code that slashes rates for corporations, allowing companies to hoard money or buy back their own stock rather than invest in the economy? How will we endure as health care insurance premiums steadily rise and social and public welfare programs such as Medicaid, Pell Grants and food stamps are cut? And under the tax code revision signed by President Trump in December, rates will increase over the long term for the working class. Over the next decade, the revision will cost the nation roughly $1.5 trillion. Where will this end?
We live in a new feudalism. We have been stripped of political power. Workers are trapped in menial jobs, forced into crippling debt and paid stagnant or declining wages. Chronic poverty and exploitative working conditions in many parts of the world, and increasingly in the United States, replicate the hell endured by industrial workers at the end of the 19th century. The complete capture of ruling institutions by corporations and their oligarchic elites, including the two dominant political parties, the courts and the press, means there is no mechanism left by which we can reform the system or protect ourselves from mounting abuse. We will revolt or become 21st-century serfs, forced to live in misery and brutally oppressed by militarized police and the most sophisticated security and surveillance system in human history while the ruling oligarchs continue to wallow in unimagined wealth and opulence.
“The new tax code is explosive excess,” the economist Richard Wolff said when we spoke in New York. “We’ve had 30 or 40 years where corporations paid less taxes than they ever did. They made more money than they ever did. They have been able to keep wages stagnant while the productivity of labor rose. This is the last moment historically they need another big gift, let alone at the expense of the very people whose wages have been stagnant. To give them a tax bust of this sort, basically reducing from 35 percent to 20 percent, is a 40 percent cut. This kind of crazy excess reminds you of the [kings] of France before the French Revolution when the level of excess reached an explosive social dimension. That’s where we are.”
When capitalism collapsed in the 1930s, the response of the working class was to form unions, strike and protest. The workers pitted power against power. They forced the oligarchs to respond with the New Deal, which created 12 million government-funded jobs, Social Security, the minimum wage and unemployment compensation. The country’s infrastructure was modernized and maintained. The Civilian Conservation Corps (CCC) alone employed 300,000 workers to form and maintain national parks.
“The message of the organized working class was unequivocal,” Wolff said. “Either you help us through this Depression or there will be a revolution.”
The New Deal programs were paid for by taxing the rich. Even in the 1950s, during the Eisenhower presidency, the top marginal rate was 91 percent.
The rich, enraged, mounted a war to undo these programs and restore the social inequality that makes them wealthy at our expense. We have come full circle. Dissidents, radicals and critics of capitalism are once again branded as agents of foreign powers and purged from universities and the airwaves. The labor movement has been dismantled, including through so-called right-to-work laws that prohibit agreements between unions and employers. The last remaining regulations to thwart corporate pillage and pollution are removed. Although government is the only mechanism we have to protect ourselves from predatory oligarchs and corporations, the rich tell us that government is the problem, not the solution. Austerity and a bloated and out-of-control military budget, along with the privatization of public services and institutions such as utilities and public education, we are assured, are the way to economic growth. And presiding over this assault and unchecked kleptocracy are the con artist in chief and his billionaire friends from the fossil fuel and war industries and elsewhere on Wall Street.
The elites cook statistics to lie about a recovery from the 2008 global financial crash. To gather unemployment statistics, for example, government agents ask people two questions: Are you working? If they answer “yes” they are counted as employed even if they have a temporary job in which they work only an hour a week. If they say “no” they are asked if they have been looking for work. If they have not looked for work in the last four weeks they are magically erased from the unemployment rolls. And then there is the long list of those not counted as unemployed, such as prisoners, the retired, stay-at-home spouses and high school and college students who want jobs. Alternative facts did not begin with Donald Trump.
“You don’t have to be a statistical genius to understand that over the last 10 years, a significant number of people gave up looking because it’s too disgusting,” Wolff said. “The jobs they were offered were inferior to what they had before or so insecure that it made their family life impossible. They went back to school, went into the illegal economy or began to live off their friends, relatives and neighbors.”
“The quality of the jobs, the security, the benefits and the impact on physical and mental health have been cascading downward as the wages remain stagnant,” he went on. “We’re not in a recovery. We’re in an ongoing decline, which, by the way, is why Mr. Trump got elected. This is happening to capitalism in Western Europe, Japan and the United States. This is why an angry working class is looking for ways to express and change its circumstances.”
