http://www.huffingtonpost.com/coleen-rowley/ndaa-civil-liberties_b_1168736.html
All I Want for Christmas Is My Civil Liberties!
Sad, isn't it, that just one day before Christmas, we have to stand out in the cold and worry about getting another big lump of coal from our politicians?! But unfortunately it's expected that Obama will sign the National Defense Authorization Act (NDAA) into law right after the holiday. Since that's the same day the big sales start, few Americans will probably be paying attention to the police state being officially ushered in.
On December 23, however, we were still able to protest the despicable NDAA in front of Obama's Minnesota Campaign Headquarters. At the end of the rally led by members of "Occupy Minnesota" and the "Minnesota Committee to Stop FBI Repression", everyone taped their signs to the front window of Obama's campaign office, hoping he'd somehow get the message. Then we also made telephone calls to tell Obama's volunteer receptionists to act as his better angels and plead for him to veto the NDAA.
But a veto would be quite the Christmas miracle. Obama's expected signature will not only de-link the "war on terror" from its original justification, the 9-11 attacks of more than a decade ago, to ensure the "long war" does not end, but it will keep Guantanamo open indefinitely and turn the whole world into a battlefield, including our own backyards here in the U.S. where citizens will stand guilty until proven innocent.
What's the worst that could happen as a result of the congressional rubberstamp broadening the war and allowing indefinite military detention of American citizens as "enemy combatants"? Can it happen here? It's interesting to see what journalist Joshua Phillips learned from research for his new book: None of Us Were Like This Before: American Soldiers and Torture, a harrowing description of the torture of prisoners in Iraq and the deep psychological scars it left on the members of one battalion who dispensed pain to their victims. When asked how this came about, the author says that almost all the soldiers he interviewed cite the main reason for the various torture abuses as the climate of "permissiveness" that began when they were told they did not need to follow the Geneva Conventions anymore. (It should be recalled that Bush's Office of Legal Counsel lawyers Robert Delahunty and John Yoo had written their memo on Jan 9, 2002 stating that the Geneva Conventions did not apply to "non-state actors", i.e. al Qaeda, Taliban and other "terrorist" suspects. Bush consequently signed a directive the following month implementing this OLC memo, and the word went out that gave rise to the abusive conditions at Guantanamo and other military detention sites.)
The term I've personally used for this new culture of "permissiveness" is "the green light". Unless you worked in the system, you might not recognize what the insidious "green light" is. I've tried to warn over and over that the green light will eventually go out and the people down the line who have gone along under its influence instead of resisting in accord with their previously ingrained sense of right and wrong are likely to pay a heavy price. Phillips' book documents that soldiers are now taking their own lives years after having participated in the abuse occasioned by the culture of permissiveness under Bush.
Instead of extinguishing the green light, Obama's signing of the NDAA could well signal an even worse one being turned on than occurred with Bush's torture memos.
Saturday, December 24, 2011
SC109-13
http://www.fcnp.com/commentary/national/10733-the-peak-oil-crisis-2012-apocalypse-now.html
The Peak Oil Crisis: 2012 – Apocalypse Now?
This would not be a biblical apocalypse or even a Mayan one, but rather an event of our own making. The world has made so many problems for itself in recent decades that the whole edifice of civilization is showing signs of coming unglued.
This sort of thing has happened within living memory - remember 1914 and 1939 - so a year is which much comes undone should not come as a great surprise. If you are looking for a general theory of what is about to happen to us, you might start with Joseph Tainter's The Collapse of Complex Societies in which the author identifies 17 examples of rapid societal collapse. In a nutshell, if anybody thinks the Roman Empire collapsed from too much complexity, one should look at the U.S. tax code or the efforts to refinance the EU's sovereign debt. Compared to the machinations of the 7 billion people currently running around the world, the Romans were running a kindergarten.
Whether the global civilization, or significant parts thereof, comes unstuck sooner or later is obviously a judgment call, but a case can be made that some very bad things might be coming in the next year or so. There would seem to be two fundamental problems behind the coming upheavals. One is that we are running into constraints on resources and the other is that the OECD nations have simply accumulated so much debt that it is unlikely to ever be repaid. No one ever thinks of the atmosphere's ability to absorb and carry off carbon emissions as a resource, but as the world's climate changes for the worse, that is exactly what it is. It could easily turn out over the course of the next 10 decades, that the atmosphere's ability to absorb greenhouse gases turns out to be far more important than reserves of fossil fuels.
Looking at what seems to be shaping up for 2012 that could be of apocalyptic proportions we have the rapidly deteriorating financial situation in the EU. Despite endless expressions of optimism on the part of political leaders, most unbiased observers believe there is nothing that can be done to prevent an economic downturn. Some are politely referring to this downturn as a double-dip recession, but others foresee a global depression equal to or worse than the one that occurred 80 years ago. The "worse than" thesis comes from the notion that there will not be the quantities of cheap energy available to support a recovery, and that there will have to be a major transition in the sources and use of energy before economic growth will ever resume.
While most attention has been paid to refinancing debt, persistently high oil prices are gaining increasing recognition as a major factor in slowing economic growth. While high oil prices coupled with new technologies have brought forth new sources of oil, most commentators ignore the fact that this "new" oil in simply unaffordable in today's economies. The older cheap stuff that we have been living on for the last century still makes up about 75 percent of our daily consumption, but, and this is a big but, the cheap oil is disappearing at the rate of 3-4 million barrels a day (b/d) each year. In 20 years cheap oil will be largely gone, replaced by unaffordable "unconventional oil," if we can raise enough capital to exploit the stuff. Recent economic research shows that when the U.S. spends more than 4.5 percent of its GDP on oil, it goes into recession. Although there is some debate on how to calculate the price at which oil prices seriously damage the GDP, some say $90 a barrel will do nicely. Keep in mind that oil has been selling in most places for over $100 a barrel during 2011 and shows no signs of retreating very much in the near future.
The second set of problems likely to explode in 2012 is the political instability. The most serious is in the Arab world, but as demonstrations in Moscow, China, Kazakhstan, Europe, and even mild ones on Wall Street show, social unrest is turning into a worldwide problem as resources become constrained and economic growth slows. Mankind now has seven billion mouths to feed and these are increasing by 70 million each year. There is going to be a turning point, the only question is when?
Unrest and various geopolitical confrontations have already reduced or eliminated oil exports from Libya, Yemen, and Syria this year. Efforts to sanction Iran seem to be picking up steam and the oil markets are nervous that many countries soon will be forced to stop buying Iranian crude. The Syrian situation continues downhill and the delicate Iraqi political balance that was crafted by the US appears to have lasted for only a few days after the last US troops were withdrawn. It is a good bet that there is going to be less oil exported from the Middle East and possibly Central Asia by the end of next year - raising oil prices despite deteriorating economic conditions.
On top of an emerging global economic downturn and the prospects for less oil from the Middle East, we have the United States where the electorate seems to have voted itself into political gridlock while seeking to vote for better times. It seems likely that very little in terms of improving economic policies will be accomplished in Washington until another election or two takes place and the electorate can sort out some sort of coherent path for the country. Until then a large case of fiscal austerity and more unemployment will be the order of the day.
The case for major new troubles starting in 2012 rests on the likelihood of the collapse of much or all of the Eurozone and increased turmoil in the Middle East. The interesting part of this scenario is both of these situations can come about in numerous ways. This of course increases the chances markedly that something very bad will indeed happen soon.
The Peak Oil Crisis: 2012 – Apocalypse Now?
This would not be a biblical apocalypse or even a Mayan one, but rather an event of our own making. The world has made so many problems for itself in recent decades that the whole edifice of civilization is showing signs of coming unglued.
This sort of thing has happened within living memory - remember 1914 and 1939 - so a year is which much comes undone should not come as a great surprise. If you are looking for a general theory of what is about to happen to us, you might start with Joseph Tainter's The Collapse of Complex Societies in which the author identifies 17 examples of rapid societal collapse. In a nutshell, if anybody thinks the Roman Empire collapsed from too much complexity, one should look at the U.S. tax code or the efforts to refinance the EU's sovereign debt. Compared to the machinations of the 7 billion people currently running around the world, the Romans were running a kindergarten.
Whether the global civilization, or significant parts thereof, comes unstuck sooner or later is obviously a judgment call, but a case can be made that some very bad things might be coming in the next year or so. There would seem to be two fundamental problems behind the coming upheavals. One is that we are running into constraints on resources and the other is that the OECD nations have simply accumulated so much debt that it is unlikely to ever be repaid. No one ever thinks of the atmosphere's ability to absorb and carry off carbon emissions as a resource, but as the world's climate changes for the worse, that is exactly what it is. It could easily turn out over the course of the next 10 decades, that the atmosphere's ability to absorb greenhouse gases turns out to be far more important than reserves of fossil fuels.
Looking at what seems to be shaping up for 2012 that could be of apocalyptic proportions we have the rapidly deteriorating financial situation in the EU. Despite endless expressions of optimism on the part of political leaders, most unbiased observers believe there is nothing that can be done to prevent an economic downturn. Some are politely referring to this downturn as a double-dip recession, but others foresee a global depression equal to or worse than the one that occurred 80 years ago. The "worse than" thesis comes from the notion that there will not be the quantities of cheap energy available to support a recovery, and that there will have to be a major transition in the sources and use of energy before economic growth will ever resume.
While most attention has been paid to refinancing debt, persistently high oil prices are gaining increasing recognition as a major factor in slowing economic growth. While high oil prices coupled with new technologies have brought forth new sources of oil, most commentators ignore the fact that this "new" oil in simply unaffordable in today's economies. The older cheap stuff that we have been living on for the last century still makes up about 75 percent of our daily consumption, but, and this is a big but, the cheap oil is disappearing at the rate of 3-4 million barrels a day (b/d) each year. In 20 years cheap oil will be largely gone, replaced by unaffordable "unconventional oil," if we can raise enough capital to exploit the stuff. Recent economic research shows that when the U.S. spends more than 4.5 percent of its GDP on oil, it goes into recession. Although there is some debate on how to calculate the price at which oil prices seriously damage the GDP, some say $90 a barrel will do nicely. Keep in mind that oil has been selling in most places for over $100 a barrel during 2011 and shows no signs of retreating very much in the near future.
The second set of problems likely to explode in 2012 is the political instability. The most serious is in the Arab world, but as demonstrations in Moscow, China, Kazakhstan, Europe, and even mild ones on Wall Street show, social unrest is turning into a worldwide problem as resources become constrained and economic growth slows. Mankind now has seven billion mouths to feed and these are increasing by 70 million each year. There is going to be a turning point, the only question is when?
Unrest and various geopolitical confrontations have already reduced or eliminated oil exports from Libya, Yemen, and Syria this year. Efforts to sanction Iran seem to be picking up steam and the oil markets are nervous that many countries soon will be forced to stop buying Iranian crude. The Syrian situation continues downhill and the delicate Iraqi political balance that was crafted by the US appears to have lasted for only a few days after the last US troops were withdrawn. It is a good bet that there is going to be less oil exported from the Middle East and possibly Central Asia by the end of next year - raising oil prices despite deteriorating economic conditions.
On top of an emerging global economic downturn and the prospects for less oil from the Middle East, we have the United States where the electorate seems to have voted itself into political gridlock while seeking to vote for better times. It seems likely that very little in terms of improving economic policies will be accomplished in Washington until another election or two takes place and the electorate can sort out some sort of coherent path for the country. Until then a large case of fiscal austerity and more unemployment will be the order of the day.
The case for major new troubles starting in 2012 rests on the likelihood of the collapse of much or all of the Eurozone and increased turmoil in the Middle East. The interesting part of this scenario is both of these situations can come about in numerous ways. This of course increases the chances markedly that something very bad will indeed happen soon.
SC109-12
http://www.leap2020.eu/GEAB-N-60-is-available-Global-systemic-crisis-USA-2012-2016-An-insolvent-and-ungovernable-country_a8481.html
Global systemic crisis – USA 2012/2016: An insolvent and ungovernable country
As announced in previous GEABs, in this issue our team presents its anticipations on the changes in the United States for the period 2012-2016. This country, the epicentre of the global systemic crisis and pillar of the international system since 1945, will go through a particularly tragic in its history during these five years. Already insolvent it will become ungovernable bringing about, for Americans and those who depend on the United States violent and destructive economic, financial, monetary, geopolitical and social shocks. If the United States today is already very different from the "super-power" of 2006, the year the first GEAB was published, announcing the global systemic crisis and the end of the all-powerful US, the changes we anticipate for the 2012-2016 period are even more important, and will radically transform the country's institutional system, its social fabric and its economic and financial weight.
At the same time, every December, we evaluate our anticipations for the year just ended. This exercise, too rarely practiced by the think tanks, experts and media (1) is a tool enabling our subscribers (2) as well as our researchers to verify that our work retains a high added-value and and is in direct contact with reality. This year our score improved slightly and LEAP/E2020 attained an 82% success rate in its anticipations for 2011.
In addition we also detail our recommendations on foreign currencies, gold, stock exchanges and the consequences of the United Kingdom’s marginalization within the EU (3) on the Pound, Gilts and UK debt and we set out some advice on developments of the American institutional system (4).
In this public communiqué we have chosen to present an excerpt from our anticipation on the changes in the United States for the 2012-2016 period.
But before addressing the American case, we wish to review the situation in Europe (5).
From the non-dislocation of Euroland to the dislocation of the United Kingdom
As anticipated by our team, the EU summit in Brussels on 7 and 8 December last has led to two key events:
. the further integration of Euroland with an acceleration and strengthening of budgetary and financial integration and the initiation of a fiscal integration (6). The Eurozone governments, led by Germany, have confirmed their willingness to go right through to the end of this process, unlike all the Anglo-Saxon and Eurosceptic discussions which, for the last two years, predicted that Germany would abandon the Euro. At the same time, they have refused to follow the path of the Fed and the Bank of England by refraining from running the printing press (Quantitative Easing) as long as budgetary discipline is not achieved within Euroland (7). The clear failure of QE in the US as in the UK (8) confirms the relevance of this choice which will allow the issue of Eurobonds at the end of 2012.
In contrast, the "assurance" that the Greek case (of a “voluntary tax” of a 50% “haircut” for the country’s private creditors) will remain an exception is a promise that binds only those who believe it. Incidentally it has been pushed by the French President, Nicolas Sarkozy, whose citizens are well aware, after five years of seeing him in action, that his commitments have no lasting value and are always tactical in nature (10).
. the lasting marginalization (at least 5 years) of the UK within the European Union vividly confirms that it really is now Euroland that henceforth leads European affairs. David Cameron’s inability to gather even only two or three of the United Kingdom’s “traditional allies” (11) illustrates the structural weakening of British diplomacy and the general lack of confidence in Europe on UK’s ability to overcome the crisis (12). It’s also a reliable indicator of the loss of US influence on the continent since the sending of Treasury Secretary Tim Geithner and Vice President Joe Biden to maraude on the mainland a few days before the summit served no purpose and didn’t prevent the British failure.
In fact this summit will have been historic, but not yet because it will have settled the European financial and budgetary problems. As we anticipated in December 2010, and as Angela Merkel has just said in the Bundestag, the Euroland path is a long journey, complex and chaotic, like the road traveled since the 1950s for European integration (14). But it’s a way that strengthens our continent and will place Euroland at the heart of the world after the crisis (15). If markets are not happy with this reality, it's their problem. They will continue to see their ghost-assets go up in smoke, their banks and hedge funds go bankrupt, trying in vain to push up interest rates on European debt (16) resulting in the ratings of the Anglo-Saxon credit rating agencies losing all credibility.
This summit is historic because it confirms and boosts the return of the EU founding countries in charge of the European project and because it shows that far from witnessing a collapse of the Euro zone, the shock treatment attempted by David Cameron on the orders of City financiers (18), is resulting in an acceleration of the United Kingdom’s dislocation (19). In addition to the confrontation between Liberal Democrats and Conservatives which Cameron’s posture initiated, undermining even further a coalition already in really bad shape, this British marginalization raises fierce opposition in Scotland and Wales whose leaders proclaim their attachment to the EU and its volition, as regards Scotland (20), to join the Euro once the independence process starts around 2014 (21).
And, the icing on the cake, the collusion between the City and the British government is now a topic that extends beyond the UK’s borders and reinforces the continent’s determination to finally bring this “outlaw” under control. As we have described since December 2009 and the beginning of the attacks against Greece and Euroland, the City, alarmed by the consequences of the crisis as regards European regulations, launched itself in an attack against an evolving Euroland, putting the Conservative Party and Anglo-Saxon financial media in its service (22). The episode of the recent Brussels summit marks a major defeat for the City in this increasingly public war, exposing by the way the resentment of a majority of British who are not so much against Euroland than against the City (23) accused of exploiting the country (24).
With £1.8 trillion of public money invested in banks to prevent their collapse in 2008, the British taxpayers are in fact those who have paid the most for the rescue of financial institutions. And the British government may well continue to exclude this amount from its public debt calculations by claiming it’s an “investment”, de facto, fewer and fewer people consider that the banks in the City will recover from the crisis, especially since its worsening in the second half of 2011: the shares purchased by the Government in fact are already worthless. The “UK hedge fund” is on the brink of collapse (25) ... and thanks to David Cameron and the City, it’s isolated with no one to come to its aid, neither in Europe nor the United States.
With the Chinese bubble (26) about to join the European recession and the US depression, the 2012 storm will determine whether David Cameron and his finance minister George Osborne are worthy descendants of the great British sailors.
But back now to the extract from our anticipation on the future of the United States for the 2012-2016 period.
The future of the USA - 2012-2016: An insolvent and ungovernable United States
In this issue, our team therefore gives its anticipations regarding the future of the United States for the 2012-2016 period. We recall that since 2006 and the first GEAB issues, LEAP/E2020 described the global systemic crisis as a phenomenon characterizing the end of the world as we know it since 1945, marking the collapse of the American pillar on which this world order has rested for nearly seven decades. Since 2006, we had identified the period 2011-2013 as that during which the “Dollar Wall” on which the power of the United States sits would fall apart. Summer 2011, with the cut in the United States’ credit rating by S & P, marked an historic turning point and confirmed that the “impossible” (27) was indeed in the process of coming true. Therefore today, it seems essential to provide our subscribers with a clear anticipatory vision of what awaits the “pillar” of the world before the crisis at the point when the crisis moved into “top gear” in summer 2011 (28).
