http://www.informationclearinghouse.info/article40587.htm
The Outlook for the New Year
Washington is the cause of the conflict, which has been brewing for some time. Russia was too weak to do anything about it when the Clinton regime pushed NATO to Russia’s borders and illegally attacked Yugoslavia, breaking the country into small easily controlled pieces. Russia was also too weak to do anything about it when the George W. Bush regime withdrew from the ABM treaty and undertook to locate anti-ballistic missile bases on Russia’s borders. Washington lied to Moscow that the purpose of the ABM bases is to protect Europe from non-existent Iranian nuclear ICBMs. However, Moscow understood that the purpose of the ABM bases is to degrade Russia’s nuclear deterrent, thereby enhancing Washington’s ability to coerce Russia into agreements that compromise Russian sovereignty.
By summer 2008 Russian power had returned. On Washington’s orders, the US and Israeli trained and equipped Georgian army attacked the breakaway republic of South Ossetia during the early hours of August 8, killing Russian peacekeepers and civilian population. Units of the Russian military instantly responded and within a few hours the American trained and equipped Georgian army was routed and defeated. Georgia was in Russia’s hands again, where the province had resided during the 19th and 20th centuries.
Putin should have hung Mikheil Saakashvili, the American puppet installed as president of Georgia by the Washington-instigated “Rose Revolution”, and reincorporated Georgia into the Russian Federation. Instead, in a strategic error, Russia withdrew its forces, leaving Washington’s puppet regime in place to cause future trouble for Russia. Washington is pushing hard to incorporate Georgia into NATO, thus adding more US military bases on Russia’s border. However, at the time, Moscow thought Europe to be more independent of Washington than it is and relied on good relations with Europe to keep American bases out of Georgia.
Today the Russian government no longer has any illusion that Europe is capable of an independent foreign policy. Russian President Vladimir Putin has stated publicly that Russia has learned that diplomacy with Europe is pointless, because European politicians represent Washington’s interest, not Europe’s. Foreign Minister Sergei Lavrov recently acknowledged that Europe’s Captive Nation status has made it clear to Russia that Russian goodwill gestures are unable to produce diplomatic results.
With Moscow’s delusion shattered that diplomacy with the West can produce peaceful solutions, reality has set in, reinforced by the demonization of Vladimir Putin by Washington and its vassal states. Hillary Clinton called Putin the new Hitler. While Washington incorporates former constituent parts of the Russian and Soviet empires into its own empire and bombs seven countries, Washington claims that Putin is militarily aggressive and intends to reconstitute the Soviet empire. Washington arms the neo-nazi regime Obama established in Ukraine, while erroneously claiming that Putin has invaded and annexed Ukrainian provinces. All of these blatant lies are echoed repeatedly by the Western presstitutes. Not even Hitler had such a compliant media as Washington has.
Every diplomatic effort by Russia has been blocked by Washington and has come to naught. So now Russia has been forced by reality to update its military doctrine. The new doctrine approved on December 26 states that the US and NATO comprise a major military threat to the existence of Russia as a sovereign independent country.
The Russian document cites Washington’s war doctrine of pre-emptive nuclear attack, deployment of anti-ballistic missiles, buildup of NATO forces, and intent to deploy weapons in space as clear indications that Washington is preparing to attack Russia.
Washington is also conducting economic and political warfare against Russia, attempting to destabilize the economy with economic sanctions and attacks on the ruble. The Russian document acknowledges that Russia faces Western threats of regime change achieved through “actions aimed at violent change of the Russian constitutional order, destabilization of the political and social environment, and disorganization of the functioning of governmental bodies, crucial civilian and military facilities and informational infrastructure of Russia.” Foreign financed NGOs and foreign owned Russian media are tools in Washington’s hands for destabilizing Russia.
Washington’s reckless aggressive policy against Russia has resurrected the nuclear arms race. Russia is developing two new ICBM systems and in 2016 will deploy a weapons system designed to negate the US anti-ballistic missile system. In short, the evil warmongers that rule in Washington have set the world on the path to nuclear armageddon.
The Russian and Chinese governments both understand that their existence is threatened by Washington’s hegemonic ambitions. Larchmonter reports that in order to defeat Washington’s plans to marginalize both countries, the Russian and Chinese governments have decided to unify their economies into one and to conjoin their military commands. Henceforth, Russia and China move together on the economic and military fronts. http://www.mediafire.com/view/08rzue8ffism94t/China-Russia_Double_Helix.docx
The unity of the Bear and the Dragon reduces the crazed neoconservatives’ dream of “an American century” to dangerous nonsense. As Larchmonter puts it, “The US and NATO would need Michael the Archangel to defeat China-Russia, and from all signs Michael the Archangel is aligned with the Bear and its Orthodox culture. There is no weapon, no strategy, no tactic conceivable in the near future to damage either of these rising economies now that they are ‘base pairs.’”