“Society has a responsibility to itself,” Wolff said. “If the private sector can’t or won’t manage that, then the public sector has to step in. It’s what [Franklin] Roosevelt said when he came on the radio: ‘If there are millions of Americans who ask for nothing other than a job, and the private sector can’t provide it, then it’s up to me. Who else is going to do it?’ If we cut back on welfare we are making people depend on the private sector. What happens to people thrown on a private capital sector that cannot and will not function in a socially acceptable way?”
“Instead of creating a middle class, it polarizes everything,” he said of the inequality. “It allows the top executives to go completely crazy with their pay packages. They are paid beyond what’s reasonable, beyond what their fellow capitalists receive in other parts of the world. There is a collapse of the ability to buy things. A company that saves all this money through a tax cut from Mr. Trump is not going to spend its money hiring people, buying machines, producing more. They’re having trouble selling what they already produce. They’re impoverishing the very people they sell to. What do they do with the money? They take it and pay themselves. They give themselves higher pay packages. They buy back their own stock, which they’re legally allowed to do. It pushes the price of the stock up. Their [personal] compensation is connected to how well the price of the stock does. No jobs are created. No growth is created. The price of stock is going up even though the viability of the enterprise—because of the [company’s] collapsing market—is shrinking.”
“Capitalism is hollowing itself out,” he said. “The capitalists refuse to face this because they are making money, for a while. That’s the same logic as the monarchs before the French Revolution building the fantastic Versailles without understanding they were digging their own graves in those lovely gardens.”
The elites divert attention from their pillage by blaming foreign countries such as China or undocumented workers for the economic demise of the working class.
“It’s a classic ploy of crooked politicians stuck with a problem of their own making, blaming somebody else,” Wolff said. “We take the poor 10 or 11 million immigrants in this country with questionable legal status and we demonize them. We scapegoat them. They couldn’t possibly account for the difficulties in this economy. Throwing them out does not fundamentally change the dynamics of the economy. It’s childishly easy to show this. But it’s good theater. ‘I am smiting the foreigner.’ ”
“Tariffs are another way to smite the foreigner,” Wolff went on. “The tariff is a punishment of others. These days, the bugaboo is China. They are the bad ones. They are doing this. I’d like to remind people two or three things about these tariffs. One: Historically, they don’t work very well. It’s very easy to evade. For example, we put a tariff on steel from China. What do the Chinese do? They cut a deal with the Canadians or the Mexicans or the Koreans or the Europeans. Sell it to them, who resell it here. It’s on the same ship coming here. It just has a different flag at the back. This is childish. It’s well known.”
“Number two: It’s political theater,” he said. “It doesn’t change very much. For example, a good half of the goods that come from China come from subsidiaries of American corporations that went to China over the last 30 years to produce for the American market. You are smiting them by closing off their market. They’re going to be angry. They’re going to lose their investments. They’re going to take corrective action. All of this is negative for the American economy. It’s bizarre.”
“Finally, the Chinese, their politicians being not that different from ours, will have to posture in return and retaliate,” he said. “They’re already targeting our farm products. It is chaos. The United States, when we were a young country, was accused by the British and the Europeans of stealing their technology and intellectual property. Never before has it been easier to communicate intellectual property than it is today. The Chinese have been doing their share of this as an up-and-coming economy. It’s not new. It’s not frightening. It’s a part of how capitalism works. To suddenly get people outraged as if something special is going on, that’s just dishonest.”
There is no discussion in the corporate-controlled media of the effects of our out-of-control corporate capitalism. Workers struggling under massive debts, unable to pay for ever-rising health care and other basic costs, trapped in low-wage jobs that make life one long emergency, are rendered invisible by a media that entertains us with court gossip from porn actresses and reality television stars and focuses on celebrity culture. We ignore reality at our peril.
“We’ve given a free pass to a capitalist system because we’ve been afraid to debate it,” Wolff said. “When you give a free pass to any institution, you create the conditions for it to rot right behind the facade. That’s what is happening.”
Saturday, August 25, 2018
SC171-7
https://www.oftwominds.com/blog.html
How "Wealthy" Would We Be If We Stopped Borrowing Trillions Every Year?