Thus, according to LEAP/E2020, the 2012 election year, which opens against the backdrop of economic and social depression, complete paralysis of the federal system (29), strong rejection of the traditional two-party system and a growing questioning of the relevance of the Constitution, inaugurates a crucial period in the history of the United States. Over the next four years, the country will be subjected to political, economic, financial and social upheaval such as it has not known since the end of the Civil War which, by an accident of history, started exactly 150 years ago in 1861. During this period, the US will be simultaneously insolvent and ungovernable, turning that which was the “flagship” of the world in recent decades into a “drunken boat”.
To make the complexity of the current process understandable, our team has chosen to organize its anticipations around three key areas:
US institutional deadlock and the break-up of the traditional two-party system
The unstoppable spiral of recession/depression/inflation
The breakdown of the US socio-political fabric
The unstoppable US economic spiral : recession/depression/inflation (extract)
In fact, the United States ends 2011 in a state of weakness unmatched since the Civil War. They practice no significant leadership at international level. The confrontation between geopolitical blocs is sharpening and they find themselves confronted by almost all the world’s major players: China, Russia, Brazil (and in general almost all of South America) and now Euroland (30). Meanwhile, they cannot control unemployment where the true rate stagnates at around 20% against the backdrop of an unabated and unprecedented reduction in the labour force (which has now fallen to its 2001 level (31)).
Real estate, the foundation of US household wealth along with the stock market, continues to see prices drop year after year despite desperate attempts by the Fed (32) to facilitate lending to the economy through its zero interest rate policy. The stock market has resumed its downward path artificially interrupted by two Quantitative Easings in 2009 and 2010. US banks, whose balance sheets are much more heavily loaded with financial derivative products than their European counterparts (33), are dangerously approaching a new series of bankruptcies of which MF Global is a but a precursor, indicating the absence of procedural controls or alarms three years after the collapse of Wall Street in 2008 (34).
Poverty is gradually increasing in the country every day, where one in six Americans now depend on food stamps (35) and one in five children has experienced periods of living on the streets (36). Public services (education, social, police, highways...) have been significantly reduced across the country to avoid city, county, or state bankruptcies. The success with which the revolt of the middle class and the young (TP and OWS) has met is explained by these objective developments. And the coming years will see these trends get worse.
The weakness of the 2011 US economy and society is, paradoxically, the result of the “rescue” attempts carried out in 2009/2010 (stimulus plans, QE ...) and the worsening of a pre-2008 “normal” situation. 2012 will mark the first year of deterioration from an already badly impaired situation (37).
SMEs, households, local authorities (38), public services,... have no more “padding” to soften the blow of the recession into which the country has fallen again (39). We anticipated that 2012 would see a 30% drop in the Dollar against major world currencies. In this economy, which imports the bulk of its consumer goods, this will result in a corresponding decrease in US household purchasing power against a backdrop of double-digit inflation.
The TP and OWS have, therefore, a bright future ahead of them since the wrath of 2011 will become the rage in 2012/2013.
Global systemic crisis – USA 2012/2016: An insolvent and ungovernable country
As announced in previous GEABs, in this issue our team presents its anticipations on the changes in the United States for the period 2012-2016. This country, the epicentre of the global systemic crisis and pillar of the international system since 1945, will go through a particularly tragic in its history during these five years. Already insolvent it will become ungovernable bringing about, for Americans and those who depend on the United States violent and destructive economic, financial, monetary, geopolitical and social shocks. If the United States today is already very different from the "super-power" of 2006, the year the first GEAB was published, announcing the global systemic crisis and the end of the all-powerful US, the changes we anticipate for the 2012-2016 period are even more important, and will radically transform the country's institutional system, its social fabric and its economic and financial weight.
At the same time, every December, we evaluate our anticipations for the year just ended. This exercise, too rarely practiced by the think tanks, experts and media (1) is a tool enabling our subscribers (2) as well as our researchers to verify that our work retains a high added-value and and is in direct contact with reality. This year our score improved slightly and LEAP/E2020 attained an 82% success rate in its anticipations for 2011.
In addition we also detail our recommendations on foreign currencies, gold, stock exchanges and the consequences of the United Kingdom’s marginalization within the EU (3) on the Pound, Gilts and UK debt and we set out some advice on developments of the American institutional system (4).
In this public communiqué we have chosen to present an excerpt from our anticipation on the changes in the United States for the 2012-2016 period.
But before addressing the American case, we wish to review the situation in Europe (5).
From the non-dislocation of Euroland to the dislocation of the United Kingdom
As anticipated by our team, the EU summit in Brussels on 7 and 8 December last has led to two key events:
. the further integration of Euroland with an acceleration and strengthening of budgetary and financial integration and the initiation of a fiscal integration (6). The Eurozone governments, led by Germany, have confirmed their willingness to go right through to the end of this process, unlike all the Anglo-Saxon and Eurosceptic discussions which, for the last two years, predicted that Germany would abandon the Euro. At the same time, they have refused to follow the path of the Fed and the Bank of England by refraining from running the printing press (Quantitative Easing) as long as budgetary discipline is not achieved within Euroland (7). The clear failure of QE in the US as in the UK (8) confirms the relevance of this choice which will allow the issue of Eurobonds at the end of 2012.
In contrast, the "assurance" that the Greek case (of a “voluntary tax” of a 50% “haircut” for the country’s private creditors) will remain an exception is a promise that binds only those who believe it. Incidentally it has been pushed by the French President, Nicolas Sarkozy, whose citizens are well aware, after five years of seeing him in action, that his commitments have no lasting value and are always tactical in nature (10).
. the lasting marginalization (at least 5 years) of the UK within the European Union vividly confirms that it really is now Euroland that henceforth leads European affairs. David Cameron’s inability to gather even only two or three of the United Kingdom’s “traditional allies” (11) illustrates the structural weakening of British diplomacy and the general lack of confidence in Europe on UK’s ability to overcome the crisis (12). It’s also a reliable indicator of the loss of US influence on the continent since the sending of Treasury Secretary Tim Geithner and Vice President Joe Biden to maraude on the mainland a few days before the summit served no purpose and didn’t prevent the British failure.
In fact this summit will have been historic, but not yet because it will have settled the European financial and budgetary problems. As we anticipated in December 2010, and as Angela Merkel has just said in the Bundestag, the Euroland path is a long journey, complex and chaotic, like the road traveled since the 1950s for European integration (14). But it’s a way that strengthens our continent and will place Euroland at the heart of the world after the crisis (15). If markets are not happy with this reality, it's their problem. They will continue to see their ghost-assets go up in smoke, their banks and hedge funds go bankrupt, trying in vain to push up interest rates on European debt (16) resulting in the ratings of the Anglo-Saxon credit rating agencies losing all credibility.
This summit is historic because it confirms and boosts the return of the EU founding countries in charge of the European project and because it shows that far from witnessing a collapse of the Euro zone, the shock treatment attempted by David Cameron on the orders of City financiers (18), is resulting in an acceleration of the United Kingdom’s dislocation (19). In addition to the confrontation between Liberal Democrats and Conservatives which Cameron’s posture initiated, undermining even further a coalition already in really bad shape, this British marginalization raises fierce opposition in Scotland and Wales whose leaders proclaim their attachment to the EU and its volition, as regards Scotland (20), to join the Euro once the independence process starts around 2014 (21).
And, the icing on the cake, the collusion between the City and the British government is now a topic that extends beyond the UK’s borders and reinforces the continent’s determination to finally bring this “outlaw” under control. As we have described since December 2009 and the beginning of the attacks against Greece and Euroland, the City, alarmed by the consequences of the crisis as regards European regulations, launched itself in an attack against an evolving Euroland, putting the Conservative Party and Anglo-Saxon financial media in its service (22). The episode of the recent Brussels summit marks a major defeat for the City in this increasingly public war, exposing by the way the resentment of a majority of British who are not so much against Euroland than against the City (23) accused of exploiting the country (24).
With £1.8 trillion of public money invested in banks to prevent their collapse in 2008, the British taxpayers are in fact those who have paid the most for the rescue of financial institutions. And the British government may well continue to exclude this amount from its public debt calculations by claiming it’s an “investment”, de facto, fewer and fewer people consider that the banks in the City will recover from the crisis, especially since its worsening in the second half of 2011: the shares purchased by the Government in fact are already worthless. The “UK hedge fund” is on the brink of collapse (25) ... and thanks to David Cameron and the City, it’s isolated with no one to come to its aid, neither in Europe nor the United States.
With the Chinese bubble (26) about to join the European recession and the US depression, the 2012 storm will determine whether David Cameron and his finance minister George Osborne are worthy descendants of the great British sailors.
But back now to the extract from our anticipation on the future of the United States for the 2012-2016 period.
The future of the USA - 2012-2016: An insolvent and ungovernable United States
In this issue, our team therefore gives its anticipations regarding the future of the United States for the 2012-2016 period. We recall that since 2006 and the first GEAB issues, LEAP/E2020 described the global systemic crisis as a phenomenon characterizing the end of the world as we know it since 1945, marking the collapse of the American pillar on which this world order has rested for nearly seven decades. Since 2006, we had identified the period 2011-2013 as that during which the “Dollar Wall” on which the power of the United States sits would fall apart. Summer 2011, with the cut in the United States’ credit rating by S & P, marked an historic turning point and confirmed that the “impossible” (27) was indeed in the process of coming true. Therefore today, it seems essential to provide our subscribers with a clear anticipatory vision of what awaits the “pillar” of the world before the crisis at the point when the crisis moved into “top gear” in summer 2011 (28).
Thus, according to LEAP/E2020, the 2012 election year, which opens against the backdrop of economic and social depression, complete paralysis of the federal system (29), strong rejection of the traditional two-party system and a growing questioning of the relevance of the Constitution, inaugurates a crucial period in the history of the United States. Over the next four years, the country will be subjected to political, economic, financial and social upheaval such as it has not known since the end of the Civil War which, by an accident of history, started exactly 150 years ago in 1861. During this period, the US will be simultaneously insolvent and ungovernable, turning that which was the “flagship” of the world in recent decades into a “drunken boat”.
To make the complexity of the current process understandable, our team has chosen to organize its anticipations around three key areas:
US institutional deadlock and the break-up of the traditional two-party system
The unstoppable spiral of recession/depression/inflation
The breakdown of the US socio-political fabric
The unstoppable US economic spiral : recession/depression/inflation (extract)
In fact, the United States ends 2011 in a state of weakness unmatched since the Civil War. They practice no significant leadership at international level. The confrontation between geopolitical blocs is sharpening and they find themselves confronted by almost all the world’s major players: China, Russia, Brazil (and in general almost all of South America) and now Euroland (30). Meanwhile, they cannot control unemployment where the true rate stagnates at around 20% against the backdrop of an unabated and unprecedented reduction in the labour force (which has now fallen to its 2001 level (31)).
Real estate, the foundation of US household wealth along with the stock market, continues to see prices drop year after year despite desperate attempts by the Fed (32) to facilitate lending to the economy through its zero interest rate policy. The stock market has resumed its downward path artificially interrupted by two Quantitative Easings in 2009 and 2010. US banks, whose balance sheets are much more heavily loaded with financial derivative products than their European counterparts (33), are dangerously approaching a new series of bankruptcies of which MF Global is a but a precursor, indicating the absence of procedural controls or alarms three years after the collapse of Wall Street in 2008 (34).
Poverty is gradually increasing in the country every day, where one in six Americans now depend on food stamps (35) and one in five children has experienced periods of living on the streets (36). Public services (education, social, police, highways...) have been significantly reduced across the country to avoid city, county, or state bankruptcies. The success with which the revolt of the middle class and the young (TP and OWS) has met is explained by these objective developments. And the coming years will see these trends get worse.
The weakness of the 2011 US economy and society is, paradoxically, the result of the “rescue” attempts carried out in 2009/2010 (stimulus plans, QE ...) and the worsening of a pre-2008 “normal” situation. 2012 will mark the first year of deterioration from an already badly impaired situation (37).
SMEs, households, local authorities (38), public services,... have no more “padding” to soften the blow of the recession into which the country has fallen again (39). We anticipated that 2012 would see a 30% drop in the Dollar against major world currencies. In this economy, which imports the bulk of its consumer goods, this will result in a corresponding decrease in US household purchasing power against a backdrop of double-digit inflation.
The TP and OWS have, therefore, a bright future ahead of them since the wrath of 2011 will become the rage in 2012/2013.
Sunday, December 18, 2011
SC109-11
http://www.golemxiv.co.uk/2011/12/plan-b-how-to-loot-nations-and-their-banks-legally/
Plan B – How to loot nations and their banks legally
Is there a plan B? That question is usually asked of governments regarding their attempts to ‘save’ the banks domiciled in their country. But has anyone asked if the banks have a plan B?
Does anyone think that if our governments fail to keep to their austerity targets and fail to keep bailing out the banking sector, that the banks will just shrug and say, “Well, thanks for trying” and accept their fate? Or do you think the banks might have a Plan B of their own?
First let’s be clear about Plan A. That plan is to enforce an era of long-term austerity cuts to public services, in part to cut public expenditure so as to free up money for spending on the banks, but perhaps more importantly to further atrophy public services so that private providers can take over. A privatization of services which will bring great profits and cash flow to the private sector and to the banks who finance them, and a further general victory for those who feel that private debts rather than public taxes should be what underpins our national life and social contract.
Plan A therefore requires that governments convince their populace that private debts should be taken on to the public purse and that once taken on, the contracts signed by governments on behalf of the tax payers/citizens, are then sacrosanct and above any democratic change of mind. If governments can hold their peoples to this,then the banks are ‘saved’ with the added bonus that democracy and the ‘Rights’ it once guaranteed will all have been redefined as subordinate to finance and its contracts, and our citizenship will have become second to one’s contractual place in a web of private debts. Debts to the private lenders will become more important than taxes to the public exchequer. And as they do the State will wither away, leaving free-market believers and extreme libertarians exactly where they have always wanted to be – in charge – by dint of being rich. It is, in my view, a bleak future which I once described as A Toxic Debt Wasteland.
BUT it does all depend on governments being able to suppress discontent and to outlaw opposition in the sense of saying to people you may disagree but we have now declared these debts and their repayment to be outside democratic control and immune to any attempt to rescind or repudiate the agreed debt contracts. As the severity of the austerity cuts to social services (health, education, pensions etc) becomes painfully clearer to people and the ‘necessity’ for them is ‘regretfully’ extended year after year, it will become harder and harder to justify, let alone impose, such suffering. We will enter an era of vicious sectarian blame. We are already in it, but it will get much darker.
The banks and those whose wealth and power is tied to them, would obviously prefer Plan A to succeed. It makes governments do all the dirty work and it would profit the banks far more in the long run. If you want to bleed a man – kill him and you get about 5 litres/quarts. But strap him to a gurney with a catheter in his arm and a drip feed in his nose, and he will bleed for you for as long as his system can stand it. That is Plan A. But what if it fails?
I cannot believe the banks, with everything at stake, have not thought it prudent to have a plan B. So here are my thoughts on what that plan could be. Let me say now, I do not think this plan was a long term conspiracy. I do not think the end game was in mind when the first elements were put in place. It has, I think, been constructed opportunistically. But the end result is no less dark and threatening.
What I offer from here on is thinking out loud. I obvioulsy have no proof at all that there is a plan B. All I can hope to do is show you the elements which I think could make a Plan B for the banks. Then my argument is that if the mechanism I describe could work, if I have not simply misunderstood something, then I think the banks will surely have thought of it before me. And so it either already exists or it will. I think there are scraps of information that suggest it does exist and the collapse of MF Global might even be the first example of Plan B in action. The MF Global case certainly contains all the clues.
MF Global imploded when it could not get the short term funding it needed. There were two kinds of funding MF Global relied upon for its liquidity/cash flow: repo and hypothecation. For those not familiar, Repo is when a bank or brokerage ‘sells’ an asset for cash but with the agreement that it will re-purchase – hence ‘repo’ – the asset at an agreed date for an agreed price. It is not really a sale but a loan. Repo is the oxygen the financial world breathes. Repo is a $10 Trillion market.
The other main source of the essential short term funding was Hypothecation. This is when a bank or brokerage pledges an asset to a ‘lender’ in return for cash but the asset remains in the possession of the borrower. What the ‘lender’ gets is hypothetical control of the asset. Although the asset never actually changes hands, the new ‘owner’s’ hypothetical control of the asset allows her to do what she wishes with the asset. Including re-hypothecating the asset to another bank or brokerage. If she does so then the hypothetical control passes to yet another ‘owner’. Even though physically it remain where it started.
Like repo – hypothecation and re-hypothecation are truely massive parts of modern debt-based banking. So the first thing the MF Global case tells us is that what happened is not due to some peripheral, parochial rogue trader-esque, isolated problem. What happened was as a result of a mechanism right at the very heart of the financial system.
In the MF Global collapse what ZeroHedge, and following them, I and others wrote about, was the way in which not only did MF Global go bankrupt, but so also did some of their clients when they found the money they thought MF Global was holding for them, went unaccountably missing. Client’s money went missing because it was ‘mingled’ with the brokerage’s money when it should not have been. Brokers should keep them separate. But it seems in the ‘re-hypothecation’ of assets it was mingled. Former CEO of MF Global, Mr Corzine has sworn under oath he knew nothing about his co-mingling nor the irregularities with his company’s re-hypothecation. It has been rumoured the client’s money may now be, possibly, in the hands of JP Morgan.
This hint of illegality has grabbed everyone’s attention. But I think it is actually the legal part of the story not the possibly illegal part which is by far the more important.
In my opinion the key to the bank’s Plan B is in understanding why any money/assets were taken from MF Global after it had gone bankrupt and how exactly it went under in the first place. We all know MF Global had huge holdings of dicey European sovereign debt. But those debts have not become worthless so what caused MF to collapse? .
The answer to all these questions lie in a change to Bankruptcy laws that happened around the world between 2002 and 05. This might seem like a detour into nerd city but it is not. It is the key.
When a company declares bankruptcy there is what the Americans call an ‘automatic stay’, which means all the assets left in a company at the moment it goes bankrupt are protected from the rush of creditor’s demands until appointed auditors can sort out who should get what. The automatic stay prevents a first come first served disorderly looting where those with the most muscle getting everything and everyone else getting nothing. As we are all painfully aware now, there is a legal pecking order to who gets paid before who, with Senior bond holders at the top. But, in America culminating in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) the order was changed. And that change is the crucial event.