Larchmonter sees hope in the new geopolitics created by the conjoining of Russia and China. I don’t dispute this, but if the arrogant neoconservatives realize that their hegemonic policy has created a foe over which Washington cannot prevail, they will push for a pre-emptive nuclear strike before the Russian-Chinese unified command is fully operational. To forestall a sneak attack, Russia and China should operate on full nuclear alert.
The US economy–indeed the entire Western orientated economy from Japan to Europe–is a house of cards. Since the economic downturn began seven years ago, the entirety of Western economic policy has been diverted to the support of a few over-sized banks, sovereign debt, and the US dollar. Consequently, the economies themselves and the ability of populations to cope have deteriorated.
The financial markets are based on manipulation, not on fundamentals. The manipulation is untenable. With debt exploding, negative real interest rates make no sense. With real consumer incomes, real consumer credit, and real retail sales stagnant or falling, the stock market is a bubble. With Russia, China, and other countries moving away from the use of the dollar to settle international accounts, with Russia developing an alternative to the SWIFT financial network, the BRICS developing alternatives to the IMF and World Bank, and with other parts of the world developing their own credit card and Internet systems, the US dollar, along with the Japanese and European currencies that are being printed in order to support the dollar’s exchange value, could experience a dramatic drop in exchange value, which would make the import-dependent Western world dysfunctional.
In my opinion, it took the Russians and Chinese too long to comprehend the evil that has control in Washington. Therefore, both countries risk nuclear attack prior to the full operational capability of their conjoined defense. As the Western economy is a house of cards, Russia and China could collapse the Western economy before the neoconservatives can drive the world to war. As Washington’s aggression against both countries is crystal clear, Russia and China have every right to the following defensive measures.
As the US and EU are conducting economic warfare against Russia, Russia could claim that by wrecking the Russian economy the West has deprived Russia of the ability to repay loans to the European banks. If this does not bring down the thinly capitalized EU banks, Russia can announce that as NATO countries are now officially recognized by Russian war doctrine as an enemy of the Russian state, Russia can no longer support NATO’s aggression against Russia by selling natural gas to NATO members. If the shutdown of much of European industry, rapidly rising rates of unemployment, and bank failures do not result in the dissolution of NATO and thus the end of the threat, the Chinese can act.
The Chinese hold a very large amount of dollar-denominated financial assets. Just as the Federal Reserve’s agents, the bullion banks, dump massive shorts onto the bullion futures markets during periods of little activity in order to drive down the bullion price, China can dump the equivalent in US Treasuries of years of Quantitative Easing in a few minutes. If the Federal Reserve quickly creates dollars with which to purchase the enormous quantity of Treasuries so that the financial house of cards does not implode, the Chinese can then dump the dollars that they are paid for the bonds in the currency market. Whereas the Federal Reserve can print dollars with which to purchase the Treasuries, the Fed cannot print foreign currencies with which to buy the dollars.
The dollar would collapse, and with it the power of the Hegemon. The war would be over without a shot or missile fired.
In my view, Russia and China owe it to the world to prevent the nuclear war intended by the neoconservatives simply by replying in kind to Washington’s economic warfare. Russia and China hold all the cards. Not Washington.
Russia and China should give no warning. They should just act. Indeed, instead of step by step, Russia and China could simultaneously use the counter-measures. With four US banks holding derivatives totaling many times world GDP, the financial explosion would be the equivalent to a nuclear one. The US and Europe would be finished, and the world would be saved.
Larchmonter possibly is correct. 2015 could be a very good year, but pre-emptive economic moves by Moscow and Beijing could be required. Putin’s current plan seems to be to turn away from the West, ignore the provocations, and mesh Russia’s strategic and economic interests with those of Asia. This is a humane and reasonable course of action, but it leaves the West untroubled and undistracted by its economic vulnerabilities. An untroubled West remains a grave danger not only to Russia and China but also to Americans and the entire world.