The widespread presumption is the U.S. is wealthy beyond words, and will remain so as far as the eye can see: wealthy enough to fund trillion-dollar weapons systems, trillion-dollar endless wars, multi-trillion dollar Medicare for all, multi-trillion dollar Universal Basic Income, and so on, in an endless profusion of endless trillions.
Just as a thought experiment, let's ask: how "wealthy" would we be if we stopped borrowing trillions of dollars every year? Or put another way, how "wealthy" would we be if the rest of the world stops buying our trillions in newly issued bonds, mortgages, auto loans, etc.?
The verboten reality is our "wealth" is nothing but a sand castle of debt. Take away more borrowing and the castle melts away. I've gathered a selection of charts that show just how dependent we are on massive debt expansion that continues essentially forever, as any pause in debt expansion will collapse the entire system.
Corporate buybacks have powered rising corporate earnings--and the buybacks are funded by debt. Corporate debt has exploded higher in the past decade, enabling stock buybacks on an unprecedented scale.
Government debt--federal, state and local-- is rising an exponential rates. We're not paying for more government programs with earnings--we're simply borrowing trillions and hoping we can borrow the interest payments that will also rise along with the debt.
Household debt, student loans, auto loans--all are soaring. The corporate sector, government and the household sector--all are living on borrowed money, and relying on magical thinking to mask the inevitable consequences.
Here's debt to GDP. Yes, the economy expanded, but debt expanded much faster. Every additional dollar of GDP now requires multiple dollars of new debt.
The tiny pause in borrowing circa 2008-09 almost collapsed the global financial system. If this is your idea of a stable, sustainable trajectory, what are you high on?
This chart of federal debt is outdated-- federal debt has far exceeded $20 trillion. A trillion here and a trillion there, pretty soon you're talking debt levels that insure a devaluation of the currency or a collapse of the entire-debt-dependent system.
Before we get all giddy about the soaring stock market, let's remember what's been driving it higher--central banks creating trillions out of thin air and using the "free money" to buy stocks and bonds.
Corporations have been gorging on low-cost debt to fund stock buybacks, which push share prices higher, rewarding insiders and the already-wealthy who own the majority of financial assets.
Speaking of insanely destabilizing and unsustainable trajectories--take a look at wealth inequality: the top 1% (actually, the top .5%) have skimmed the vast majority of the past decade's gains, the top 5% have gathered most of the remaining crumbs, the next 15% (between 80% and 95%) have illusory gains solely based on bubble valuations, and the bottom 80% have lost ground.
Anyone who thinks exponentially rising debt and staggering wealth/income inequality are stable and sustainable is taking way too much Ibogaine. Magical thinking doesn't actually change reality or make the unsustainable sustainable.
These charts reflect a linear system that is wobbling into the first stages of non-linear destabilization. What is unsustainable and unstable will destabilize, slowly at first, and then rapidly as all the buffers creating the illusion of stability give way.
Our "wealth" is as illusory as the fantasy that ever-expanding trillions of dollars can be borrowed annually for decades to come, with no consequence.
The system collapses if we trim borrowing, and it collapses if we keep borrowing more every year. There is no middle ground, no Goldilocks state where we can borrow just enough to squeak by. That appears possible in a linear system, but once it shifts into non-linear dynamics, that fantasy will quickly be destroyed.
How "Wealthy" Would We Be If We Stopped Borrowing Trillions Every Year?
The widespread presumption is the U.S. is wealthy beyond words, and will remain so as far as the eye can see: wealthy enough to fund trillion-dollar weapons systems, trillion-dollar endless wars, multi-trillion dollar Medicare for all, multi-trillion dollar Universal Basic Income, and so on, in an endless profusion of endless trillions.
Just as a thought experiment, let's ask: how "wealthy" would we be if we stopped borrowing trillions of dollars every year? Or put another way, how "wealthy" would we be if the rest of the world stops buying our trillions in newly issued bonds, mortgages, auto loans, etc.?
The verboten reality is our "wealth" is nothing but a sand castle of debt. Take away more borrowing and the castle melts away. I've gathered a selection of charts that show just how dependent we are on massive debt expansion that continues essentially forever, as any pause in debt expansion will collapse the entire system.
Corporate buybacks have powered rising corporate earnings--and the buybacks are funded by debt. Corporate debt has exploded higher in the past decade, enabling stock buybacks on an unprecedented scale.