At the time the law was being passed few were aware of this change and even fewer were aware of how important it would become. At the time the furore was all about changes to personal bankruptcy. The Credit Card industry (AKA Banks) had spent more than a decade and its rumoured as much as $100 million lobbying to make bankruptcy much harder and more punitive for ordinary debtors.
An article from 2005 in the Boston Globe quoting a very senior Republican Senator, gives a flavour of what was then being said about ordinary people who fell into debt.
Senator Orrin Hatch (R-UT) has said that millions of Americans are bankrupt or near-bankrupt because “they run up huge bills and then expect society to pay for them.”
After 4 years of bailing out banks who did exactly that the irony is enough to gag on.
But what was not talked about was an amendment which was put into the bill and, as far as I know little debated. Don’t let the word ‘amendment’ mislead you. Amendments are generally not there as refinements and improvements on the original idea. Whenever a bill goes through Congress every lobby group and industry with something it wants done, gets their tamed/owned/ political friends to tack on the change in the law that suits them in return for supporting the original bill. The bill emerges from this process festooned with ‘amendments’ to other vaguely related laws. Amendments are the price of getting the original bill passed. They are often little understood, written by and for the benefit of the sponsoring lobby group and can be far more influential than the bill they are smuggled in on. This is certainly the case here.
According to a scholarly article in the American Bankruptcy Law Review,
“the provisions [in the amendment] were derived from recommendations from the President’s Working Group and revisions espoused by the financial industry”
The President at the time was Bush and one of the most vociferous sponsors of the amendment was none other than Senator Leach whose other claim to fame was the Gram-Leech-Bliley Act which repealed most of the Glass Steagal Act of 1933 whose repeal virtually assured that the present debt crisis would happen. When bankers play pocket billiards, Senator Leach is what they prod their balls with. Ribaldry aside Senator Leach can certainly be described as one of the principle architects of our present global misery. But I digress.
What was this ammendment? The ammendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.
Which means,
The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others.
Or as the official report from the US Financial Crisis Inquirey Commission said,
under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)
So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.
This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies also allowed a whole range of far riskier assets to be used, making them too immune from the automatic stay in the event of bankruptcy. Which meant traders flocked to a market where risky assets would be traded and used as collateral without apparent risk to the lender. The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get your money back before anyone else and no one could stop them.
It also did one other thing. Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.
All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.
The collapse of both Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those instituions suddenly stoppped trading and ‘looted’ them instead.
According to Enrico Perotti, professor of international finance at Amsterdam Business School speaking at the London Conference on The Future of Bank Funding, held in June of this year, 2011,
The financial crisis happened when repo lenders and derivative parties lost confidence in the mortgage-backed securities they’d accepted as collateral for repo loans and credit default swaps. They demanded to be paid, forcing their troubled trading partners into fire sales of their holdings to raise cash. They were unconcerned that they might drive their trading partners into bankruptcy, because they were exempt from the automatic stay.
Professor Perotti went on to say,
As often in financial regulation, this leads to unintended consequences. As a default leads to repossession of collateral for all safe harbor claims, repossession accelerates fire sales, resulting in a disorderly resolution, with a rush to sell collateral ahead of others, creating a downward spiral in valuations. The timing of the jumps in risk spreads on Lehman, two days after the default, demonstrates this effect, as does AIG.
Should the bankers and their political fluffers like Mr Leach have known? Well they were warned at the time. In 2005 a paper entitled “Derivatives and the Bankruptcy Code: Why the Special Treatment?” by Franklin R. Edwards and Edward R. Morrison, in the Yale Journal of Regulation
http://www1.gsb.columbia.edu/mygsb/faculty/research/pubfiles/1666/Morrison%20%26%20Edwards%20Yale%20Rev
VI. Conclusion
… the Code’s special treatment of derivatives contracts cannot be justified by a fear of systemic risk…. Indeed, exempting derivatives counterparties from the automatic stay may make matters worse by increasing systemic risk….Our analysis, however, should worry members of Congress and legislators in other countries. They have been lobbied heavily by special interest groups (such as ISDA) to expand the special treatment of derivatives on grounds that such legislation is necessary to prevent a systemic meltdown in OTC derivatives markets should a derivatives counterparty suffer financial distress.
Our analysis casts serious doubt on this proposition. Systemic risk may be a real threat, but bankruptcy law has no role to play in addressing it.”
The same changes to the bankruptcy laws were also adopted in the UK and throughout Europe. In fact they may well have preceded them. I simply have not done that research yet. And the changes in the UK and Europe were also lobbied for and sponsored by the banks via among others the ISDA (International Swaps and Derivatives Association). Most of the Big banks are ISDA members.
OK all of that was the back-ground to show you how we got here and that it is all ‘legal’. On the basis of laws sponsored by the banks of course. Now lets come to the present.
MF Global is where I started. There was something about its collapse which did not seem right to me. Mr Corzine’s claim that he ‘didn’t know’ where his clients’ money had gone might be true, but I was and am still, left with the feeling that there is a deeper story here. When I wrote about MF Global and the renewed crisis of bank lending, I came across the fact that in the six months to June 2011 the global trade in Derivatives increased by 18% to an astonishing $707 trillion in nominal value (the face value of all the contracts). And remember the Repo market is $10 trillion.
Somehow MF Global’s collapse and the huge increase in derivatives trading felt related. For me it was not the huge exposure to risky European bonds which MF Global had deliberately amassed, it was the nature of its demise, the trigger, and what happened to its assets afterwards, which were key. MF Global collapsed because it could not get short term funding. It could not get other financial institutions to accept its assets as collateral for Repo agreements nor hypothecate tham any longer.
When MF Global went down it did so because its repo, derivaitve and hypothecation partners essentially foreclosed on it. And when they did so they then ‘looted’ the company. And because of the co-mingling of clients money in the hypothecation deals the ‘looters’ also seized clients money as well. The co-mingling story is what brought the whole thing into the light but also provided a wonderful distraction.
The important point is that the change in the Bankruptcy laws. The change, as illustrated by Bear Stearns, Lehman Brothers and AIG has made the markets more not less systemically unstable. Yet the banks have defeated all attempts to reform these unwise laws. The Dodd Frank financial reform act in eth US did nothing to address them AT ALL. Mr Dodd was lobbied very hard to make sure of this.
Why?
Here, finally, is my answer.
Let us say you are a bank or broker that has bought up a lot of European bank and sovereign bonds from Italy, Spain and Greece for example. You would be very exposed to great losses should those countries or their banks default. You are relying on the politicians forcing their tax payers to bail out you and the other banks you trade with. What if they don’t?
One solution would be to sell as many of those bonds as you could accepting the inevitable losses as being better than a much larger loss if the banks or nations or both, defaulted. The other solution, counter-intuitively, would be to do more business with them. But make sure it is repo lending and derivative trading. Specifically offer the banks in troubled nations CDS insurance on their own bad debts and currency swaps. How would this help?
First, lets keep in mind that the trade in both these types of derivatives did increase by 18% in the first 6 months of 2011 precisely as the Euro crisis has worsened.
If a bank or nation was to default on you as a mere bond holder, you would have to wait in a the queue of creditors to see what you were going to be given back. And some ‘hair cut’ would be likely. But if you had done rather a lot of derivatives trading (CDS insurance and currency swaps are both derivative trades) then you would not have to wait. You would seize all the collateral the bank had pledged to you for repo lending or derivative trading and walk away. Now you will say that if you had done CDS insurance then you might well have to pay back out the money you had seized. Except that possession is nine tenths of the law. While lawyers set about arguing about what you owe, the critical fact is that in the mean time, in the height of the crisis you HAVE the money. JP Morgan allegedly has MF Global money while other people’s lawyers can only argue about it.
This will also be true if you have also rather wisely been on the right side of lots of re-hypothecation deals and repo deals with the collapsed bank. In both cases if the collapsed bank had pledged to you assets for Repo or hypothecation then you get to keep all those assets in the case of the bank going bankrupt. We have the clear proof of this already. As Zerohedge reported some days ago, “HSBC Sues MF Global Over Disputed Ownership Of Physical Gold”. It seems HSBC’s gold may have been hypothecated or re-hypothecated. Someone else, some other bank, has their gold and all they have are lots of lawyers charging them fat fees.
So what we have, courtesy of the change in the bankruptcy laws is the means for banks to loot each other. Simply become a major short term funder via repo or hypothecation or a major counterpary in derivatives deals with the ailing bank and in both cases should the bank you are lending to go bankrupt, you will keep all the assets it pledged to you before any other creditor get a chance.
If I am right then MF Global was the first hint of Plan B in action. The bankruptcy laws allow a mechanism for banks to disembowel each other. The strongest lend to the weaker and loot them when the moment of crisis approaches. The plan allows the biggest banks, those who happen to be burdened with massive holdings of dodgy euro area bonds, to leap out of the bond crisis and instead profit from a bankruptcy which might otherwise have killed them. All that is required is to know the import of the bankruptcy law and do as much repo, hypothecation and derivative trading with the weaker banks as you can. To me, this gives a possible answer to why there has been such a surge in derivatives trading.
If I am right about all this, I think this means that some of the biggest banks, themselves, have already constructed and greatly enlarged a now truly massive trip wired auto-destruct on the banking system. If they have and they have explained any of this to our politicians then it would explain why our governments have been so abjectly willing to bail out any and all of the biggest banks and sacrifice anything else in the process. Any hint of relucatnace and the banks can make veiled reference to the extreme ‘risk’ of systemic ‘panic’ and forced liquidations. None of which is really a panic, since they have engineered it.
Are the banks threatening us? No, no, good lord no! Just pointing out the reality of the state of the system. There just happens to be a gun pointed at our head and the banks just happen to find their finger on the trigger. All they ask is that we do nothing to make them feel that their best interests are served by pulling it. And all we have to do to avoid that is stick to plan A. Simple.
But now I come to the really ugly part.
For the last four years who has been putting money in to the banks? And who has become a massive bond holder in all the banks? We have. First via our national banks and now via the Fed, ECB and various tax payer funded bail out funds. We are the bond holders who would be shafted by the Plan B looting. We would be the people waiting in line for the money the banks would have already made off with.
It is the money we have been putting in to bail out the biggest banks which they have then been using as collateral for offering weaker banks in weaker nations, repo loans or hypothecation. And the money or government bonds the weaker banks are using to pledge as assets and collateral for those loans or in derivative deals with the bigger banks is also from us. We have and are funding both sides of the deal.
The result is that the assets which the big banks would be legally allowed to seize and keep in the event of the failing bank actually going under would be ours.
To give a concrete example. Spain or Greece puts its tax payer money in to one of its insolvent banks.That bank then uses that money to get a short term repo or hypothecated it for loan. Or it uses it to hedge its currency problems via a currency swap or buys CDS insurance on assets it is deeply worried about. If the weak bank then goes down all those assets are seized by the big bank who was lending or was the counter-party to the derivative deals. The tax payer gets zero. And there is no redress. It was legally done. And the money the Big bank would have used to get themselves into this position would be the bail out money we had earlier given to the mega banks. They would have used that money against us – again.
The largest banks, those with the greatest exposure to bank and sovereign bonds from the most indebted euro nations, have the most to gain from doing derivative. repo and hypothecation deals with the troubled euro area banks and nations. The more assets the weak banks and nations have pledged in deals with teh Big banks, the more theBig banks will walk away with in the event of a crash. I suggest this is why, even as this crisis has worsened, the Big banks have been increasing by 18% their trade in derivatives and why Repo and hypothecation is as large or larger than even before the crash.
I am sorry this has been such a long piece but I wanted you to see exactly how I came to this because I hope you can show me how I am wrong. Please do so politely and I will go downstairs and celebrate my stupidity with a cup of tea, before apologizing to you all. I would very much like to be wrong.
But if I am not wrong, then the banks have created a financial Armageddon looting machine. Their Plan B is a mechanism to loot not just the more vulnerable banks in weaker nations, but those nations themselves. And the looting will not take months not even days. It could happen in hours if not minutes. Our leaders would have only a few hours to decide who they would side with: the banks or us. The past four years give me no faith they would chose us.
Plan B – How to loot nations and their banks legally
Is there a plan B? That question is usually asked of governments regarding their attempts to ‘save’ the banks domiciled in their country. But has anyone asked if the banks have a plan B?
Does anyone think that if our governments fail to keep to their austerity targets and fail to keep bailing out the banking sector, that the banks will just shrug and say, “Well, thanks for trying” and accept their fate? Or do you think the banks might have a Plan B of their own?
First let’s be clear about Plan A. That plan is to enforce an era of long-term austerity cuts to public services, in part to cut public expenditure so as to free up money for spending on the banks, but perhaps more importantly to further atrophy public services so that private providers can take over. A privatization of services which will bring great profits and cash flow to the private sector and to the banks who finance them, and a further general victory for those who feel that private debts rather than public taxes should be what underpins our national life and social contract.
Plan A therefore requires that governments convince their populace that private debts should be taken on to the public purse and that once taken on, the contracts signed by governments on behalf of the tax payers/citizens, are then sacrosanct and above any democratic change of mind. If governments can hold their peoples to this,then the banks are ‘saved’ with the added bonus that democracy and the ‘Rights’ it once guaranteed will all have been redefined as subordinate to finance and its contracts, and our citizenship will have become second to one’s contractual place in a web of private debts. Debts to the private lenders will become more important than taxes to the public exchequer. And as they do the State will wither away, leaving free-market believers and extreme libertarians exactly where they have always wanted to be – in charge – by dint of being rich. It is, in my view, a bleak future which I once described as A Toxic Debt Wasteland.
BUT it does all depend on governments being able to suppress discontent and to outlaw opposition in the sense of saying to people you may disagree but we have now declared these debts and their repayment to be outside democratic control and immune to any attempt to rescind or repudiate the agreed debt contracts. As the severity of the austerity cuts to social services (health, education, pensions etc) becomes painfully clearer to people and the ‘necessity’ for them is ‘regretfully’ extended year after year, it will become harder and harder to justify, let alone impose, such suffering. We will enter an era of vicious sectarian blame. We are already in it, but it will get much darker.
The banks and those whose wealth and power is tied to them, would obviously prefer Plan A to succeed. It makes governments do all the dirty work and it would profit the banks far more in the long run. If you want to bleed a man – kill him and you get about 5 litres/quarts. But strap him to a gurney with a catheter in his arm and a drip feed in his nose, and he will bleed for you for as long as his system can stand it. That is Plan A. But what if it fails?
I cannot believe the banks, with everything at stake, have not thought it prudent to have a plan B. So here are my thoughts on what that plan could be. Let me say now, I do not think this plan was a long term conspiracy. I do not think the end game was in mind when the first elements were put in place. It has, I think, been constructed opportunistically. But the end result is no less dark and threatening.
What I offer from here on is thinking out loud. I obvioulsy have no proof at all that there is a plan B. All I can hope to do is show you the elements which I think could make a Plan B for the banks. Then my argument is that if the mechanism I describe could work, if I have not simply misunderstood something, then I think the banks will surely have thought of it before me. And so it either already exists or it will. I think there are scraps of information that suggest it does exist and the collapse of MF Global might even be the first example of Plan B in action. The MF Global case certainly contains all the clues.
MF Global imploded when it could not get the short term funding it needed. There were two kinds of funding MF Global relied upon for its liquidity/cash flow: repo and hypothecation. For those not familiar, Repo is when a bank or brokerage ‘sells’ an asset for cash but with the agreement that it will re-purchase – hence ‘repo’ – the asset at an agreed date for an agreed price. It is not really a sale but a loan. Repo is the oxygen the financial world breathes. Repo is a $10 Trillion market.
The other main source of the essential short term funding was Hypothecation. This is when a bank or brokerage pledges an asset to a ‘lender’ in return for cash but the asset remains in the possession of the borrower. What the ‘lender’ gets is hypothetical control of the asset. Although the asset never actually changes hands, the new ‘owner’s’ hypothetical control of the asset allows her to do what she wishes with the asset. Including re-hypothecating the asset to another bank or brokerage. If she does so then the hypothetical control passes to yet another ‘owner’. Even though physically it remain where it started.
Like repo – hypothecation and re-hypothecation are truely massive parts of modern debt-based banking. So the first thing the MF Global case tells us is that what happened is not due to some peripheral, parochial rogue trader-esque, isolated problem. What happened was as a result of a mechanism right at the very heart of the financial system.
In the MF Global collapse what ZeroHedge, and following them, I and others wrote about, was the way in which not only did MF Global go bankrupt, but so also did some of their clients when they found the money they thought MF Global was holding for them, went unaccountably missing. Client’s money went missing because it was ‘mingled’ with the brokerage’s money when it should not have been. Brokers should keep them separate. But it seems in the ‘re-hypothecation’ of assets it was mingled. Former CEO of MF Global, Mr Corzine has sworn under oath he knew nothing about his co-mingling nor the irregularities with his company’s re-hypothecation. It has been rumoured the client’s money may now be, possibly, in the hands of JP Morgan.
This hint of illegality has grabbed everyone’s attention. But I think it is actually the legal part of the story not the possibly illegal part which is by far the more important.
In my opinion the key to the bank’s Plan B is in understanding why any money/assets were taken from MF Global after it had gone bankrupt and how exactly it went under in the first place. We all know MF Global had huge holdings of dicey European sovereign debt. But those debts have not become worthless so what caused MF to collapse? .
The answer to all these questions lie in a change to Bankruptcy laws that happened around the world between 2002 and 05. This might seem like a detour into nerd city but it is not. It is the key.
When a company declares bankruptcy there is what the Americans call an ‘automatic stay’, which means all the assets left in a company at the moment it goes bankrupt are protected from the rush of creditor’s demands until appointed auditors can sort out who should get what. The automatic stay prevents a first come first served disorderly looting where those with the most muscle getting everything and everyone else getting nothing. As we are all painfully aware now, there is a legal pecking order to who gets paid before who, with Senior bond holders at the top. But, in America culminating in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) the order was changed. And that change is the crucial event.
At the time the law was being passed few were aware of this change and even fewer were aware of how important it would become. At the time the furore was all about changes to personal bankruptcy. The Credit Card industry (AKA Banks) had spent more than a decade and its rumoured as much as $100 million lobbying to make bankruptcy much harder and more punitive for ordinary debtors.