Wednesday, December 31, 2014
SC125-4
http://thearchdruidreport.blogspot.com/
The Cold Wet Mackerel of Reality
To misuse a bit of prose from Charles Dickens, it was neither the best of times nor the worst of times, but I know very few people who will object when, a few hours from now, 2014 gets dragged off to the glue factory. This has not been a good year for most people in the United States. By all accounts, this year’s holiday season was an economic flop of considerable scale—the US media, which normally treats cheery corporate press releases with the same enforced credulity that Pravda used to give to pronouncements from the Politburo in the Soviet era, has had to admit that Black Friday sales were down hard this year, even counting the internet—and plenty of Americans outside the echo chambers of the media have very good reasons to worry about what 2015 will bring.
Mind you, cheerleading of a distinctly Pravda-esque variety can still be heard from those pundits and politicians who are still convinced that people can be talked into ignoring their own experience if they can only be force-fed enough spin-doctored malarkey. That sort of enthusiasm for the glorious capitalist banker’s paradise has plenty of company just now; I’m thinking in particular of the steady drumbeat of articles and essays in the US mass media wondering aloud why so many Americans haven’t noticed the economic recovery of the last four years, and are still behaving as though there’s a recession on.
Of course there’s an explanation for that awkward fact, which is that the recovery in question never happened—outside, that is, of the abstract otherworld of numerical jugglery and spin doctoring that passes for official economic statistics these days. For most Americans, the last four years have been a bleak era of soaring expenses, shrinking incomes and benefits, rising economic insecurity, and increasingly frequent and bitter struggles with dysfunctional institutions that no longer bother even to pretend to serve the public good. That’s the reality people in the United States face when they get out of bed each morning, but it’s not a reality that’s welcome in the American mass media, so endless ingenuity has been expended in explaining why so many people in the US these days haven’t noticed the alleged economic recovery that’s allegedly burgeoning all around them.
I expect to see a good deal more of this sort of twaddle in the weeks immediately ahead, as those mass media pundits who haven’t yet trotted out their predictions for the new year get around to that annual task. For that matter, it’s doubtless safe to assume that out here on the fringes where archdruids lurk, there will be plenty of predictions of a different kind or, rather, several different kinds. There will be another round of claims that this is the year when the global economy will seize up suddenly and leave us all to starve in the dark; there will be another round of claims that this is the year when this or that or the other hot new technology will come swooping in to save the day and let the middle classes maintain their privileged lifestyles; there will be—well, those of my readers who have been following the blogosphere for any length of time can fill in the blanks themselves.
I’ve noted in previous years just how many of these latter predictions get rehashed every single January in the serene conviction that nobody will notice how often they’ve flopped before. Popular though that habit may be, it seems counterproductive to me, since—at least in theory—predictions of the sort we’re discussing is intended to be something more than light entertainment. With this in mind, I’d like to engage in the annual ritual of glancing back over the predictions I posted here at the beginning of the year now ending, and see how well I did. Here’s what I said:
“My prediction for 2014, in turn, is that we’ll see more of the same: another year, that is, of uneven but continued downward movement along the same arc of decline and fall, while official statistics here in the United States will be doctored even more extravagantly than before to manufacture a paper image of prosperity. The number of Americans trying to survive without a job will continue to increase, the effective standard of living for most of the population will continue to decline, and what used to count as the framework of ordinary life in this country will go on unraveling a thread at a time. Even so, the dollar, the Euro, the stock market, and the Super Bowl will still be functioning as 2015 begins; there will still be gas in the gas pumps and food on grocery store shelves, though fewer people will be able to afford to buy either one.
“The fracking bubble has more than lived up to last year’s expectations, filling the mass media with vast amounts of meretricious handwaving about the coming era of abundance: the same talk, for all practical purposes, that surrounded the equally delusional claims made for the housing bubble, the tech bubble, and so on all the way back to the Dutch tulip bubble of 1637. That rhetoric will prove just as dishonest as its predecessors, and the supposed new era of prosperity will come tumbling back down to earth once the bubble pops, taking a good chunk of the American economy with it. Will that happen in 2014? That’s almost impossible to know in advance. Timing the collapse of a bubble is one of the trickiest jobs in economic life; no less a mind than Isaac Newton’s was caught flatfooted by the collapse of the South Sea Bubble in 1720, and the current bubble is far more opaque. My guess is that the collapse will come toward the end of 2014, but it could have another year or so to run first.
“It’s probably a safe bet that weather-related disasters will continue to increase in number and severity. If we get a whopper on the scale of Katrina or Sandy, watch the Federal response; it’s certain to fall short of meeting the needs of the survivors and their communities, but the degree to which it falls short will be a useful measure of just how brittle and weak the national government has become. One of these years—just possibly this year, far more likely later on—that weakness is going to become one of the crucial political facts of our time, and responses to major domestic disasters are among the few good measures we’ll have of how close we are to the inevitable crisis.