Government debt--federal, state and local-- is rising an exponential rates. We're not paying for more government programs with earnings--we're simply borrowing trillions and hoping we can borrow the interest payments that will also rise along with the debt.
Household debt, student loans, auto loans--all are soaring. The corporate sector, government and the household sector--all are living on borrowed money, and relying on magical thinking to mask the inevitable consequences.
Here's debt to GDP. Yes, the economy expanded, but debt expanded much faster. Every additional dollar of GDP now requires multiple dollars of new debt.
The tiny pause in borrowing circa 2008-09 almost collapsed the global financial system. If this is your idea of a stable, sustainable trajectory, what are you high on?
This chart of federal debt is outdated-- federal debt has far exceeded $20 trillion. A trillion here and a trillion there, pretty soon you're talking debt levels that insure a devaluation of the currency or a collapse of the entire-debt-dependent system.
Before we get all giddy about the soaring stock market, let's remember what's been driving it higher--central banks creating trillions out of thin air and using the "free money" to buy stocks and bonds.
Corporations have been gorging on low-cost debt to fund stock buybacks, which push share prices higher, rewarding insiders and the already-wealthy who own the majority of financial assets.
Speaking of insanely destabilizing and unsustainable trajectories--take a look at wealth inequality: the top 1% (actually, the top .5%) have skimmed the vast majority of the past decade's gains, the top 5% have gathered most of the remaining crumbs, the next 15% (between 80% and 95%) have illusory gains solely based on bubble valuations, and the bottom 80% have lost ground.
Anyone who thinks exponentially rising debt and staggering wealth/income inequality are stable and sustainable is taking way too much Ibogaine. Magical thinking doesn't actually change reality or make the unsustainable sustainable.
These charts reflect a linear system that is wobbling into the first stages of non-linear destabilization. What is unsustainable and unstable will destabilize, slowly at first, and then rapidly as all the buffers creating the illusion of stability give way.
Our "wealth" is as illusory as the fantasy that ever-expanding trillions of dollars can be borrowed annually for decades to come, with no consequence.
The system collapses if we trim borrowing, and it collapses if we keep borrowing more every year. There is no middle ground, no Goldilocks state where we can borrow just enough to squeak by. That appears possible in a linear system, but once it shifts into non-linear dynamics, that fantasy will quickly be destroyed.
Friday, August 24, 2018
SC171-6
https://www.peakprosperity.com/blog/114310/what-if-there-isnt-enough-energy-going-forward
What If There Isn't Enough Energy Going Forward?
We'll be forced to live with less. Maybe a LOT less.
Currently the media is breathlessly cheering the record amounts of US oil production. Stories like this one get top billing on major news websites:
Texas Gulf Coast exports more oil than it imports for the first time (CNN)
It's a big achievement that highlights a surge in US oil exports, and that shows how the shale boom can make America less reliant on foreign oil.
"It's a definite milestone. Nobody saw this coming 10 years ago," said Bob McNally, president of consulting firm Rapidan Energy Group and a former energy official under President George W. Bush. "It's an unambiguously good thing. It diversifies our dependence from the volatile Middle East."
Texas is the epicenter of the shale revolution, with soaring production in the oil-rich Permian Basin leading the United States to record output. Rapid technological advances in fracking, the process of unlocking oil and gas deep underground, have dramatically reduced the cost to drill oil in the Permian Basin.
Texas is now on track to produce more oil than either Iran or Iraq. That would make Texas No. 3 in the world if it were a country.
Sounds pretty wonderful, right? Technology advances in the fracking process have enabled the "shale miracle", resulting in the US producing over 10 million barrels per day for the first time since the 1970s. Think of all the incremental GDP growth that excess oil will power!
If these trends continue, CNN goes on to tell us, the US will become an net energy exporter soon:
US on track to become net energy exporter
The United States still relies on foreign oil -- but not as much.
The gap between oil imports and exports shrank to a 24-year low of 6.8 million barrels per day in 2017, according to the EIA. Even though the economy is stronger, US oil imports fell to 7.8 million barrels per day in May. That's down from more than 9 million barrels per day as recently as mid-2012.
Reality-Check
OK, let's take a moment to conduct a little reality-check of the hype.