An article from 2005 in the Boston Globe quoting a very senior Republican Senator, gives a flavour of what was then being said about ordinary people who fell into debt.
Senator Orrin Hatch (R-UT) has said that millions of Americans are bankrupt or near-bankrupt because “they run up huge bills and then expect society to pay for them.”
After 4 years of bailing out banks who did exactly that the irony is enough to gag on.
But what was not talked about was an amendment which was put into the bill and, as far as I know little debated. Don’t let the word ‘amendment’ mislead you. Amendments are generally not there as refinements and improvements on the original idea. Whenever a bill goes through Congress every lobby group and industry with something it wants done, gets their tamed/owned/ political friends to tack on the change in the law that suits them in return for supporting the original bill. The bill emerges from this process festooned with ‘amendments’ to other vaguely related laws. Amendments are the price of getting the original bill passed. They are often little understood, written by and for the benefit of the sponsoring lobby group and can be far more influential than the bill they are smuggled in on. This is certainly the case here.
According to a scholarly article in the American Bankruptcy Law Review,
“the provisions [in the amendment] were derived from recommendations from the President’s Working Group and revisions espoused by the financial industry”
The President at the time was Bush and one of the most vociferous sponsors of the amendment was none other than Senator Leach whose other claim to fame was the Gram-Leech-Bliley Act which repealed most of the Glass Steagal Act of 1933 whose repeal virtually assured that the present debt crisis would happen. When bankers play pocket billiards, Senator Leach is what they prod their balls with. Ribaldry aside Senator Leach can certainly be described as one of the principle architects of our present global misery. But I digress.
What was this ammendment? The ammendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.
Which means,
The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others.
Or as the official report from the US Financial Crisis Inquirey Commission said,
under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)
So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.
This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies also allowed a whole range of far riskier assets to be used, making them too immune from the automatic stay in the event of bankruptcy. Which meant traders flocked to a market where risky assets would be traded and used as collateral without apparent risk to the lender. The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get your money back before anyone else and no one could stop them.
It also did one other thing. Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.
All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.
The collapse of both Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those instituions suddenly stoppped trading and ‘looted’ them instead.
According to Enrico Perotti, professor of international finance at Amsterdam Business School speaking at the London Conference on The Future of Bank Funding, held in June of this year, 2011,
The financial crisis happened when repo lenders and derivative parties lost confidence in the mortgage-backed securities they’d accepted as collateral for repo loans and credit default swaps. They demanded to be paid, forcing their troubled trading partners into fire sales of their holdings to raise cash. They were unconcerned that they might drive their trading partners into bankruptcy, because they were exempt from the automatic stay.
Professor Perotti went on to say,
As often in financial regulation, this leads to unintended consequences. As a default leads to repossession of collateral for all safe harbor claims, repossession accelerates fire sales, resulting in a disorderly resolution, with a rush to sell collateral ahead of others, creating a downward spiral in valuations. The timing of the jumps in risk spreads on Lehman, two days after the default, demonstrates this effect, as does AIG.
Should the bankers and their political fluffers like Mr Leach have known? Well they were warned at the time. In 2005 a paper entitled “Derivatives and the Bankruptcy Code: Why the Special Treatment?” by Franklin R. Edwards and Edward R. Morrison, in the Yale Journal of Regulation
http://www1.gsb.columbia.edu/mygsb/faculty/research/pubfiles/1666/Morrison%20%26%20Edwards%20Yale%20Rev
VI. Conclusion
… the Code’s special treatment of derivatives contracts cannot be justified by a fear of systemic risk…. Indeed, exempting derivatives counterparties from the automatic stay may make matters worse by increasing systemic risk….Our analysis, however, should worry members of Congress and legislators in other countries. They have been lobbied heavily by special interest groups (such as ISDA) to expand the special treatment of derivatives on grounds that such legislation is necessary to prevent a systemic meltdown in OTC derivatives markets should a derivatives counterparty suffer financial distress.
Our analysis casts serious doubt on this proposition. Systemic risk may be a real threat, but bankruptcy law has no role to play in addressing it.”
The same changes to the bankruptcy laws were also adopted in the UK and throughout Europe. In fact they may well have preceded them. I simply have not done that research yet. And the changes in the UK and Europe were also lobbied for and sponsored by the banks via among others the ISDA (International Swaps and Derivatives Association). Most of the Big banks are ISDA members.
OK all of that was the back-ground to show you how we got here and that it is all ‘legal’. On the basis of laws sponsored by the banks of course. Now lets come to the present.
MF Global is where I started. There was something about its collapse which did not seem right to me. Mr Corzine’s claim that he ‘didn’t know’ where his clients’ money had gone might be true, but I was and am still, left with the feeling that there is a deeper story here. When I wrote about MF Global and the renewed crisis of bank lending, I came across the fact that in the six months to June 2011 the global trade in Derivatives increased by 18% to an astonishing $707 trillion in nominal value (the face value of all the contracts). And remember the Repo market is $10 trillion.
Somehow MF Global’s collapse and the huge increase in derivatives trading felt related. For me it was not the huge exposure to risky European bonds which MF Global had deliberately amassed, it was the nature of its demise, the trigger, and what happened to its assets afterwards, which were key. MF Global collapsed because it could not get short term funding. It could not get other financial institutions to accept its assets as collateral for Repo agreements nor hypothecate tham any longer.
When MF Global went down it did so because its repo, derivaitve and hypothecation partners essentially foreclosed on it. And when they did so they then ‘looted’ the company. And because of the co-mingling of clients money in the hypothecation deals the ‘looters’ also seized clients money as well. The co-mingling story is what brought the whole thing into the light but also provided a wonderful distraction.
The important point is that the change in the Bankruptcy laws. The change, as illustrated by Bear Stearns, Lehman Brothers and AIG has made the markets more not less systemically unstable. Yet the banks have defeated all attempts to reform these unwise laws. The Dodd Frank financial reform act in eth US did nothing to address them AT ALL. Mr Dodd was lobbied very hard to make sure of this.
Why?
Here, finally, is my answer.
Let us say you are a bank or broker that has bought up a lot of European bank and sovereign bonds from Italy, Spain and Greece for example. You would be very exposed to great losses should those countries or their banks default. You are relying on the politicians forcing their tax payers to bail out you and the other banks you trade with. What if they don’t?
One solution would be to sell as many of those bonds as you could accepting the inevitable losses as being better than a much larger loss if the banks or nations or both, defaulted. The other solution, counter-intuitively, would be to do more business with them. But make sure it is repo lending and derivative trading. Specifically offer the banks in troubled nations CDS insurance on their own bad debts and currency swaps. How would this help?
First, lets keep in mind that the trade in both these types of derivatives did increase by 18% in the first 6 months of 2011 precisely as the Euro crisis has worsened.
If a bank or nation was to default on you as a mere bond holder, you would have to wait in a the queue of creditors to see what you were going to be given back. And some ‘hair cut’ would be likely. But if you had done rather a lot of derivatives trading (CDS insurance and currency swaps are both derivative trades) then you would not have to wait. You would seize all the collateral the bank had pledged to you for repo lending or derivative trading and walk away. Now you will say that if you had done CDS insurance then you might well have to pay back out the money you had seized. Except that possession is nine tenths of the law. While lawyers set about arguing about what you owe, the critical fact is that in the mean time, in the height of the crisis you HAVE the money. JP Morgan allegedly has MF Global money while other people’s lawyers can only argue about it.
This will also be true if you have also rather wisely been on the right side of lots of re-hypothecation deals and repo deals with the collapsed bank. In both cases if the collapsed bank had pledged to you assets for Repo or hypothecation then you get to keep all those assets in the case of the bank going bankrupt. We have the clear proof of this already. As Zerohedge reported some days ago, “HSBC Sues MF Global Over Disputed Ownership Of Physical Gold”. It seems HSBC’s gold may have been hypothecated or re-hypothecated. Someone else, some other bank, has their gold and all they have are lots of lawyers charging them fat fees.
So what we have, courtesy of the change in the bankruptcy laws is the means for banks to loot each other. Simply become a major short term funder via repo or hypothecation or a major counterpary in derivatives deals with the ailing bank and in both cases should the bank you are lending to go bankrupt, you will keep all the assets it pledged to you before any other creditor get a chance.
If I am right then MF Global was the first hint of Plan B in action. The bankruptcy laws allow a mechanism for banks to disembowel each other. The strongest lend to the weaker and loot them when the moment of crisis approaches. The plan allows the biggest banks, those who happen to be burdened with massive holdings of dodgy euro area bonds, to leap out of the bond crisis and instead profit from a bankruptcy which might otherwise have killed them. All that is required is to know the import of the bankruptcy law and do as much repo, hypothecation and derivative trading with the weaker banks as you can. To me, this gives a possible answer to why there has been such a surge in derivatives trading.
If I am right about all this, I think this means that some of the biggest banks, themselves, have already constructed and greatly enlarged a now truly massive trip wired auto-destruct on the banking system. If they have and they have explained any of this to our politicians then it would explain why our governments have been so abjectly willing to bail out any and all of the biggest banks and sacrifice anything else in the process. Any hint of relucatnace and the banks can make veiled reference to the extreme ‘risk’ of systemic ‘panic’ and forced liquidations. None of which is really a panic, since they have engineered it.
Are the banks threatening us? No, no, good lord no! Just pointing out the reality of the state of the system. There just happens to be a gun pointed at our head and the banks just happen to find their finger on the trigger. All they ask is that we do nothing to make them feel that their best interests are served by pulling it. And all we have to do to avoid that is stick to plan A. Simple.
But now I come to the really ugly part.
For the last four years who has been putting money in to the banks? And who has become a massive bond holder in all the banks? We have. First via our national banks and now via the Fed, ECB and various tax payer funded bail out funds. We are the bond holders who would be shafted by the Plan B looting. We would be the people waiting in line for the money the banks would have already made off with.
It is the money we have been putting in to bail out the biggest banks which they have then been using as collateral for offering weaker banks in weaker nations, repo loans or hypothecation. And the money or government bonds the weaker banks are using to pledge as assets and collateral for those loans or in derivative deals with the bigger banks is also from us. We have and are funding both sides of the deal.
The result is that the assets which the big banks would be legally allowed to seize and keep in the event of the failing bank actually going under would be ours.
To give a concrete example. Spain or Greece puts its tax payer money in to one of its insolvent banks.That bank then uses that money to get a short term repo or hypothecated it for loan. Or it uses it to hedge its currency problems via a currency swap or buys CDS insurance on assets it is deeply worried about. If the weak bank then goes down all those assets are seized by the big bank who was lending or was the counter-party to the derivative deals. The tax payer gets zero. And there is no redress. It was legally done. And the money the Big bank would have used to get themselves into this position would be the bail out money we had earlier given to the mega banks. They would have used that money against us – again.
The largest banks, those with the greatest exposure to bank and sovereign bonds from the most indebted euro nations, have the most to gain from doing derivative. repo and hypothecation deals with the troubled euro area banks and nations. The more assets the weak banks and nations have pledged in deals with teh Big banks, the more theBig banks will walk away with in the event of a crash. I suggest this is why, even as this crisis has worsened, the Big banks have been increasing by 18% their trade in derivatives and why Repo and hypothecation is as large or larger than even before the crash.
I am sorry this has been such a long piece but I wanted you to see exactly how I came to this because I hope you can show me how I am wrong. Please do so politely and I will go downstairs and celebrate my stupidity with a cup of tea, before apologizing to you all. I would very much like to be wrong.
But if I am not wrong, then the banks have created a financial Armageddon looting machine. Their Plan B is a mechanism to loot not just the more vulnerable banks in weaker nations, but those nations themselves. And the looting will not take months not even days. It could happen in hours if not minutes. Our leaders would have only a few hours to decide who they would side with: the banks or us. The past four years give me no faith they would chose us.
SC109-10
http://www.huffingtonpost.com/michael-meade-dhl/occupy-wall-street_b_1140259.html
Occupy vs. Nihilism: All or Nothing at All
The Occupy movement may be an instinctive response, not just to the greatest disparity of wealth and power in the history of America, but also to the emptying out of institutions and loss of meaning at all levels of life. An underlying instinct to inhabit life more fully may be arising and taking root in different places for different reasons. The message of Occupy may be "all over the place" because the underlying message is about "place," about reclaiming and more fully inhabiting public places, about being more present to the critical issues in each place, and about taking one's own place in life more fully.
A movement whose time has come keeps moving and keeps changing; it morphs and alters itself because it represents underlying changes that are only beginning to surface. Although national in scope, each new occupation takes up local issues and takes on local style. As the movement moves it stirs a wide range of issues and injustices waiting just under the skin of the country; that is what "grass roots" means. Seeds are carried on the winds of change, take root in all kinds of places, and sprout up everywhere at once.
Campuses and courthouses, parks and banks become places of intentional occupation as an instinctive, embodied response to the hollowing out of local as well as national institutions takes shape. When Occupy appears on campuses the stunning emptiness and increasing meaninglessness of "higher education" as well as its outrageous cost is being highlighted.
When campus police appear as storm troopers ready to punish students for being more present and more engaged in their own education, the emptiness of the institutions themselves is being depicted. University means a place of universal learning, not a staging ground for mindless careers or a franchise site for the blind continuance of the "business of education."
When mini-Occupy sites appear at individual houses threatened with foreclosure and neighbors set aside typical disagreements in order to protect each other's homes, the roots of community are trying to resurface. Genuine grass roots movements can cross typical "party lines" and dissolve class distinctions as the deep-rooted connections between people and the underlying dreams of the country rise up from below. The difference and distance between those who inhabit the land and those who rule the nation become revealed. For, it is not simply that government has gotten too big, but that it has become so empty of meaning and devoid of the values that sustain common humanity.
Occupy can be an instinctive, collective response to the loss of meaning and spread of nihilism throughout the culture. The Latin word nihil means "nothing at all;" absence as opposed to a presence, emptiness instead of abundance, a lack of substance rather than something substantial. Nihilism refers to various "doctrines of negation" that tend to be reductionist, narrow-minded, and rejecting. The spread of nihilism is one way of understanding what is currently happening where reductionist ideas, single-issue politics, and fixed ideologies make politics, public discourse, and public institutions increasingly empty of substance and lacking in meaning.
It is not just that the "do nothing" Congress appears to be a replica of the old "know nothing party," but that it also represents an underlying negation of life, an unconscious nihilistic movement that threatens to drain meaning and justice from collective life. It is not simply that the debates between "those who would be king" lack genuine substance, but that the candidates aspire to so little and reject so much.
It is not just that those who desire to lead seem so ready to reduce elected office to simplistic tax pledges and the dull repetition of ideas that lack both substance and imagination. It is that they do it so willfully, so blindly, and with a bravado that surpasses egotism and seems intended to elevate narcissism to religious heights. The bankrupting of the system allows those who are most empty of substance to rise to the top most readily. When winning is the only goal, everyone loses.
When Donald Trump and Newt Gingrich appear as ego-twins trumpeting "big ideas" that are empty of true meaning, lacking in genuine intention, and devoid of actual political value, something is being said about the emptiness of both business and politics. Something is being said about the loss of statesmanship and absence of genuine ideas of governance, about the hopeless collapse of the complexities of life into the most common forms of commerce and self aggrandizement. In the end, economics alone can never solve the problems of economics.
The desire to punish the poor, blame the disadvantaged, and force children into hard labor arises from willful ignorance as well as blind arrogance. Notions of putting "poor kids" to work because they lack inner values is not just regressive and possibly racist; it is not simply ignorant and unfeeling; it is also another form of the doctrines of negation that attack the meaning of individual lives. Such hollow ideas may serve the narcissistic needs and short term interests of a few, but what begins as simple negation can end in nihilistic disaster as those with hollow ideas and hardened avoid the real work of reviving the heart of culture and tending to the soul of the country.
Nihilism also raises its reckless head in the coarse and dehumanizing idea that a corporation can be a person. No matter how many people "sell their souls to the corporation," the corporation can never become a person. The idea of elevating a common business form to human status does not just distort reality, it also diminishes humanity. Like any abstract entity, a corporation can readily dehumanize people because it has no soul and no real interest in individual life.
Such doctrines of negation are not "big ideas" as much as clever manipulations that occur when real ideas are absent. The issue is not just financial corruption on a wide scale, but also that people have "bought a bill of goods" that have no long-term backing and have forgotten the common good. The great crises and great movements of the world do not take place outside the human soul, but within the souls of those moved by the unseen forces of change.
At issue in all genuine movements is the suffering of the individual human soul and it is soul that is missing when no one can imagine ways out of the practical dilemmas of life.
The hidden meaning of Occupy may involve an instinctive response to the threat of nihilism and the rise of emptiness; it may be a collective attempt to find the heart and soul of America again. Not "occupy" as a single-minded political statement, but the soulful sense of occupying life in ways that return meaning and justice, truth and beauty to the lives of individuals and communities, to institutions and practices that are after all intended to serve the people. Occupy may be an instinctive vehicle for making life in its diverse and surprising forms more valuable and meaningful again.
The soul of a movement cannot be simply identified or be easily codified. Yet, soul is what brings people together and shapes new ways of being when the old ways have become mere rote or have hardened into fixed and unmovable attitudes. Soul is what gives any movement depth, what gives any action meaning, what gives each life substance, authenticity, and genuine meaning. The underlying notion of Occupy may be an inspiration to begin to occupy something, anything more fully before the spread of nihilistic attitudes and heartless policies leech all meaning from the land.
Occupy an idea, live with it, sleep with it, inhabit it until it becomes a kind of "gnosis," or genuine knowing. Occupy a place because you love it or because it needs loving attention or simply because you need a place to be. Find something that feels and smells authentic and occupy it fully in order to bring back life's natural state of diversity and abundance. In the midst of all the change, confusion, and chaos, occupy your own soul; for without soulful presence even momentous events can become hollow and be reduced to political in-fighting and the seeds of change can fail to take root.
Occupy vs. Nihilism: All or Nothing at All
The Occupy movement may be an instinctive response, not just to the greatest disparity of wealth and power in the history of America, but also to the emptying out of institutions and loss of meaning at all levels of life. An underlying instinct to inhabit life more fully may be arising and taking root in different places for different reasons. The message of Occupy may be "all over the place" because the underlying message is about "place," about reclaiming and more fully inhabiting public places, about being more present to the critical issues in each place, and about taking one's own place in life more fully.