“Meanwhile, what won’t happen is at least as important as what will. Despite plenty of enthusiastic pronouncements and no shortage of infomercials disguised as meaningful journalism, there will be no grand breakthroughs on the energy front. Liquid fuels—that is to say, petroleum plus anything else that can be thrown into a gas tank—will keep on being produced at something close to 2013’s rates, though the fraction of the total supply that comes from expensive alternative fuels with lower net energy and higher production costs will continue to rise, tightening a noose around the neck of every other kind of economic activity. Renewables will remain as dependent on government subsidies as they’ve been all along, nuclear power will remain dead in the water, fusion will remain a pipe dream, and more exotic items such as algal biodiesel will continue to soak up their quotas of investment dollars before going belly up in the usual way. Once the fracking bubble starts losing air, expect something else to be scooped up hurriedly by the media and waved around to buttress the claim that peak oil won’t happen, doesn’t matter, and so on; any of my readers who happen to guess correctly what that will be, and manage their investments accordingly, may just make a great deal of money.
“Sudden world-ending catastrophes will also be in short supply in 2014, though talk about them will be anything but...Both the grandiose breakthroughs that never happen and the equally gaudy catastrophes that never happen will thus continue to fill their current role as excuses not to think about, much less do anything about, what’s actually happening around us right now—the long ragged decline and fall of industrial civilization that I’ve called the Long Descent. Given the popularity of both these evasive moves, we can safely assume that one more thing won’t happen in 2014: any meaningful collective response to the rising spiral of crises that’s shredding our societies and our future. As before, anything useful that’s going to happen will be the work of individuals, families, and community groups, using the resources on hand to cope with local conditions.”
As I write these words, the US media is still parroting the fantasy of a fracking-driven “Saudi America” with a mindless repetitiveness that puts broken records to shame, and so the next shiny distraction disguised as a marvelous new energy breakthrough hasn’t yet been trotted out for the usual round of carefully choreographed oohs and aahs. Other than that, once again, I think it’s fair to say I called it. Continuing economic decline, check; a fracking bubble heading toward a world-class bust, check; climate-related disasters on the rise, with government interventions doing less and less to help those affected, check; and a continuing shortage of game-changing breakthroughs, world-ending catastrophes, and meaningful collective responses to the crisis of our age, check-check-check. If this were a bingo game, I’d be walking up to the front of the room with a big smile on my face.
Now of course a case could be made that I’m cheating. After all, it doesn’t take any particular insight to point out that continuing trends tend to continue, or to choose trends that are pretty clearly ongoing and predict that they’ll keep on going for another year. While this is true, it’s also part of the point I’ve been trying to make here for getting on for nine years now: in the real world, by and large, history is what happened when you weren’t looking. Under some circumstances, sudden jarring discontinuities can hit societies like a cold wet mackerel across the face, but close attention to the decade or so before things changed routinely shows that the discontinuity itself was the product of long-established trends, and could have been anticipated if anyone was willing to do so.
That’s a particularly relevant issue just now, because the sort of long-established trends that can lead to sudden jarring discontinuities have been more and more evident in the United States in recent years, and one of the things that made 2014 so wretched for everyone outside the narrowing circle of the privileged well-to-do is precisely that several of those trends seem to be moving toward a flashpoint. I’d like to sketch out a couple of examples, because my predictions for 2015 will center on them.
The first and most obvious is the headlong collapse of the fracking bubble, which I discussed at some length in a post earlier this month. For most of the last decade, Wall Street has been using the fracking industry in all the same ways it used the real estate industry in the runup to the 2008 crash, churning out what we still laughably call “securities” on the back of a rapidly inflating speculative bubble. As the slumping price of oil kicks the props out from under the fracking boom, the vast majority of that paper—the junk bonds issued by fracking-industry firms, the securitized loans those same firms used to make up for the fact that they lost money every single quarter, the chopped and packaged shale leases, the volumetric production agreements, and all the rest of it—will revert to its actual value, which in most cases approximates pretty closely to zero.