First off, notice how the CNN article above mentions that the US is still importing 7.8 million barrels per day. That's not much less that the record levels we're currently extracting from our own soil. So domestic oil production would have to nearly double from here to turn the US into a net oil exporter. Translation: we're not weaning ourselves off of foreign oil anytime soon, under the best of conditions.
Next, a key assumption the shale cheerleaders are making is that current output trends will continue. That shale basins like the Permian will yield increasing volumes of crude from here well into the future.
As petroleum geologist Art Berman has explained to us in numerous podcasts, shale oil (called "tight oil") wells deplete very differently than conventional oil wells.
Oil extraction from a conventional well over time follows a bell curve (left), where it takes roughly as many years as it did to the hit the apex of production as it does for the well to peter out. Shale wells on the other hand, deplete on a hyberbolic curve (right). Roughly 80% of a shale well's total output is exausted by the end of Year 2(!):
So to increase production from a shale basin, you have to drill more and more wells to overcompensate for this rapid decline of each individual well.
This is referred to as the Red Queen syndrome, where eventually you're having to drill more and more aggressively just to maintain a constant (i.e. flat) level of output:
An even bigger problem with this approach is that shale basins are not infinite. Eventually, they deplete. You run out of well sites to drill.
And well quality within a basin tends to degrade over time. Humans being humans, we tend to pursure the best well prospects first, and then move on to lower and lower-grade prospects as the better wells dry up.
In fact, production for most major US shale basins like the Bakken and Eagle Ford declined substantially from their peaks in 2015 to the beginning of this year. They've both seen a resurgence in output over 2018 as oil has risen to the $70 per barrel range -- though the big question is: How long can this new surge last?
It's also important to keep in mind that estimates of how much oil in these basins is actually economically recoverable are not rock-solid. Over the past decade, estimates for several large shale basins have been drastically reduced once better data started coming in from oil explorers. The Utica play is a good examples of this -- but none is more extreme than the Monterrey basin, which was reduced overnight in 2014 by a whopping 96%:
U.S. officials cut estimate of recoverable Monterey Shale oil by 96%
Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California's vast Monterey Shale deposits, deflating its potential as a national "black gold mine" of petroleum.
Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.
The Monterey Shale formation contains about two-thirds of the nation's shale oil reserves. It had been seen as an enormous bonanza, reducing the nation's need for foreign oil imports through the use of the latest in extraction techniques, including acid treatments, horizontal drilling and fracking.
The energy agency said the earlier estimate of recoverable oil, issued in 2011 by an independent firm under contract with the government, broadly assumed that deposits in the Monterey Shale formation were as easily recoverable as those found in shale formations elsewhere.
The estimate touched off a speculation boom among oil companies. The new findings seem certain to dampen that enthusiasm.
Take that in for a moment. Two thirds of the US shale oil reserves suddently declared essentially useless/unobtainable.
Why This Matters
OK, so why does this matter?
Because Energy is essential to the Economy. It powers economic activity.
More energy = more growth. Less energy = economic contraction.
There's a plethora of charts out there showing this 1:1 correlation between energy expended (Mtep/Mbtus) and economic growth (GDP). Here's just one:
So, as energy goes, so goes the economy.
As we've covered in great depth on this website and in The Crash Course video series, the world remains addicted to liquid fuels and nearly all of those today are fossil-based. Even under the best case scenarios, the world will continue to be fossil-fuel dependent for decades to come.
Looking at projections for world liquid fuel demand, we see demand continuing to grow substantially, as shown this chart from ExxonMobile's 2018 Outlook for Energy: A View to 2040 report:
Note a few important observations here:
Conventional oil production is projected to decrease, while total oil production (conv + deepwater + sands + tight) will increase
Tight (i.e. shale) oil will be the biggest contributor to filling this gap
Now, remember above. The shale plays deplete MUCH faster than conventional fields and we've already gone after the richest basin deposits. A big question to answer is: Can we really count on the shale industry to provide this much new oil for this long?
Petroleum geologists like Art Berman don't think so. He sees the current spike in shale output as a relatively short-term event, a pleasant windfall that will exhaust itself much faster than most realize. He refers to the current bonanza as not a new dawn for US oil production, but as its 'retirement party'
We're also cautioned not to put too much faith in the conventional oil supply projections, as the industry is notorious for over-estimating remaining deposits. This chart, referred to as the "hedgehog" chart by oil analysts, shows how nearly every year, the IEA has been forced to downgrade its previous production projections for conventional oil:
So, the existing fields may deplete faster than we think AND there may be less economic recoverable supply than we currently forecast.