A movement whose time has come keeps moving and keeps changing; it morphs and alters itself because it represents underlying changes that are only beginning to surface. Although national in scope, each new occupation takes up local issues and takes on local style. As the movement moves it stirs a wide range of issues and injustices waiting just under the skin of the country; that is what "grass roots" means. Seeds are carried on the winds of change, take root in all kinds of places, and sprout up everywhere at once.
Campuses and courthouses, parks and banks become places of intentional occupation as an instinctive, embodied response to the hollowing out of local as well as national institutions takes shape. When Occupy appears on campuses the stunning emptiness and increasing meaninglessness of "higher education" as well as its outrageous cost is being highlighted.
When campus police appear as storm troopers ready to punish students for being more present and more engaged in their own education, the emptiness of the institutions themselves is being depicted. University means a place of universal learning, not a staging ground for mindless careers or a franchise site for the blind continuance of the "business of education."
When mini-Occupy sites appear at individual houses threatened with foreclosure and neighbors set aside typical disagreements in order to protect each other's homes, the roots of community are trying to resurface. Genuine grass roots movements can cross typical "party lines" and dissolve class distinctions as the deep-rooted connections between people and the underlying dreams of the country rise up from below. The difference and distance between those who inhabit the land and those who rule the nation become revealed. For, it is not simply that government has gotten too big, but that it has become so empty of meaning and devoid of the values that sustain common humanity.
Occupy can be an instinctive, collective response to the loss of meaning and spread of nihilism throughout the culture. The Latin word nihil means "nothing at all;" absence as opposed to a presence, emptiness instead of abundance, a lack of substance rather than something substantial. Nihilism refers to various "doctrines of negation" that tend to be reductionist, narrow-minded, and rejecting. The spread of nihilism is one way of understanding what is currently happening where reductionist ideas, single-issue politics, and fixed ideologies make politics, public discourse, and public institutions increasingly empty of substance and lacking in meaning.
It is not just that the "do nothing" Congress appears to be a replica of the old "know nothing party," but that it also represents an underlying negation of life, an unconscious nihilistic movement that threatens to drain meaning and justice from collective life. It is not simply that the debates between "those who would be king" lack genuine substance, but that the candidates aspire to so little and reject so much.
It is not just that those who desire to lead seem so ready to reduce elected office to simplistic tax pledges and the dull repetition of ideas that lack both substance and imagination. It is that they do it so willfully, so blindly, and with a bravado that surpasses egotism and seems intended to elevate narcissism to religious heights. The bankrupting of the system allows those who are most empty of substance to rise to the top most readily. When winning is the only goal, everyone loses.
When Donald Trump and Newt Gingrich appear as ego-twins trumpeting "big ideas" that are empty of true meaning, lacking in genuine intention, and devoid of actual political value, something is being said about the emptiness of both business and politics. Something is being said about the loss of statesmanship and absence of genuine ideas of governance, about the hopeless collapse of the complexities of life into the most common forms of commerce and self aggrandizement. In the end, economics alone can never solve the problems of economics.
The desire to punish the poor, blame the disadvantaged, and force children into hard labor arises from willful ignorance as well as blind arrogance. Notions of putting "poor kids" to work because they lack inner values is not just regressive and possibly racist; it is not simply ignorant and unfeeling; it is also another form of the doctrines of negation that attack the meaning of individual lives. Such hollow ideas may serve the narcissistic needs and short term interests of a few, but what begins as simple negation can end in nihilistic disaster as those with hollow ideas and hardened avoid the real work of reviving the heart of culture and tending to the soul of the country.
Nihilism also raises its reckless head in the coarse and dehumanizing idea that a corporation can be a person. No matter how many people "sell their souls to the corporation," the corporation can never become a person. The idea of elevating a common business form to human status does not just distort reality, it also diminishes humanity. Like any abstract entity, a corporation can readily dehumanize people because it has no soul and no real interest in individual life.
Such doctrines of negation are not "big ideas" as much as clever manipulations that occur when real ideas are absent. The issue is not just financial corruption on a wide scale, but also that people have "bought a bill of goods" that have no long-term backing and have forgotten the common good. The great crises and great movements of the world do not take place outside the human soul, but within the souls of those moved by the unseen forces of change.
At issue in all genuine movements is the suffering of the individual human soul and it is soul that is missing when no one can imagine ways out of the practical dilemmas of life.
The hidden meaning of Occupy may involve an instinctive response to the threat of nihilism and the rise of emptiness; it may be a collective attempt to find the heart and soul of America again. Not "occupy" as a single-minded political statement, but the soulful sense of occupying life in ways that return meaning and justice, truth and beauty to the lives of individuals and communities, to institutions and practices that are after all intended to serve the people. Occupy may be an instinctive vehicle for making life in its diverse and surprising forms more valuable and meaningful again.
The soul of a movement cannot be simply identified or be easily codified. Yet, soul is what brings people together and shapes new ways of being when the old ways have become mere rote or have hardened into fixed and unmovable attitudes. Soul is what gives any movement depth, what gives any action meaning, what gives each life substance, authenticity, and genuine meaning. The underlying notion of Occupy may be an inspiration to begin to occupy something, anything more fully before the spread of nihilistic attitudes and heartless policies leech all meaning from the land.
Occupy an idea, live with it, sleep with it, inhabit it until it becomes a kind of "gnosis," or genuine knowing. Occupy a place because you love it or because it needs loving attention or simply because you need a place to be. Find something that feels and smells authentic and occupy it fully in order to bring back life's natural state of diversity and abundance. In the midst of all the change, confusion, and chaos, occupy your own soul; for without soulful presence even momentous events can become hollow and be reduced to political in-fighting and the seeds of change can fail to take root.
Friday, December 16, 2011
SC109-9
http://cluborlov.blogspot.com/2011/12/conversation-about-europe.html
A Conversation About Europe
I came upon Dmitry Orlov's writings—as with most good things on the Internet—by letting chance and curiosity guide me from link to link. It was one of those moments of clarity when a large number of confusing questions find their answer along with their correct formulation. For example, the existence of fundamental similarities between the Soviet Union and the United States was for me a vague intuition, but I was unable to draw up a detailed list as Dmitry has done. One must have lived in two crumbling empires in order to be able to do that.
I must say that my enthusiasm was not shared by those around me, with whom I have shared my translations. It's only natural: who wants to hear how our world of material comfort, opportunity and unstoppable individual progress is about to collapse under the weight of its own expansion? Certainly not the post-war generation weaned on the exuberant growth of the postwar boom (1945-1973), well established in their lives of average consumers since the 1980s, and willing to enjoy a hedonistic age while remaining convinced that despite the economic tragedies ravaging society around them, their young children will benefit from more or less the same well-padded, industrialized lifestyle. The generation of their grandchildren is more receptive to the notion of economic decline—though to varying degrees, depending on the decrease of their purchasing power and how lethally bored they feel at work (if they can find any) .
It would be wrong to shoot the messenger who brings bad news. If you read Dmitry carefully, scrupulously separating the factual bad news, which are beyond his control, from his views on what can be done to survive and live in a post-industrial world, you will find evidence of strong optimism. I hope that in this he is right.
Whatever our views on peak oil and its consequences—or our distate for scary prophecies—we can find in Dmitry Orlov fresh ideas on how to conduct our lives in a degraded economic and political environment, reasons to seek fruitful relations with people you might not normally cherry-pick, or the most effective approach to the frustrating political and media chatter and the honeyed whisper of commercial propaganda (shrug, turn around and go on with your life).
TB: What difference do you see between American and European close future?
DO: European countries are historical entities that still hold vestiges of allegiances beyond the monetized, corporate realm, while the United States was started as a corporate entity, based on a revolution that was essentially a tax revolt and thus has no fall-back. The European population is less transient than in America, with a stronger sense of regional belonging and are more likely to be acquainted with their neighbors and to be able to find a common language and to find solutions to common problems.
Probably the largest difference, and the one most promising for fruitful discussion, is in the area of local politics. European political life may be damaged by money politics and free market liberalism, but unlike in the United States, it does not seem completely brain-dead. At least I hope that it isn't completely dead; the warm air coming out of Brussels is often indistinguishable from the vapor vented by Washington, but better things might happen on the local level. In Europe there is something of a political spectrum left, dissent is not entirely futile, and revolt is not entirely suicidal. In all, the European political landscape may offer many more possibilities for relocalization, for demonitization of human relationships, for devolution to more local institutions and support systems, than the United States.
TB: Will American collapse delay European collapse or accelerate it?
DO: There are many uncertainties to how events might unfold, but Europe is at least twice as able to weather the next, predicted oil shock as the United States. Once petroleum demand in the US collapses following a hard crash, Europe will for a time, perhaps for as long as a decade, have the petroleum resources it needs, before resource depletion catches up with demand.
The relative proximity to Eurasia's large natural gas reserves should also prove to be a major safeguard against disruption, in spite of toxic pipeline politics. The predicted sudden demise of the US dollar will no doubt be economically disruptive, but in the slightly longer term the collapse of the dollar system will stop the hemorrhaging of the world's savings into American risky debt and unaffordable consumption. This should boost the fortunes of Eurozone countries and also give some breathing space to the world's poorer countries.
TB: How does Europe compare to the United States and the former Soviet Union, collapse-wise?
DO: Europe is ahead of the United States in all the key Collapse Gap categories, such as housing, transportation, food, medicine, education and security. In all these areas, there is at least some system of public support and some elements of local resilience. How the subjective experience of collapse will compare to what happened in the Soviet Union is something we will all have to think about after the fact. One major difference is that the collapse of the USSR was followed by a wave of corrupt and even criminal privatization and economic liberalization, which was like having an earthquake followed by arson, whereas I do not see any horrible new economic system on the horizon that is ready to be imposed on Europe the moment it stumbles. On the other hand, the remnants of socialism that were so helpful after the Soviet collapse are far more eroded in Europe thanks to the recent wave of failed experiments of market liberalization.
TB: How does peak oil interact with peak gas and peak coal? Should we care about other peaks?
DO: The various fossil fuels are not interchangeable. Oil provides the vast majority of transport fuels, without which commerce in developed economies comes to a standstill. Coal is important for providing for the base electric load in many countries (not France, which relies on nuclear). Natural gas (methane) provides ammonia fertilizer for industrial agriculture, and also provides thermal energy for domestic heating, cooking and numerous manufacturing processes.
All of these supplies are past their peaks in most countries, and are either past or approaching their peaks globally.
About a quarter of all the oil is still being produced from a handful of super-giant oil fields which were discovered several decades ago. The productive lives of these fields have been extended by techniques such as in-fill drilling and water injection. These techniques allow the resource to be depleted more fully and more quickly, resulting in a much steeper decline: the oil turns to water, slowly at first, then all at once. The super-giant Cantarell field in the Gulf of Mexico is a good example of such rapid depletion, and Mexico does not have many years left as an oil exporter. Saudi Arabia, the world's second-largest oil producer after Russia, is very secretive about its fields, but it is telltale that they have curtailed oil field development and are investing in solar technology.
Although there is currently an attempt to represent as a break-through the new (in reality, not so new) hydraulic fracturing and horizontal drilling techniques for producing natural gas from geological formations, such as shale, that were previously considered insufficiently porous, this is, in reality, a financial play. The effort is too expensive in terms of both technical requirements and environmental damage to pay for itself, unless the price of natural gas rises to the point where it starts to cause economic damage, which suppresses demand.
Coal was previously thought to be very abundant, with hundreds of years of supply left at current levels. However, these estimates have been reassessed in recent years, and it would appear that the world's largest coal producer, China, is quite close to its peak. Since it is coal that has directly fueled the recent bout of Chinese economic growth, this implies that Chinese economic growth is at an end, with severe economic, social and political dislocations to follow. The US relies on coal for close to half of its electricity generation, and is likewise unable to increase the use of this resource. Most of the energy-dense anthracite has been depleted in the US, and what is being produced now, through environmentally destructive techniques such as mountaintop removal, is much lower grades of coal. The coal is slowly turning to dirt. At a certain point in time coal will cease to provide an energy gain: digging it up, crushing it and transporting it to a power plant will become a net waste of energy.
It is essential to appreciate the fact that it is oil, and the transport fuels produced from it, that enables all other types of economic activity. Without diesel for locomotives, coal cannot be transported to power plants, the electric grid goes down, and all economic activity stops. It is also essential to understand that even minor shortfalls in the availability of transport fuels have severe economic knock-on effects. These effects are exacerbated by the fact that it is economic growth, not economic décroissance [Fr., "de-growth"] (which seems inevitable, given the factors described above) that forms the basis of all economic and industrial planning. Modern industrial economies, at the financial, political and technological level, are not designed for shrinkage, or even for steady state. Thus, a minor oil crisis (such as the recent steady increase in the price of oil punctuated by severe price spikes) results in a sociopolitical calamity.
Lastly, it bears mentioning that fossil fuels are really only useful in the context of an industrial economy that can make use of them. An industrial economy that is in an advanced state of decay and collapse can neither produce nor make use of the vast quantities of fossil fuels that are currently burned up daily. There is no known method of scaling industry down to boutique size, to serve just the needs of the elite, or to provide life support to social, financial and political institutions that co-evolved with industry in absence of industry. It also bears pointing out that fossil fuel use was very tightly correlated with human population size on the way up, and is likely to remain so on the way down. Thus, it may not be necessary to look too far past the peak in global oil production to see major disruption of global industry, which will make other fossil fuels irrelevant.
TB: How is post-collapse Russia doing ? Ready for its second peak ?
DO: Russia remains the world's largest oil producer. Although it has been unable to grow its conventional oil production, it has recently claimed that it can double its oil endowment by drilling offshore in the melting Arctic. Russia is and remains Europe's second largest energy asset. In spite of toxic pipeline politics (which have recently been remedied somewhat by the construction of the Nordstream gas pipeline across the Baltic) it has historically been the single most reliable European energy supplier, and shows every intention of remaining so into the future.
TB: Is there hope for a safe, harmless European decline, or is any industrial society just bound to collapse at once when fuel runs out?
DO: The severity of collapse will depend on how quickly societies can scale down their energy use, curtail their reliance on industry, grow their own food, go back to manual methods of production for fulfilling their immediate needs, and so forth. It is to be expected that large cities and industrial centers will depopulate the fastest. On the other hand, remote, land-locked, rural areas will not have the local resources to reboot into a post-industrial mode. But there is hope for small-to-middling towns that are surrounded by arable land and have access to a waterway. To see what will be survivable, one needs to look at ancient and medieval settlement patterns, ignoring places that became overdeveloped during the industrial era. Those are the places to move to, to ride out the coming events.
TB: I remember my grandmother telling me about the German occupation, when urban and suburban dwellers flocked into country towns every Sunday with empty cases, eager too find some food to buy from the local farmers, hoping back in a train the same day. Is there any advantage in living in a city, in a post-collapse era, rather than in the countryside?
DO: Surviving in the countryside requires a different mindset, and different set of skills than surviving in a town or a city. Certainly, most of our contemporaries, who spend their days manipulating symbols, and expect to be fed for doing so, would not survive when left to their own devices in the countryside. On the other hand, even those living in the countryside are currently missing much of the know-how they once had for surviving without industrial supplies, and lack the resources to reconstitute it in a crisis. There could be some fruitful collaboration between them, given sufficient focus and preparation.
TB: Can we grow sufficient food with low technology, low energy methods, out of highly exhausted, highly polluted farmland ? It seems we might end up in a worse farming situation than our ancestors just two or three generations ago.
DO: That is certainly true. Add global warming, which is already causing severe soil erosion due to torrential rains and floods, droughts and heat waves in other areas. It is likely that agriculture as it has existed for the past ten thousand years will become ineffective in many areas. However, there are other techniques for growing food, which involve setting up stable ecosystems consisting of many species of plants and animals, including humans, living together synergistically. What will of necessity be left behind is the current system, where fertilizers and pesticides are spread out on tilled dirt (rather than living soil) to kill everything but one organism (a cash crop) which is then mechanically harvested, processed, ingested, excreted, and flushed into the ocean. This system is already encountering a hard limit in the availability of phosphate fertilizer. But it is possible to create closed cycle systems, where nutrients stay on the land and are allowed to build up over time. The key to post-industrial human survival, it turns out, is in making proper use of human excrement and urine.
TB: If cities or big towns survive collapse, what will be their core activities? What do we need cities for?
DO: The size of towns and cities is proportional to the surplus that the countryside is able to produce. This surplus has become gigantic during the period of industrial development, where one or two percent of the population is able to feed the rest. In a post-industrial world, where two-thirds of the population is directly involved in growing or gathering food, there will be many fewer people who will be able to live on agricultural surplus. The activities that are typically centralized are those that have to do with long-range transportation (sail ports) and manufacturing (mills and manufactures powered by waterwheels). Some centers of learning may also remain, although much of contemporary higher education, which involves training young people for occupations which will no longer exist, is sure to fall by the wayside.
TB: Some Americans view peak oil and collapse as another investment opportunity. You already wrote on the fallacies of the faith in money. That leaves a more useful question: what can people do of their savings during or preferably before collapse? What can you buy that is truly useful? I assume the answer vary greatly according to how much money you still have.
DO: This is a very important question. While there is still time, money should be converted to commodity items that will remain useful even after the industrial base disappears. These commodities can be stockpiled in containers and are sure to lose their value more slowly than any paper asset. One example is hand implements for performing manual labor, to provide essential services that are currently performed by mechanized labor. Another is materials that will be needed to bring back essential post-industrial services such as sail-based transportation: materials such as synthetic fibre rope and sail cloth need to be stockpiled beforehand to ease the transition.
TB: You don't mention arable land or housing. Do you think some kind of real property may turn out a valuable post-collapse asset, assuming you can afford them without drowning into debt, or is it too much financial and fiscal liability in our pre-collapse era to be of any use?
DO: The laws and customs that govern real property are not helpful or conducive to the right kind of change. As the age of mechanized agriculture comes to an end, we should expect there to be large tracts of fallow land. It won't matter too much who owns them, on paper, since the owner is unlikely to be able to make productive use of large fields without mechanized labor. Other patterns of occupying the landscape will have to emerge, of necessity, such as small plots tended by families, for subsistence. Absentee landlords (those who hold title to land without actually physically residing on it but using it as a financial asset) are likely to be simply run off once the financial and mechanical amplifiers of their feeble physical energies are no longer available to them. I expect several decades more of fruitless efforts to grow cash crops on increasingly depleted land using increasingly unaffordable and unreliable mechanical and chemical farming techniques. These efforts will increasingly lead to failure due to climate disruption, causing food prices to spike and robbing the population of their savings in a downward spiral. The new patterns of subsisting off the land will take time to emerge, but this process can be accelerated by people who pool resources, buy up, lease, or simply occupy small tracts of land, and practice permaculture techniques. Community gardens, guerilla gardening efforts, planting wild edibles using seed balls, seasonal camps for growing and gathering food, and other humble and low-key arrangements can pave the way towards something bigger, allowing some groups of people to avoid the most dismal scenario.
TB: How can people make preparations for collapse or decline without losing connections with their current social environment, friends, relatives, jobs or customers, and everything around them that still function as usual. That is a question about sanity as much as practicality.
DO: This is perhaps the most difficult question. The level of alienation in developed industrial societies, in Europe, North America and elsewhere, is quite staggering. People are only able to form lasting friendships in school, and are unable to become close with people thereafter with the possible exception of romantic involvements, which are often fleeting. By a certain age people become set in their ways, develop manners specific to their class, and their interactions with others become scripted and limited to socially sanctioned, commercial modes. A far-reaching, fundamental transition, such as the one we are discussing, is impossible without the ability to improvise, to be flexible—in effect, to be able to abandon who you have been and to change who you are in favor of what the moment demands. Paradoxically, it is usually the young and the old, who have nothing to lose, who do the best, and it is the successful, productive people between 30 and 60 who do the worst. It takes a certain detachment from all that is abstract and impersonal, and a personal approach to everyone around you, to navigate the new landscape.
A Conversation About Europe
I came upon Dmitry Orlov's writings—as with most good things on the Internet—by letting chance and curiosity guide me from link to link. It was one of those moments of clarity when a large number of confusing questions find their answer along with their correct formulation. For example, the existence of fundamental similarities between the Soviet Union and the United States was for me a vague intuition, but I was unable to draw up a detailed list as Dmitry has done. One must have lived in two crumbling empires in order to be able to do that.
I must say that my enthusiasm was not shared by those around me, with whom I have shared my translations. It's only natural: who wants to hear how our world of material comfort, opportunity and unstoppable individual progress is about to collapse under the weight of its own expansion? Certainly not the post-war generation weaned on the exuberant growth of the postwar boom (1945-1973), well established in their lives of average consumers since the 1980s, and willing to enjoy a hedonistic age while remaining convinced that despite the economic tragedies ravaging society around them, their young children will benefit from more or less the same well-padded, industrialized lifestyle. The generation of their grandchildren is more receptive to the notion of economic decline—though to varying degrees, depending on the decrease of their purchasing power and how lethally bored they feel at work (if they can find any) .
It would be wrong to shoot the messenger who brings bad news. If you read Dmitry carefully, scrupulously separating the factual bad news, which are beyond his control, from his views on what can be done to survive and live in a post-industrial world, you will find evidence of strong optimism. I hope that in this he is right.
Whatever our views on peak oil and its consequences—or our distate for scary prophecies—we can find in Dmitry Orlov fresh ideas on how to conduct our lives in a degraded economic and political environment, reasons to seek fruitful relations with people you might not normally cherry-pick, or the most effective approach to the frustrating political and media chatter and the honeyed whisper of commercial propaganda (shrug, turn around and go on with your life).
TB: What difference do you see between American and European close future?
DO: European countries are historical entities that still hold vestiges of allegiances beyond the monetized, corporate realm, while the United States was started as a corporate entity, based on a revolution that was essentially a tax revolt and thus has no fall-back. The European population is less transient than in America, with a stronger sense of regional belonging and are more likely to be acquainted with their neighbors and to be able to find a common language and to find solutions to common problems.
Probably the largest difference, and the one most promising for fruitful discussion, is in the area of local politics. European political life may be damaged by money politics and free market liberalism, but unlike in the United States, it does not seem completely brain-dead. At least I hope that it isn't completely dead; the warm air coming out of Brussels is often indistinguishable from the vapor vented by Washington, but better things might happen on the local level. In Europe there is something of a political spectrum left, dissent is not entirely futile, and revolt is not entirely suicidal. In all, the European political landscape may offer many more possibilities for relocalization, for demonitization of human relationships, for devolution to more local institutions and support systems, than the United States.
TB: Will American collapse delay European collapse or accelerate it?
DO: There are many uncertainties to how events might unfold, but Europe is at least twice as able to weather the next, predicted oil shock as the United States. Once petroleum demand in the US collapses following a hard crash, Europe will for a time, perhaps for as long as a decade, have the petroleum resources it needs, before resource depletion catches up with demand.
The relative proximity to Eurasia's large natural gas reserves should also prove to be a major safeguard against disruption, in spite of toxic pipeline politics. The predicted sudden demise of the US dollar will no doubt be economically disruptive, but in the slightly longer term the collapse of the dollar system will stop the hemorrhaging of the world's savings into American risky debt and unaffordable consumption. This should boost the fortunes of Eurozone countries and also give some breathing space to the world's poorer countries.
TB: How does Europe compare to the United States and the former Soviet Union, collapse-wise?
DO: Europe is ahead of the United States in all the key Collapse Gap categories, such as housing, transportation, food, medicine, education and security. In all these areas, there is at least some system of public support and some elements of local resilience. How the subjective experience of collapse will compare to what happened in the Soviet Union is something we will all have to think about after the fact. One major difference is that the collapse of the USSR was followed by a wave of corrupt and even criminal privatization and economic liberalization, which was like having an earthquake followed by arson, whereas I do not see any horrible new economic system on the horizon that is ready to be imposed on Europe the moment it stumbles. On the other hand, the remnants of socialism that were so helpful after the Soviet collapse are far more eroded in Europe thanks to the recent wave of failed experiments of market liberalization.
TB: How does peak oil interact with peak gas and peak coal? Should we care about other peaks?
DO: The various fossil fuels are not interchangeable. Oil provides the vast majority of transport fuels, without which commerce in developed economies comes to a standstill. Coal is important for providing for the base electric load in many countries (not France, which relies on nuclear). Natural gas (methane) provides ammonia fertilizer for industrial agriculture, and also provides thermal energy for domestic heating, cooking and numerous manufacturing processes.
All of these supplies are past their peaks in most countries, and are either past or approaching their peaks globally.
About a quarter of all the oil is still being produced from a handful of super-giant oil fields which were discovered several decades ago. The productive lives of these fields have been extended by techniques such as in-fill drilling and water injection. These techniques allow the resource to be depleted more fully and more quickly, resulting in a much steeper decline: the oil turns to water, slowly at first, then all at once. The super-giant Cantarell field in the Gulf of Mexico is a good example of such rapid depletion, and Mexico does not have many years left as an oil exporter. Saudi Arabia, the world's second-largest oil producer after Russia, is very secretive about its fields, but it is telltale that they have curtailed oil field development and are investing in solar technology.
Although there is currently an attempt to represent as a break-through the new (in reality, not so new) hydraulic fracturing and horizontal drilling techniques for producing natural gas from geological formations, such as shale, that were previously considered insufficiently porous, this is, in reality, a financial play. The effort is too expensive in terms of both technical requirements and environmental damage to pay for itself, unless the price of natural gas rises to the point where it starts to cause economic damage, which suppresses demand.
Coal was previously thought to be very abundant, with hundreds of years of supply left at current levels. However, these estimates have been reassessed in recent years, and it would appear that the world's largest coal producer, China, is quite close to its peak. Since it is coal that has directly fueled the recent bout of Chinese economic growth, this implies that Chinese economic growth is at an end, with severe economic, social and political dislocations to follow. The US relies on coal for close to half of its electricity generation, and is likewise unable to increase the use of this resource. Most of the energy-dense anthracite has been depleted in the US, and what is being produced now, through environmentally destructive techniques such as mountaintop removal, is much lower grades of coal. The coal is slowly turning to dirt. At a certain point in time coal will cease to provide an energy gain: digging it up, crushing it and transporting it to a power plant will become a net waste of energy.
It is essential to appreciate the fact that it is oil, and the transport fuels produced from it, that enables all other types of economic activity. Without diesel for locomotives, coal cannot be transported to power plants, the electric grid goes down, and all economic activity stops. It is also essential to understand that even minor shortfalls in the availability of transport fuels have severe economic knock-on effects. These effects are exacerbated by the fact that it is economic growth, not economic décroissance [Fr., "de-growth"] (which seems inevitable, given the factors described above) that forms the basis of all economic and industrial planning. Modern industrial economies, at the financial, political and technological level, are not designed for shrinkage, or even for steady state. Thus, a minor oil crisis (such as the recent steady increase in the price of oil punctuated by severe price spikes) results in a sociopolitical calamity.
Lastly, it bears mentioning that fossil fuels are really only useful in the context of an industrial economy that can make use of them. An industrial economy that is in an advanced state of decay and collapse can neither produce nor make use of the vast quantities of fossil fuels that are currently burned up daily. There is no known method of scaling industry down to boutique size, to serve just the needs of the elite, or to provide life support to social, financial and political institutions that co-evolved with industry in absence of industry. It also bears pointing out that fossil fuel use was very tightly correlated with human population size on the way up, and is likely to remain so on the way down. Thus, it may not be necessary to look too far past the peak in global oil production to see major disruption of global industry, which will make other fossil fuels irrelevant.
TB: How is post-collapse Russia doing ? Ready for its second peak ?
DO: Russia remains the world's largest oil producer. Although it has been unable to grow its conventional oil production, it has recently claimed that it can double its oil endowment by drilling offshore in the melting Arctic. Russia is and remains Europe's second largest energy asset. In spite of toxic pipeline politics (which have recently been remedied somewhat by the construction of the Nordstream gas pipeline across the Baltic) it has historically been the single most reliable European energy supplier, and shows every intention of remaining so into the future.
TB: Is there hope for a safe, harmless European decline, or is any industrial society just bound to collapse at once when fuel runs out?
DO: The severity of collapse will depend on how quickly societies can scale down their energy use, curtail their reliance on industry, grow their own food, go back to manual methods of production for fulfilling their immediate needs, and so forth. It is to be expected that large cities and industrial centers will depopulate the fastest. On the other hand, remote, land-locked, rural areas will not have the local resources to reboot into a post-industrial mode. But there is hope for small-to-middling towns that are surrounded by arable land and have access to a waterway. To see what will be survivable, one needs to look at ancient and medieval settlement patterns, ignoring places that became overdeveloped during the industrial era. Those are the places to move to, to ride out the coming events.
TB: I remember my grandmother telling me about the German occupation, when urban and suburban dwellers flocked into country towns every Sunday with empty cases, eager too find some food to buy from the local farmers, hoping back in a train the same day. Is there any advantage in living in a city, in a post-collapse era, rather than in the countryside?
DO: Surviving in the countryside requires a different mindset, and different set of skills than surviving in a town or a city. Certainly, most of our contemporaries, who spend their days manipulating symbols, and expect to be fed for doing so, would not survive when left to their own devices in the countryside. On the other hand, even those living in the countryside are currently missing much of the know-how they once had for surviving without industrial supplies, and lack the resources to reconstitute it in a crisis. There could be some fruitful collaboration between them, given sufficient focus and preparation.
TB: Can we grow sufficient food with low technology, low energy methods, out of highly exhausted, highly polluted farmland ? It seems we might end up in a worse farming situation than our ancestors just two or three generations ago.
DO: That is certainly true. Add global warming, which is already causing severe soil erosion due to torrential rains and floods, droughts and heat waves in other areas. It is likely that agriculture as it has existed for the past ten thousand years will become ineffective in many areas. However, there are other techniques for growing food, which involve setting up stable ecosystems consisting of many species of plants and animals, including humans, living together synergistically. What will of necessity be left behind is the current system, where fertilizers and pesticides are spread out on tilled dirt (rather than living soil) to kill everything but one organism (a cash crop) which is then mechanically harvested, processed, ingested, excreted, and flushed into the ocean. This system is already encountering a hard limit in the availability of phosphate fertilizer. But it is possible to create closed cycle systems, where nutrients stay on the land and are allowed to build up over time. The key to post-industrial human survival, it turns out, is in making proper use of human excrement and urine.
TB: If cities or big towns survive collapse, what will be their core activities? What do we need cities for?
DO: The size of towns and cities is proportional to the surplus that the countryside is able to produce. This surplus has become gigantic during the period of industrial development, where one or two percent of the population is able to feed the rest. In a post-industrial world, where two-thirds of the population is directly involved in growing or gathering food, there will be many fewer people who will be able to live on agricultural surplus. The activities that are typically centralized are those that have to do with long-range transportation (sail ports) and manufacturing (mills and manufactures powered by waterwheels). Some centers of learning may also remain, although much of contemporary higher education, which involves training young people for occupations which will no longer exist, is sure to fall by the wayside.
TB: Some Americans view peak oil and collapse as another investment opportunity. You already wrote on the fallacies of the faith in money. That leaves a more useful question: what can people do of their savings during or preferably before collapse? What can you buy that is truly useful? I assume the answer vary greatly according to how much money you still have.
DO: This is a very important question. While there is still time, money should be converted to commodity items that will remain useful even after the industrial base disappears. These commodities can be stockpiled in containers and are sure to lose their value more slowly than any paper asset. One example is hand implements for performing manual labor, to provide essential services that are currently performed by mechanized labor. Another is materials that will be needed to bring back essential post-industrial services such as sail-based transportation: materials such as synthetic fibre rope and sail cloth need to be stockpiled beforehand to ease the transition.
TB: You don't mention arable land or housing. Do you think some kind of real property may turn out a valuable post-collapse asset, assuming you can afford them without drowning into debt, or is it too much financial and fiscal liability in our pre-collapse era to be of any use?
DO: The laws and customs that govern real property are not helpful or conducive to the right kind of change. As the age of mechanized agriculture comes to an end, we should expect there to be large tracts of fallow land. It won't matter too much who owns them, on paper, since the owner is unlikely to be able to make productive use of large fields without mechanized labor. Other patterns of occupying the landscape will have to emerge, of necessity, such as small plots tended by families, for subsistence. Absentee landlords (those who hold title to land without actually physically residing on it but using it as a financial asset) are likely to be simply run off once the financial and mechanical amplifiers of their feeble physical energies are no longer available to them. I expect several decades more of fruitless efforts to grow cash crops on increasingly depleted land using increasingly unaffordable and unreliable mechanical and chemical farming techniques. These efforts will increasingly lead to failure due to climate disruption, causing food prices to spike and robbing the population of their savings in a downward spiral. The new patterns of subsisting off the land will take time to emerge, but this process can be accelerated by people who pool resources, buy up, lease, or simply occupy small tracts of land, and practice permaculture techniques. Community gardens, guerilla gardening efforts, planting wild edibles using seed balls, seasonal camps for growing and gathering food, and other humble and low-key arrangements can pave the way towards something bigger, allowing some groups of people to avoid the most dismal scenario.
TB: How can people make preparations for collapse or decline without losing connections with their current social environment, friends, relatives, jobs or customers, and everything around them that still function as usual. That is a question about sanity as much as practicality.
DO: This is perhaps the most difficult question. The level of alienation in developed industrial societies, in Europe, North America and elsewhere, is quite staggering. People are only able to form lasting friendships in school, and are unable to become close with people thereafter with the possible exception of romantic involvements, which are often fleeting. By a certain age people become set in their ways, develop manners specific to their class, and their interactions with others become scripted and limited to socially sanctioned, commercial modes. A far-reaching, fundamental transition, such as the one we are discussing, is impossible without the ability to improvise, to be flexible—in effect, to be able to abandon who you have been and to change who you are in favor of what the moment demands. Paradoxically, it is usually the young and the old, who have nothing to lose, who do the best, and it is the successful, productive people between 30 and 60 who do the worst. It takes a certain detachment from all that is abstract and impersonal, and a personal approach to everyone around you, to navigate the new landscape.
SC109-8
http://www.huffingtonpost.com/jim-garrison/obamas-most-fateful-decis_b_1143005.html
Obama's Most Fateful Decision
The 2012 National Defense Authorization Act, if signed into law, will signal the death knell of our constitutional republic and the formal inception of a legalized police state in the United States. Passed by the House on May 26, 2011 (HR 1540), the Senate version (S. 1867) was passed on Dec. 1, 2011. Now only one man -- Barack Obama, a scholar of constitutional law -- will make the decision as to whether the Bill of Rights he went to Harvard to study will be superceded by a law that abrogates it.
First, let's be clear what is at stake. Most critical are Sections 1031 and 1032 of the Act, which authorize detaining U.S. citizens indefinitely without charge or trial if deemed necessary by the president. The bill would allow federal officials to take these steps based on suspicions only, without having to demonstrate to any judicial official that there is solid evidence to justify their actions. No reasonable proof will any longer be required for the government to suspend an American citizen's constitutional rights. Detentions can follow mere membership, past or present, in "suspect organizations." Government agents would have unchecked authority to arrest, interrogate, and indefinitely detain law-abiding citizens if accused of potentially posing a threat to "national security." Further, military personnel anywhere in the world would be authorized to seize U.S. citizens without due process. As Senator Lindsay Graham put it, under this Act the U.S. homeland is considered a "battlefield."
What is at stake is more than the Constitution itself, as central as that document has been to the American experiment in democracy. What is a stake is nothing short of the basic fundamentals of western jurisprudence. Central to civilized law is the notion that a person cannot be held without a charge and cannot be detained indefinitely without a trial. These principles date back to Greco-Roman times, were developed by English common law beginning in 1215 with the Magna Carta, and were universalized by the Enlightenment in the century before the American Constitution and Bill of Rights were fought for and adopted as the supreme law of the land.
For more than two centuries of constitutional development since then, the United States has been heralded as the light to the world precisely because of the liberties it enshrined in its Declaration of Independence and Constitution as inalienable. It now seems as if the events of 9/11 have been determined to be of such a threatening magnitude that our national leaders feel justified to abrogate in their entirety the very inalienable principles upon which our Republic was founded.
At the heart of this Act is the most fundamental question we must ask ourselves as a free people: is 9/11 worth the Republic? The question screaming at us through this bill is whether the war on terror is a better model around which to shape our destiny than our constitutional liberties. It compels the question of whether we remain an ongoing experiment in democracy, pioneering new frontiers in the name of liberty and justice for all, or have we become a national security state, having financially corrupted and militarized our democracy to such an extent that we define ourselves, as Sparta did, only through the exigencies of war?