Furthermore, a lot of investment is required to get all of this future liquid fuel out of the ground and to market. The chart below (from the same ExxonMobile study) shows that roughly 80% of the supply from today's current wells will be gone in the next 20 years.
With the shale oil producers losing money every year for the past decade, with oil producers underinvesting in capex for much of that time, and the risk of global recession(s) returning, will the full investments necessary to meet world liquid fuel demand actually be made?
What If There Isn't Enough Energy To Meet World Demand?
What if future oil supply comes up short? Either from lack of investment, or faster-than-expected depletion of the shale plays (and/or the conventional ones), or whatever.
For a world addicted to liquid fossil fuels, what would the ramifications be?
Transportation specialist Alice Friedemann has made a career of warning of how bad things could get, depending on the swiftness and severity of a liquid fuels emergency.
Best known for her book, When Trucks Stop Running, here's her forecast of what would happen should our trucking system shut down for lack of fuel:
Day 1 without trucks
Manufacturers and assembly lines that use just-in-time delivery will shut down when parts run out or storage for finished products fills up.
Hospitals will run out of supplies like syringes and catheters within hours.
Milk and fresh bread will run out.
Day 2 without trucks
Food shortages will escalate, especially in the face of hoarding and consumer panic. Supplies of essentials and perishable foods will disappear
Restaurants and fast food outlets close
ATMs will run out of cash
Construction stops
Pharmacies close
Americans generate 685,000 tons of trash per day. Garbage will start piling up in urban and suburban areas creating a health hazard.
Day 3 without trucks
Most service stations will run out of fuel
Widespread lay-offs in the manufacturing sector
Waste water sludge becomes a problem as tanks at treatment plants are now full
Work on infrastructure stops as repairs can’t be undertaken
Public transport, fire, police, ambulances, telecommunications, utilities, mail, and other essential services stop
Day 4 without trucks
The repercussions start to reverberate globally, as 48,000 imported containers per day can’t be unloaded off of ships. Exports stop too.
All fuel supplies are depleted from service stations. Many people can’t get to work
With no fuel, airplanes and railroads shut down.
Garbage is piling up and has become a sanitary problem
Britain is out of beer
Day 5 without truck transport
Drinking water is depleted. The delay of weekly deliveries of chemicals has meant that water treatment plants can no longer guarantee that water is fit to drink.
Industrial production stops, a large proportion of the labor force is laid-off or unable to get to work, travel and recreation stop
Healthcare is confined to emergency services
Utilities have localized disruption of gas and electricity, and due to lack of fuel can’t pump water and gas, repair broken water and gas networks, etc
Livestock begin to suffer from lack of feed deliveries, wastes accumulate, ranchers can’t transport animals to slaughterhouses, meat production stops
The Swedish Alcohol Retail Monopoly is out of alcohol
Within four weeks:
The nation will exhaust its clean water supply and water will be safe for drinking only after boiling.
If this happened at harvest time, many crops will rot in the fields
The Department of Defense supply chain will break down, crippling the military “in ways no adversary has been able to achieve”.
Global financial collapse. A halt of international trade would bring the financial system down, probably sooner than this.
This is just a partial list of what would occur....
What If There Isn't Enough Energy Going Forward?
We'll be forced to live with less. Maybe a LOT less.
Currently the media is breathlessly cheering the record amounts of US oil production. Stories like this one get top billing on major news websites:
Texas Gulf Coast exports more oil than it imports for the first time (CNN)
It's a big achievement that highlights a surge in US oil exports, and that shows how the shale boom can make America less reliant on foreign oil.
"It's a definite milestone. Nobody saw this coming 10 years ago," said Bob McNally, president of consulting firm Rapidan Energy Group and a former energy official under President George W. Bush. "It's an unambiguously good thing. It diversifies our dependence from the volatile Middle East."
Texas is the epicenter of the shale revolution, with soaring production in the oil-rich Permian Basin leading the United States to record output. Rapid technological advances in fracking, the process of unlocking oil and gas deep underground, have dramatically reduced the cost to drill oil in the Permian Basin.