Within a week of 9/11, the Use of Military Force Act was approved which authorized the full application of U.S. military power against "terrorism." A month later, on Oct. 26, 2001, Congress overwhelmingly passed the Patriot Act that began the legislative assault on the Bill of Rights. The First Amendment right to freedom of association was gutted as federal officials were authorized to prosecute citizens for alleged association with "undesirable groups." The Fourth Amendment right against unreasonable search and seizure was compromised by permitting indefinite detentions of those suspected of "terrorism." The Fourteenth Amendment right to privacy was obliterated as unchecked surveillance was authorized to access personal records, financial dealings, and medical records of any citizen at any time without any judicial oversight or permission. Evidence obtained extra-judicially could be withheld from defense attorneys.
The Patriot Act also criminalized "domestic terrorism." It stated that civil conduct can be considered "domestic terrorism" if such actions aim to "influence by intimidation or coercion" or "intimidate or coerce a civilian population." Put in plain language, this means that actions such as Occupy Wall Street can be designated as "domestic terrorism" by Federal authorities without judicial oversight and dealt with outside the due process of constitutional protections.
Two weeks after passage of the Patriot Act, on Nov. 13, President Bush issued Military Order No. 1 authorizing the executive branch and the military to capture, kidnap, or otherwise arrest non-citizens anywhere in the world if suspected of engaging in terrorist activities. Proof was not required. It stipulated that trials, if held, would be military tribunals, not civil courts, and that evidence obtained by torture was permissible. No right of appeal was afforded to those convicted. Numerous executive orders, findings, and National and Homeland Security Presidential Directives followed, further consolidating the militarization of due process under the law and enabling the executive branch to act without legal constraint after it has defined a person or group as potentially engaging in "terrorist" activity.
A year later, on Nov. 25, 2002, the Homeland Security Act was passed that for the first time integrated all U.S. intelligence agencies, both domestic and foreign, into a single interactive network under the president. The Act gave these intelligence agencies complete freedom to collect any and all data on anyone anywhere in the United States and, working with allies abroad, to access complete information on anyone anywhere in the world, working closely with local police, intelligence agencies, and the corporate sector. This dissolved the distinctions between domestic and foreign spying and made more ambiguous the distinction between domestic and foreign "terrorism."
The next major step took place on Oct. 17, 2006, when Congress passed the Military Commissions Act that effectively abrogated habeas corpus for domestic and foreign enemies alike, stating, "Any person is punishable who aides, abets, counsels, commands, or procures" material support for alleged terrorist groups. One of the most basic principles of both our democracy and our civilization, that a person cannot be held without being charged, was surrendered, and done so by substantial majorities in both houses. On the same day, the 2007 NDAA was passed, which amended the 1807 Insurrection Act and 1878 Posse Comitatus Act, prohibiting U.S. military personnel from acting upon U.S. citizens within U.S. borders. Not only was anything allowable in the pursuit of "terrorists," but the military was authorized to conduct operations inside the homeland in their pursuit.
Now comes the 2012 NDAA, which completes the process and thus serves as the coup de grace for a democratically voted metamorphosis from republic to national security state. It puts the final nail in the coffin of the Constitution by designating the entire United States as essentially the same "battlefield" in the war on terror as Iraq or Afghanistan, and authorizes the executive branch and the military to take whatever actions they consider legitimate against any human being anywhere on planet earth, civilian or enemy combatant, and to do so without any judicial oversight or constitutional constraint. If this Act is passed, the Bill of Rights will no longer protect American citizens from their government. The Constitution will no longer be the ultimate law of the land.
The House and Senate versions of the Act must now be reconciled and the Act sent to the president to either sign or veto. With his decision, he will determine the fate of those very liberties which, up to this point, have been integral to and indeed have defined America.
Obama's Most Fateful Decision
The 2012 National Defense Authorization Act, if signed into law, will signal the death knell of our constitutional republic and the formal inception of a legalized police state in the United States. Passed by the House on May 26, 2011 (HR 1540), the Senate version (S. 1867) was passed on Dec. 1, 2011. Now only one man -- Barack Obama, a scholar of constitutional law -- will make the decision as to whether the Bill of Rights he went to Harvard to study will be superceded by a law that abrogates it.
First, let's be clear what is at stake. Most critical are Sections 1031 and 1032 of the Act, which authorize detaining U.S. citizens indefinitely without charge or trial if deemed necessary by the president. The bill would allow federal officials to take these steps based on suspicions only, without having to demonstrate to any judicial official that there is solid evidence to justify their actions. No reasonable proof will any longer be required for the government to suspend an American citizen's constitutional rights. Detentions can follow mere membership, past or present, in "suspect organizations." Government agents would have unchecked authority to arrest, interrogate, and indefinitely detain law-abiding citizens if accused of potentially posing a threat to "national security." Further, military personnel anywhere in the world would be authorized to seize U.S. citizens without due process. As Senator Lindsay Graham put it, under this Act the U.S. homeland is considered a "battlefield."
What is at stake is more than the Constitution itself, as central as that document has been to the American experiment in democracy. What is a stake is nothing short of the basic fundamentals of western jurisprudence. Central to civilized law is the notion that a person cannot be held without a charge and cannot be detained indefinitely without a trial. These principles date back to Greco-Roman times, were developed by English common law beginning in 1215 with the Magna Carta, and were universalized by the Enlightenment in the century before the American Constitution and Bill of Rights were fought for and adopted as the supreme law of the land.
For more than two centuries of constitutional development since then, the United States has been heralded as the light to the world precisely because of the liberties it enshrined in its Declaration of Independence and Constitution as inalienable. It now seems as if the events of 9/11 have been determined to be of such a threatening magnitude that our national leaders feel justified to abrogate in their entirety the very inalienable principles upon which our Republic was founded.
At the heart of this Act is the most fundamental question we must ask ourselves as a free people: is 9/11 worth the Republic? The question screaming at us through this bill is whether the war on terror is a better model around which to shape our destiny than our constitutional liberties. It compels the question of whether we remain an ongoing experiment in democracy, pioneering new frontiers in the name of liberty and justice for all, or have we become a national security state, having financially corrupted and militarized our democracy to such an extent that we define ourselves, as Sparta did, only through the exigencies of war?
Within a week of 9/11, the Use of Military Force Act was approved which authorized the full application of U.S. military power against "terrorism." A month later, on Oct. 26, 2001, Congress overwhelmingly passed the Patriot Act that began the legislative assault on the Bill of Rights. The First Amendment right to freedom of association was gutted as federal officials were authorized to prosecute citizens for alleged association with "undesirable groups." The Fourth Amendment right against unreasonable search and seizure was compromised by permitting indefinite detentions of those suspected of "terrorism." The Fourteenth Amendment right to privacy was obliterated as unchecked surveillance was authorized to access personal records, financial dealings, and medical records of any citizen at any time without any judicial oversight or permission. Evidence obtained extra-judicially could be withheld from defense attorneys.
The Patriot Act also criminalized "domestic terrorism." It stated that civil conduct can be considered "domestic terrorism" if such actions aim to "influence by intimidation or coercion" or "intimidate or coerce a civilian population." Put in plain language, this means that actions such as Occupy Wall Street can be designated as "domestic terrorism" by Federal authorities without judicial oversight and dealt with outside the due process of constitutional protections.
Two weeks after passage of the Patriot Act, on Nov. 13, President Bush issued Military Order No. 1 authorizing the executive branch and the military to capture, kidnap, or otherwise arrest non-citizens anywhere in the world if suspected of engaging in terrorist activities. Proof was not required. It stipulated that trials, if held, would be military tribunals, not civil courts, and that evidence obtained by torture was permissible. No right of appeal was afforded to those convicted. Numerous executive orders, findings, and National and Homeland Security Presidential Directives followed, further consolidating the militarization of due process under the law and enabling the executive branch to act without legal constraint after it has defined a person or group as potentially engaging in "terrorist" activity.
A year later, on Nov. 25, 2002, the Homeland Security Act was passed that for the first time integrated all U.S. intelligence agencies, both domestic and foreign, into a single interactive network under the president. The Act gave these intelligence agencies complete freedom to collect any and all data on anyone anywhere in the United States and, working with allies abroad, to access complete information on anyone anywhere in the world, working closely with local police, intelligence agencies, and the corporate sector. This dissolved the distinctions between domestic and foreign spying and made more ambiguous the distinction between domestic and foreign "terrorism."
The next major step took place on Oct. 17, 2006, when Congress passed the Military Commissions Act that effectively abrogated habeas corpus for domestic and foreign enemies alike, stating, "Any person is punishable who aides, abets, counsels, commands, or procures" material support for alleged terrorist groups. One of the most basic principles of both our democracy and our civilization, that a person cannot be held without being charged, was surrendered, and done so by substantial majorities in both houses. On the same day, the 2007 NDAA was passed, which amended the 1807 Insurrection Act and 1878 Posse Comitatus Act, prohibiting U.S. military personnel from acting upon U.S. citizens within U.S. borders. Not only was anything allowable in the pursuit of "terrorists," but the military was authorized to conduct operations inside the homeland in their pursuit.
Now comes the 2012 NDAA, which completes the process and thus serves as the coup de grace for a democratically voted metamorphosis from republic to national security state. It puts the final nail in the coffin of the Constitution by designating the entire United States as essentially the same "battlefield" in the war on terror as Iraq or Afghanistan, and authorizes the executive branch and the military to take whatever actions they consider legitimate against any human being anywhere on planet earth, civilian or enemy combatant, and to do so without any judicial oversight or constitutional constraint. If this Act is passed, the Bill of Rights will no longer protect American citizens from their government. The Constitution will no longer be the ultimate law of the land.
The House and Senate versions of the Act must now be reconciled and the Act sent to the president to either sign or veto. With his decision, he will determine the fate of those very liberties which, up to this point, have been integral to and indeed have defined America.
SC109-7
http://thearchdruidreport.blogspot.com/2011/12/future-cant-pay-its-bills.html
The Future Can't Pay Its Bills
I want to expand here on some of the points raised in last week’s post, because they deal with factors in our situation that operate well below the surface. One of the things that makes the predicament of industrial society so difficult for most people to notice, in fact, is that its effects are woven so deeply into the patterns of everyday life. Over the last decade, for example, crude oil prices have more than tripled; over the last decade, behind a froth of speculative booms and busts, the world’s industrial economies have lurched deeper into depression. Peak oil researchers have pointed out for years that the former trend would bring about the latter, but long after events proved them right, the connection still remains unnoticed by most people.
To be fair, the way most people and nearly all economists think about economics makes this sort of blindness to the obvious hard to avoid. It’s standard these days to treat the circulation of money—the tertiary economy, to use a term from my book The Wealth of Nature—as though it’s all that matters, and to insist that the cycles of nature and the production of goods and services (the primary and secondary economies) will inevitably do whatever we want them to do, so long as there’s enough money. This is why, for instance, you’ll hear economists insisting that the soaring price of oil is good for the economy; after all, all the money being spent to buy oil is getting spent in turn on other things, right?
What this ignores, of course, is the fact that the price of oil is going up, in large part, because petroleum is getting steadily more difficult to extract as we exhaust the easily accessible sources, and so the cost of oil production is going up while the amount of oil being produced is not. As a growing fraction of industrial civilization’s capacity to produce goods and services has to be diverted into oil extraction in order to keep the oil flowing, the amount of that capacity that can be used for anything else decreases accordingly. Notice, though, that this diversion isn’t an obvious thing; it happens one transaction at a time, throughout the economy, as laborers, raw materials, capital, and a thousand other things go into oil production instead of some other economic sector.
The place to begin making sense of the shape of the process under way, it seems to me, is the intriguing article by green economist Herman Daly, cited in last week’s post, about the way that the World Bank’s pursuit of global growth via the worship of economic orthodoxies ran headfirst into a shortage of "bankable projects"—in plain English, economic projects that would yield the ten per cent or so per year necessary to pay off the loan and also make a profit. The World Bank, as Daly recounts, tried to make up for the shortage by lowering its standards, and pouring money into projects that counted as bankable only in the same imaginary world where Pets.com stock and subprime mortgage-backed securities count as good investments.
The point I’d like to make here, though, is that a shortage of bankable projects has been a problem for some time now in regions not normally consigned to the Third World. The Rust Belt town where I live, Cumberland, Maryland, is one example. Until 1974 it was a significant industrial center, with two large breweries, a tire factory, a fabric mill, and several smaller concerns. 1974, though, was the year that the consequences of America’s first brush with peak oil hit home, and Cumberland was one of the targets. A combination of soaring raw material costs, slumping sales, and competition from overseas shuttered every factory in town, and none ever reopened. Cumberland, like the rest of the Rust Belt, suddenly had a shortage of bankable projects. The shortage wasn’t total—a handful of "big box" stores found construction loans during the retail-empire boom of the 1990s, for example—but rock-bottom real estate prices, favorable tax policies, low labor costs, and two colleges nearby to provide workforce training at state expense couldn’t lure factory jobs back into the region.
That same experience is being repeated now all over America, and for that matter across much of the industrial world. Capital shortage isn’t an issue—with two rounds of quantitative easing and a tacit agreement on the part of bank regulators not to raise awkward questions about the actual value of the paper assets owned by banks, there’s plenty of money available to lend—but loans aren’t being made, and the reason given by bank after bank is that next to nobody who wants to borrow money has a credible plan that will allow them to pay it back. That claim has been rejected with some heat by commentators, but I’ve come to suspect that it may be more accurate than not. That was exactly what happened to Cumberland, after all; in the changed economic environment after 1974, a factory built here wouldn’t have made enough money to pay back the loans that would have been needed to build it, and so the loans weren’t made. Increasingly, that seems to be true of the industrial world as a whole.
All this can be described, in the terms I used in The Wealth of Nature, as a widening mismatch between the tertiary economy of money and the secondary economy of goods and services—or, to put the matter even more simply, a rising tide of paper wealth chasing a falling tide of actual value. Still, I’ve come to think that there’s another way of looking at it—one that unfolds from the perspectives I’ve been discussing here over the last few weeks.
Let’s step away for a moment from the game of arbitrary tokens we call "money," and look at the economy from a thermodynamic perspective, as a system for producing goods and services by applying energy to an assortment of raw materials. Until the coming of the industrial revolution, the vast majority of the energy that went into human economic systems went from sunlight to crops to human and animal muscle, which produced and distributed goods and services. The industrial revolution transformed that equation adding torrents of cheap abundant fossil fuel energy to the annual income from photosynthesis. Only a small fraction of the labor force and other resources had to be diverted from food production to bring this flood of energy into the economic equation, and only a small fraction of fossil fuels had to be cycled back into the fossil fuel extraction process; the rest of the labor force, other resources, and all that additional energy from fossil fuels could be poured into the rest of the economy, producing goods and services in unparalleled amounts.
Physicist Ilya Prigogine has shown by way of intricate equations that the flow of energy through a system increases the complexity of the system. If any further evidence was needed to back up his claims, the history of the world’s industrial economies provides it. The three centuries that followed the development of the first functional steam engines saw economic complexity, measured by the creation of new job categories, soar to a level almost unimaginably greater than any previous civilization had achieved. The bonanza of wealth produced by adding fossil fuel energy to the sun’s annual contribution spread throughout the industrial economies, and the ways and means by which money sprayed outwards from the pockets of coal magnates and oil barons quickly became institutionalized.
Governments, businesses, and societies ballooned in complexity, creating niches for entire ecosystems of office fauna to do tasks the presidents and tycoons of the nineteenth century had accomplished with a tiny fraction of the personnel; workloads obeyed Parkinson’s Law—"work expands so as to fill the time available for its completion"—and everyone found that it was easier to add more staff to get a job done than to get the existing staff to do it themselves. The result, in most industrial societies, is an economy in which only a small fraction of the labor force actually has anything directly to do with the production of goods and services, while the rest are kept busy managing the sprawling social and economic machinery that has come into being to organize, finance, manage, staff, market, advertise, sell, analyze, tax, regulate, review, praise, and denounce the production of goods and services.
What seems to have been lost sight of, though, is that this immense superstructure all rests on the same foundation as any other economy, the use of energy to convert raw materials into goods and services. More to the point, it depends on a certain level of surplus that can be produced in this way, and that depends in turn on being able to add plenty of fossil fuel energy to the economic system without having to divert too large a fraction of the labor force, resource base, and energy supply into the extraction of fossil fuels. Some sense of the difference made by fossil fuels can be measured by comparing the economies of the industrial age to those of societies that, by any other standard, were near the upper end of human social complexity—Tokugawa Japan and Renaissance Italy are the ones that come to mind. Urban, literate, and highly cultured, each of these societies had the resources to support extraordinary artistic, literary, and intellectual creativity. Still, they did this with economies vastly simpler than anything you’ll find in a modern industrial society.
The division of the labor force among economic roles makes a good measure of the difference. In both societies, the largest economic sector, employing around fifty per cent of the adult population (nearly all adult women and most elderly people of both sexes), was the household economy; a good half of the total economic value produced in each society came out of the kitchen gardens, spindles, looms, and other economic facilities associated with households. Another thirty per cent or so of the population in each society, including most of the adult men, was engaged full time in farming and other forms of direct food production; maybe ten per cent of the adult population worked in the skilled trades; and the remaining ten per cent or so was divided between religious professionals, military professionals, artists and performers, aristocrats, and merchants who lived by buying and selling goods produced by others.
The limited range of categories available in those societies was not the result of inadequate cleverness. If some Italian despot or Tokugawa shogun had decided he needed a staff of human resource managers, corporate image consultants, strategic marketing specialists, and the rest of the occupational apparatus of modern business life, say, he would have been out of luck, and if he tried anyway, he would have been out of a job—the resources needed to train and employ some equivalent of modern office fauna would have had to be diverted from more immediate necessities such as training and employing an adequate force of condottieri or samurai, which was not exactly a viable strategy in those times. This is why Italian despots and Tokugawa shoguns got by with relatively small staffs of clerks, scribes, feudal subordinates, and maybe an astrologer; that’s what their economic systems could afford.