Texas is now on track to produce more oil than either Iran or Iraq. That would make Texas No. 3 in the world if it were a country.
Sounds pretty wonderful, right? Technology advances in the fracking process have enabled the "shale miracle", resulting in the US producing over 10 million barrels per day for the first time since the 1970s. Think of all the incremental GDP growth that excess oil will power!
If these trends continue, CNN goes on to tell us, the US will become an net energy exporter soon:
US on track to become net energy exporter
The United States still relies on foreign oil -- but not as much.
The gap between oil imports and exports shrank to a 24-year low of 6.8 million barrels per day in 2017, according to the EIA. Even though the economy is stronger, US oil imports fell to 7.8 million barrels per day in May. That's down from more than 9 million barrels per day as recently as mid-2012.
Reality-Check
OK, let's take a moment to conduct a little reality-check of the hype.
First off, notice how the CNN article above mentions that the US is still importing 7.8 million barrels per day. That's not much less that the record levels we're currently extracting from our own soil. So domestic oil production would have to nearly double from here to turn the US into a net oil exporter. Translation: we're not weaning ourselves off of foreign oil anytime soon, under the best of conditions.
Next, a key assumption the shale cheerleaders are making is that current output trends will continue. That shale basins like the Permian will yield increasing volumes of crude from here well into the future.
As petroleum geologist Art Berman has explained to us in numerous podcasts, shale oil (called "tight oil") wells deplete very differently than conventional oil wells.
Oil extraction from a conventional well over time follows a bell curve (left), where it takes roughly as many years as it did to the hit the apex of production as it does for the well to peter out. Shale wells on the other hand, deplete on a hyberbolic curve (right). Roughly 80% of a shale well's total output is exausted by the end of Year 2(!):
So to increase production from a shale basin, you have to drill more and more wells to overcompensate for this rapid decline of each individual well.
This is referred to as the Red Queen syndrome, where eventually you're having to drill more and more aggressively just to maintain a constant (i.e. flat) level of output:
An even bigger problem with this approach is that shale basins are not infinite. Eventually, they deplete. You run out of well sites to drill.
And well quality within a basin tends to degrade over time. Humans being humans, we tend to pursure the best well prospects first, and then move on to lower and lower-grade prospects as the better wells dry up.
In fact, production for most major US shale basins like the Bakken and Eagle Ford declined substantially from their peaks in 2015 to the beginning of this year. They've both seen a resurgence in output over 2018 as oil has risen to the $70 per barrel range -- though the big question is: How long can this new surge last?
It's also important to keep in mind that estimates of how much oil in these basins is actually economically recoverable are not rock-solid. Over the past decade, estimates for several large shale basins have been drastically reduced once better data started coming in from oil explorers. The Utica play is a good examples of this -- but none is more extreme than the Monterrey basin, which was reduced overnight in 2014 by a whopping 96%:
U.S. officials cut estimate of recoverable Monterey Shale oil by 96%
Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California's vast Monterey Shale deposits, deflating its potential as a national "black gold mine" of petroleum.
Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.
The Monterey Shale formation contains about two-thirds of the nation's shale oil reserves. It had been seen as an enormous bonanza, reducing the nation's need for foreign oil imports through the use of the latest in extraction techniques, including acid treatments, horizontal drilling and fracking.
The energy agency said the earlier estimate of recoverable oil, issued in 2011 by an independent firm under contract with the government, broadly assumed that deposits in the Monterey Shale formation were as easily recoverable as those found in shale formations elsewhere.
The estimate touched off a speculation boom among oil companies. The new findings seem certain to dampen that enthusiasm.
Take that in for a moment. Two thirds of the US shale oil reserves suddently declared essentially useless/unobtainable.
Why This Matters
OK, so why does this matter?
Because Energy is essential to the Economy. It powers economic activity.
More energy = more growth. Less energy = economic contraction.
There's a plethora of charts out there showing this 1:1 correlation between energy expended (Mtep/Mbtus) and economic growth (GDP). Here's just one:
So, as energy goes, so goes the economy.
As we've covered in great depth on this website and in The Crash Course video series, the world remains addicted to liquid fuels and nearly all of those today are fossil-based. Even under the best case scenarios, the world will continue to be fossil-fuel dependent for decades to come.