Equally, an aspiring craftsman or merchant faced real challenges in expanding his business beyond fairly sharp limits. In a few cases, a combination of luck, technical skill, and adequate transport allowed one region to take on a commanding role in some specific export market, profit considerably from that, and build up an impressive degree of infrastructure; the golden age of Greece was paid for by the profits from Greek wine and olive oil exports, for example, and the woolen trade brought similar benefits to late medieval Flanders. Far more often, though, local needs had to be supplied by local production, because the surplus energy that would have been needed to power long distance trade on a large scale simply didn’t exist, or couldn’t be spared from more pressing needs. Thus the institutional arrangements that governed economic life before the industrial age were as closely tailored to a world of relatively scarce energy, in which most people worked in the household or farming sectors of the economy, as today’s institutional arrangements are tailored to a world awash in cheap abundant energy.
That last point defines the crisis of our times, however, because we no longer live in a world awash in cheap abundant energy. We’ve still got a lot more energy than Renaissance Italy or Tokugawa Japan had, to be sure, but the per capita surplus is not what it once was, and a growing fraction of what we’ve got has had to be diverted to cover increases in direct and indirect energy costs of energy production. Meanwhile, the institutional arrangements are still firmly fixed in place, and they aren’t optional; try starting a business sometime without dealing with banks, real estate companies, licensing boards, tax authorities, et al., and you’ll quickly discover how non-optional these arrangements are.
The mismatch between the economy we’ve got and the economy we can afford has many implications, but one of the largest is precisely the issue I raised earlier in this post: across the industrial world, there are very few bankable projects to be found, even at a time when there are millions of people who need work, and who would happily buy products if they had the chance to earn the money to do so. Our economy is burdened with an unproductive superstructure it can no longer support. The globalization fad of the 1990s, which arbitraged the difference in wage costs between Third World sweatshops and industrial-world factories, was in effect an attempt to evade the resulting difficulties by throwing the industrial nations’ working classes under the bus, and it only worked for a decade or so; as so often happens in the declining years of a civilization, a short term fix was treated as a long term solution, and a brief remission of symptoms allowed the underlying crisis to worsen steadily.
Over the long run, the mismatch is a problem that will solve itself; once the unraveling of the industrial economy goes far enough, the superstructure will come apart, leaving a great many human resource managers, corporate image consultants, strategic marketing specialists, and the like with about as much chance of finding jobs in their fields as they would have had 17th-century Osaka or 14th-century Milan. In the short and middle term, though, the mismatch will almost certainly continue to show itself in exactly the same way that it’s been visible over the last few decades: more and more often, business ventures simply won’t be able to make enough money to cover startup costs or to stay in business.
Of course there will be exceptions. We are talking about a shift that will appear, as it has appeared so far, as a shifting of statistical averages, and the background of ordinary economic fluctuations will make it more than usually difficult to tease out the signal from the noise. Even in hard times, some ventures make fortunes; what makes hard times differ from boomtimes is that the fortunes are fewer, and the odds of making one of them come more and more to resemble the odds of walking away from a Vegas casino with a six-figure jackpot.
All this has two implications, it seems to me, that are of core importance for the shape of our future. The first is simply that those of my readers whose plans for the future depend on holding down a job may have a very hard row to hoe. The shift under way in the economy will more than likely squeeze the current model of economic life from both ends—as it becomes harder to find, keep, and earn a decent living at an ordinary job, businesses will continue to fold, debase their products, or both, and so it will also become harder to convert the income from an ordinary job back into goods and services worth having. One of the core themes I’ve been discussing here for some time now, the need to move at least one family member out of employment into the household economy, is in part a response to that situation; what you produce yourself for your own consumption doesn’t pay a share of the costs of the economic superstructure. Beyond that, the deterioration of the official economy is accompanied, as pretty much always happens, by the growth of alternative economic networks that allow goods and services to be exchanged outside normal channels; it may be a while before those networks become solid enough to support more than a few people, but taking part in exchanges through these networks even in their early stages may be worthwhile.
The second implication also relates to a core theme of this blog, though it’s on a larger scale. While other economic arrangements are certainly imaginable, the one we have right now is strictly limited in what it can accomplish by what can make a profit: to repeat Daly’s term, it has to be a bankable project, or by and large, it won’t get done. This may just turn out to be a far more dangerous limitation than anybody has yet realized. There are, after all, any number of plans for grand projects in response to the end of the age of cheap abundant energy; each of them would require the investment of a great deal of capital, labor, raw materials, and other resources; and under present arrangements, none of them can go forward unless someone can count on making a profit from making them happen. Under present arrangements, in turn, it’s likely that none of them will be profitable enough to get a construction loan or to cover their operating costs once they get built.
We’ve already seen a solid prefigure of this in the ethanol bubble of a few years ago, in which firms in corn states rushed to build ethanol plants. Even with government subsidies and a guaranteed market, a great many of those plants are now bankrupt and shuttered. It’s an open secret that many recent solar and wind energy projects make money only because of government subsidies. Grandiose plans to turn large swathes of Nevada into algal biodiesel farms or vast solar arrays are arguably even more likely to be subject to the same rule—and the subsidies in these latter cases would be ruinously expensive. Earlier posts here have discussed some of the other reasons why such projects will not be built; if the pattern I’ve sketched here is anything to go by, though, the future these projects imagine won’t arrive, because it won’t be able to pay its bills.
The Future Can't Pay Its Bills
I want to expand here on some of the points raised in last week’s post, because they deal with factors in our situation that operate well below the surface. One of the things that makes the predicament of industrial society so difficult for most people to notice, in fact, is that its effects are woven so deeply into the patterns of everyday life. Over the last decade, for example, crude oil prices have more than tripled; over the last decade, behind a froth of speculative booms and busts, the world’s industrial economies have lurched deeper into depression. Peak oil researchers have pointed out for years that the former trend would bring about the latter, but long after events proved them right, the connection still remains unnoticed by most people.
To be fair, the way most people and nearly all economists think about economics makes this sort of blindness to the obvious hard to avoid. It’s standard these days to treat the circulation of money—the tertiary economy, to use a term from my book The Wealth of Nature—as though it’s all that matters, and to insist that the cycles of nature and the production of goods and services (the primary and secondary economies) will inevitably do whatever we want them to do, so long as there’s enough money. This is why, for instance, you’ll hear economists insisting that the soaring price of oil is good for the economy; after all, all the money being spent to buy oil is getting spent in turn on other things, right?
What this ignores, of course, is the fact that the price of oil is going up, in large part, because petroleum is getting steadily more difficult to extract as we exhaust the easily accessible sources, and so the cost of oil production is going up while the amount of oil being produced is not. As a growing fraction of industrial civilization’s capacity to produce goods and services has to be diverted into oil extraction in order to keep the oil flowing, the amount of that capacity that can be used for anything else decreases accordingly. Notice, though, that this diversion isn’t an obvious thing; it happens one transaction at a time, throughout the economy, as laborers, raw materials, capital, and a thousand other things go into oil production instead of some other economic sector.
The place to begin making sense of the shape of the process under way, it seems to me, is the intriguing article by green economist Herman Daly, cited in last week’s post, about the way that the World Bank’s pursuit of global growth via the worship of economic orthodoxies ran headfirst into a shortage of "bankable projects"—in plain English, economic projects that would yield the ten per cent or so per year necessary to pay off the loan and also make a profit. The World Bank, as Daly recounts, tried to make up for the shortage by lowering its standards, and pouring money into projects that counted as bankable only in the same imaginary world where Pets.com stock and subprime mortgage-backed securities count as good investments.
The point I’d like to make here, though, is that a shortage of bankable projects has been a problem for some time now in regions not normally consigned to the Third World. The Rust Belt town where I live, Cumberland, Maryland, is one example. Until 1974 it was a significant industrial center, with two large breweries, a tire factory, a fabric mill, and several smaller concerns. 1974, though, was the year that the consequences of America’s first brush with peak oil hit home, and Cumberland was one of the targets. A combination of soaring raw material costs, slumping sales, and competition from overseas shuttered every factory in town, and none ever reopened. Cumberland, like the rest of the Rust Belt, suddenly had a shortage of bankable projects. The shortage wasn’t total—a handful of "big box" stores found construction loans during the retail-empire boom of the 1990s, for example—but rock-bottom real estate prices, favorable tax policies, low labor costs, and two colleges nearby to provide workforce training at state expense couldn’t lure factory jobs back into the region.
That same experience is being repeated now all over America, and for that matter across much of the industrial world. Capital shortage isn’t an issue—with two rounds of quantitative easing and a tacit agreement on the part of bank regulators not to raise awkward questions about the actual value of the paper assets owned by banks, there’s plenty of money available to lend—but loans aren’t being made, and the reason given by bank after bank is that next to nobody who wants to borrow money has a credible plan that will allow them to pay it back. That claim has been rejected with some heat by commentators, but I’ve come to suspect that it may be more accurate than not. That was exactly what happened to Cumberland, after all; in the changed economic environment after 1974, a factory built here wouldn’t have made enough money to pay back the loans that would have been needed to build it, and so the loans weren’t made. Increasingly, that seems to be true of the industrial world as a whole.
All this can be described, in the terms I used in The Wealth of Nature, as a widening mismatch between the tertiary economy of money and the secondary economy of goods and services—or, to put the matter even more simply, a rising tide of paper wealth chasing a falling tide of actual value. Still, I’ve come to think that there’s another way of looking at it—one that unfolds from the perspectives I’ve been discussing here over the last few weeks.
Let’s step away for a moment from the game of arbitrary tokens we call "money," and look at the economy from a thermodynamic perspective, as a system for producing goods and services by applying energy to an assortment of raw materials. Until the coming of the industrial revolution, the vast majority of the energy that went into human economic systems went from sunlight to crops to human and animal muscle, which produced and distributed goods and services. The industrial revolution transformed that equation adding torrents of cheap abundant fossil fuel energy to the annual income from photosynthesis. Only a small fraction of the labor force and other resources had to be diverted from food production to bring this flood of energy into the economic equation, and only a small fraction of fossil fuels had to be cycled back into the fossil fuel extraction process; the rest of the labor force, other resources, and all that additional energy from fossil fuels could be poured into the rest of the economy, producing goods and services in unparalleled amounts.
Physicist Ilya Prigogine has shown by way of intricate equations that the flow of energy through a system increases the complexity of the system. If any further evidence was needed to back up his claims, the history of the world’s industrial economies provides it. The three centuries that followed the development of the first functional steam engines saw economic complexity, measured by the creation of new job categories, soar to a level almost unimaginably greater than any previous civilization had achieved. The bonanza of wealth produced by adding fossil fuel energy to the sun’s annual contribution spread throughout the industrial economies, and the ways and means by which money sprayed outwards from the pockets of coal magnates and oil barons quickly became institutionalized.
Governments, businesses, and societies ballooned in complexity, creating niches for entire ecosystems of office fauna to do tasks the presidents and tycoons of the nineteenth century had accomplished with a tiny fraction of the personnel; workloads obeyed Parkinson’s Law—"work expands so as to fill the time available for its completion"—and everyone found that it was easier to add more staff to get a job done than to get the existing staff to do it themselves. The result, in most industrial societies, is an economy in which only a small fraction of the labor force actually has anything directly to do with the production of goods and services, while the rest are kept busy managing the sprawling social and economic machinery that has come into being to organize, finance, manage, staff, market, advertise, sell, analyze, tax, regulate, review, praise, and denounce the production of goods and services.
What seems to have been lost sight of, though, is that this immense superstructure all rests on the same foundation as any other economy, the use of energy to convert raw materials into goods and services. More to the point, it depends on a certain level of surplus that can be produced in this way, and that depends in turn on being able to add plenty of fossil fuel energy to the economic system without having to divert too large a fraction of the labor force, resource base, and energy supply into the extraction of fossil fuels. Some sense of the difference made by fossil fuels can be measured by comparing the economies of the industrial age to those of societies that, by any other standard, were near the upper end of human social complexity—Tokugawa Japan and Renaissance Italy are the ones that come to mind. Urban, literate, and highly cultured, each of these societies had the resources to support extraordinary artistic, literary, and intellectual creativity. Still, they did this with economies vastly simpler than anything you’ll find in a modern industrial society.
The division of the labor force among economic roles makes a good measure of the difference. In both societies, the largest economic sector, employing around fifty per cent of the adult population (nearly all adult women and most elderly people of both sexes), was the household economy; a good half of the total economic value produced in each society came out of the kitchen gardens, spindles, looms, and other economic facilities associated with households. Another thirty per cent or so of the population in each society, including most of the adult men, was engaged full time in farming and other forms of direct food production; maybe ten per cent of the adult population worked in the skilled trades; and the remaining ten per cent or so was divided between religious professionals, military professionals, artists and performers, aristocrats, and merchants who lived by buying and selling goods produced by others.
The limited range of categories available in those societies was not the result of inadequate cleverness. If some Italian despot or Tokugawa shogun had decided he needed a staff of human resource managers, corporate image consultants, strategic marketing specialists, and the rest of the occupational apparatus of modern business life, say, he would have been out of luck, and if he tried anyway, he would have been out of a job—the resources needed to train and employ some equivalent of modern office fauna would have had to be diverted from more immediate necessities such as training and employing an adequate force of condottieri or samurai, which was not exactly a viable strategy in those times. This is why Italian despots and Tokugawa shoguns got by with relatively small staffs of clerks, scribes, feudal subordinates, and maybe an astrologer; that’s what their economic systems could afford.
Equally, an aspiring craftsman or merchant faced real challenges in expanding his business beyond fairly sharp limits. In a few cases, a combination of luck, technical skill, and adequate transport allowed one region to take on a commanding role in some specific export market, profit considerably from that, and build up an impressive degree of infrastructure; the golden age of Greece was paid for by the profits from Greek wine and olive oil exports, for example, and the woolen trade brought similar benefits to late medieval Flanders. Far more often, though, local needs had to be supplied by local production, because the surplus energy that would have been needed to power long distance trade on a large scale simply didn’t exist, or couldn’t be spared from more pressing needs. Thus the institutional arrangements that governed economic life before the industrial age were as closely tailored to a world of relatively scarce energy, in which most people worked in the household or farming sectors of the economy, as today’s institutional arrangements are tailored to a world awash in cheap abundant energy.
That last point defines the crisis of our times, however, because we no longer live in a world awash in cheap abundant energy. We’ve still got a lot more energy than Renaissance Italy or Tokugawa Japan had, to be sure, but the per capita surplus is not what it once was, and a growing fraction of what we’ve got has had to be diverted to cover increases in direct and indirect energy costs of energy production. Meanwhile, the institutional arrangements are still firmly fixed in place, and they aren’t optional; try starting a business sometime without dealing with banks, real estate companies, licensing boards, tax authorities, et al., and you’ll quickly discover how non-optional these arrangements are.
The mismatch between the economy we’ve got and the economy we can afford has many implications, but one of the largest is precisely the issue I raised earlier in this post: across the industrial world, there are very few bankable projects to be found, even at a time when there are millions of people who need work, and who would happily buy products if they had the chance to earn the money to do so. Our economy is burdened with an unproductive superstructure it can no longer support. The globalization fad of the 1990s, which arbitraged the difference in wage costs between Third World sweatshops and industrial-world factories, was in effect an attempt to evade the resulting difficulties by throwing the industrial nations’ working classes under the bus, and it only worked for a decade or so; as so often happens in the declining years of a civilization, a short term fix was treated as a long term solution, and a brief remission of symptoms allowed the underlying crisis to worsen steadily.
Over the long run, the mismatch is a problem that will solve itself; once the unraveling of the industrial economy goes far enough, the superstructure will come apart, leaving a great many human resource managers, corporate image consultants, strategic marketing specialists, and the like with about as much chance of finding jobs in their fields as they would have had 17th-century Osaka or 14th-century Milan. In the short and middle term, though, the mismatch will almost certainly continue to show itself in exactly the same way that it’s been visible over the last few decades: more and more often, business ventures simply won’t be able to make enough money to cover startup costs or to stay in business.
Of course there will be exceptions. We are talking about a shift that will appear, as it has appeared so far, as a shifting of statistical averages, and the background of ordinary economic fluctuations will make it more than usually difficult to tease out the signal from the noise. Even in hard times, some ventures make fortunes; what makes hard times differ from boomtimes is that the fortunes are fewer, and the odds of making one of them come more and more to resemble the odds of walking away from a Vegas casino with a six-figure jackpot.
All this has two implications, it seems to me, that are of core importance for the shape of our future. The first is simply that those of my readers whose plans for the future depend on holding down a job may have a very hard row to hoe. The shift under way in the economy will more than likely squeeze the current model of economic life from both ends—as it becomes harder to find, keep, and earn a decent living at an ordinary job, businesses will continue to fold, debase their products, or both, and so it will also become harder to convert the income from an ordinary job back into goods and services worth having. One of the core themes I’ve been discussing here for some time now, the need to move at least one family member out of employment into the household economy, is in part a response to that situation; what you produce yourself for your own consumption doesn’t pay a share of the costs of the economic superstructure. Beyond that, the deterioration of the official economy is accompanied, as pretty much always happens, by the growth of alternative economic networks that allow goods and services to be exchanged outside normal channels; it may be a while before those networks become solid enough to support more than a few people, but taking part in exchanges through these networks even in their early stages may be worthwhile.
The second implication also relates to a core theme of this blog, though it’s on a larger scale. While other economic arrangements are certainly imaginable, the one we have right now is strictly limited in what it can accomplish by what can make a profit: to repeat Daly’s term, it has to be a bankable project, or by and large, it won’t get done. This may just turn out to be a far more dangerous limitation than anybody has yet realized. There are, after all, any number of plans for grand projects in response to the end of the age of cheap abundant energy; each of them would require the investment of a great deal of capital, labor, raw materials, and other resources; and under present arrangements, none of them can go forward unless someone can count on making a profit from making them happen. Under present arrangements, in turn, it’s likely that none of them will be profitable enough to get a construction loan or to cover their operating costs once they get built.
We’ve already seen a solid prefigure of this in the ethanol bubble of a few years ago, in which firms in corn states rushed to build ethanol plants. Even with government subsidies and a guaranteed market, a great many of those plants are now bankrupt and shuttered. It’s an open secret that many recent solar and wind energy projects make money only because of government subsidies. Grandiose plans to turn large swathes of Nevada into algal biodiesel farms or vast solar arrays are arguably even more likely to be subject to the same rule—and the subsidies in these latter cases would be ruinously expensive. Earlier posts here have discussed some of the other reasons why such projects will not be built; if the pattern I’ve sketched here is anything to go by, though, the future these projects imagine won’t arrive, because it won’t be able to pay its bills.
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