Looking at projections for world liquid fuel demand, we see demand continuing to grow substantially, as shown this chart from ExxonMobile's 2018 Outlook for Energy: A View to 2040 report:
Note a few important observations here:
Conventional oil production is projected to decrease, while total oil production (conv + deepwater + sands + tight) will increase
Tight (i.e. shale) oil will be the biggest contributor to filling this gap
Now, remember above. The shale plays deplete MUCH faster than conventional fields and we've already gone after the richest basin deposits. A big question to answer is: Can we really count on the shale industry to provide this much new oil for this long?
Petroleum geologists like Art Berman don't think so. He sees the current spike in shale output as a relatively short-term event, a pleasant windfall that will exhaust itself much faster than most realize. He refers to the current bonanza as not a new dawn for US oil production, but as its 'retirement party'
We're also cautioned not to put too much faith in the conventional oil supply projections, as the industry is notorious for over-estimating remaining deposits. This chart, referred to as the "hedgehog" chart by oil analysts, shows how nearly every year, the IEA has been forced to downgrade its previous production projections for conventional oil:
So, the existing fields may deplete faster than we think AND there may be less economic recoverable supply than we currently forecast.
Furthermore, a lot of investment is required to get all of this future liquid fuel out of the ground and to market. The chart below (from the same ExxonMobile study) shows that roughly 80% of the supply from today's current wells will be gone in the next 20 years.
With the shale oil producers losing money every year for the past decade, with oil producers underinvesting in capex for much of that time, and the risk of global recession(s) returning, will the full investments necessary to meet world liquid fuel demand actually be made?
What If There Isn't Enough Energy To Meet World Demand?
What if future oil supply comes up short? Either from lack of investment, or faster-than-expected depletion of the shale plays (and/or the conventional ones), or whatever.
For a world addicted to liquid fossil fuels, what would the ramifications be?
Transportation specialist Alice Friedemann has made a career of warning of how bad things could get, depending on the swiftness and severity of a liquid fuels emergency.
Best known for her book, When Trucks Stop Running, here's her forecast of what would happen should our trucking system shut down for lack of fuel:
Day 1 without trucks
Manufacturers and assembly lines that use just-in-time delivery will shut down when parts run out or storage for finished products fills up.
Hospitals will run out of supplies like syringes and catheters within hours.
Milk and fresh bread will run out.
Day 2 without trucks
Food shortages will escalate, especially in the face of hoarding and consumer panic. Supplies of essentials and perishable foods will disappear
Restaurants and fast food outlets close
ATMs will run out of cash
Construction stops
Pharmacies close
Americans generate 685,000 tons of trash per day. Garbage will start piling up in urban and suburban areas creating a health hazard.
Day 3 without trucks
Most service stations will run out of fuel
Widespread lay-offs in the manufacturing sector
Waste water sludge becomes a problem as tanks at treatment plants are now full
Work on infrastructure stops as repairs can’t be undertaken
Public transport, fire, police, ambulances, telecommunications, utilities, mail, and other essential services stop
Day 4 without trucks
The repercussions start to reverberate globally, as 48,000 imported containers per day can’t be unloaded off of ships. Exports stop too.
All fuel supplies are depleted from service stations. Many people can’t get to work
With no fuel, airplanes and railroads shut down.
Garbage is piling up and has become a sanitary problem
Britain is out of beer
Day 5 without truck transport
Drinking water is depleted. The delay of weekly deliveries of chemicals has meant that water treatment plants can no longer guarantee that water is fit to drink.
Industrial production stops, a large proportion of the labor force is laid-off or unable to get to work, travel and recreation stop
Healthcare is confined to emergency services
Utilities have localized disruption of gas and electricity, and due to lack of fuel can’t pump water and gas, repair broken water and gas networks, etc
Livestock begin to suffer from lack of feed deliveries, wastes accumulate, ranchers can’t transport animals to slaughterhouses, meat production stops
The Swedish Alcohol Retail Monopoly is out of alcohol
Within four weeks:
The nation will exhaust its clean water supply and water will be safe for drinking only after boiling.
If this happened at harvest time, many crops will rot in the fields
The Department of Defense supply chain will break down, crippling the military “in ways no adversary has been able to achieve”.
Global financial collapse. A halt of international trade would bring the financial system down, probably sooner than this.
This is just a partial list of what would occur....
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