It’s important in this context to remember that those highly insecure securities haven’t been cooped up in the financial equivalent of the dog pound where they belong; quite the contrary, they’ve gone roaming all over the neighborhood, leaving an assortment of messes behind. Banks, investment firms, pension funds, university endowments, and many other institutions in the US and abroad snapped this stuff up in gargantuan amounts, because it offered something like what used to count as a normal rate of return on investment. As a result, as the fracking boom goes belly up, it’s not just firms in the fracking industry that will be joining it in that undignified position. In the real estate bust, a great many businesses and institutions that seemingly had nothing to do with real estate found themselves in deep financial trouble; in the fracking bust, we can count on the same thing happening—and a great deal of the resulting bankruptcies, defaults, and assorted financial chaos will likely hit in 2015.
Thus one of the entertainments 2015 has in store for us is a thumping economic crisis here in the US, and in every other country that depends on our economy for its bread and butter. The scale of the crash depends on how many people bet how much of their financial future on the fantasy of an endless frack-propelled boom, but my guess is it’ll be somewhere around the scale of the 2008 real estate bust.
It probably has to be said that this doesn’t work out to the kind of fast-crash fantasy that sees the global economy grind to a sudden stop in a matter of weeks, leaving supermarket shelves bare and so on. The events of the 2008 crash proved, if there was ever any doubt on that score, that the governments of the world are willing to do whatever it takes to keep economic activity going, and if bailing out their pals in the big banks is what’s needed, hey, that’s all in a day’s work. Now of course bailing out the big banks won’t stop the bankruptcies, the layoffs, the steep cuts to pensions, the slashing of local and state government services, and the rest of it, any more than the same thing did in the wake of the 2008 crisis, but it does guarantee that the perfect storms and worst case scenarios beloved of a certain category of collapsitarian thinkers will remain imaginative fictions.
Something else that’s baked into the baby new year’s birthday cake at this point is a rising spiral of political unrest here in the United States. The mass protests over the extrajudicial executions of nonwhite Americans by police were pretty much inevitable, as pressures on the American underclass have been building toward an explosion for decades now. There’s a certain bleak amusement to be had from watching financially comfortable white Americans come up with reasons to insist that this can’t possibly be the case, or for that matter, from hearing them contrive ways to evade the awkward fact that American police seem to have much less difficulty subduing belligerent suspects in nonlethal ways when the skins of the suspects in question are white.
Behind the killings and the protests, though, lies an explosive tangle that nobody on either side of the picket lines seems willing to address. Morale in many police departments across the United States resembles nothing so much as morale among American enlisted men in Vietnam in the last years of US involvement; after decades of budget cuts, grandstanding politicians, bungled reforms, an imploding criminal justice system, and ongoing blowback from misguided economic and social policies, a great many police officers feel that they’re caught between an enemy they can’t defeat and a political leadership that’s more than willing to throw them to the wolves for personal advantage. That the “enemy” they think they’re fighting is indistinguishable from the people they’re supposed to be protecting just adds to the list of troubling parallels.
In Vietnam, collapsing morale led to war crimes, “fragging” of officers by their own men, and worried reports to the Pentagon warning of the possibility of armed mutinies among US troops. We haven’t yet gotten to the fragging stage this time, though the response of New York police to Mayor De Blasio suggests that we’re closer to that than most people think. The routine extrajudicial execution of nonwhite suspects—there are scores if not hundreds of such executions a year—is the My Lai of our era, one of the few warnings that gets through the Five O’Clock Follies of the media to let the rest of us know that the guys on the front lines are cracking under the strain.
The final bitter irony here is that the federal government has been busily worsening the situation by encouraging the militarization of police departments across the United States, to the extent of equipping them with armored personnel carriers and other pieces of hardware that don’t have any possible use in ordinary policing. This is one of a good many data points that has me convinced that the US government is frantically gearing up to fight a major domestic insurgency. What’s more, they’re almost certainly going to get one. For decades now, since the post-Soviet “color revolutions,” the US has been funding and directing mass movements and rebellions against governments we don’t like, with Syria and Ukraine the two most recent beneficiaries of that strategy. We’ve made a lot of enemies in the process; it’s a safe bet that some of those enemies are eager to give us a heaping dose of our own medicine, and there are certainly nations with the means, motive, and opportunity to do just that.
Will an American insurgency funded by one or more hostile foreign powers get under way in 2015? I don’t think so, though I’m prepared to be wrong. More likely, I think, is another year of rising tensions, political gridlock, scattered gunfire, and rhetoric heated to the point of incandescence, while the various players in the game get into position for actual conflict: the sort of thing the United States last saw in the second half of the 1850s, as sectional tensions built toward the bloody opening rounds of the Civil War. One sign to watch for is the first outbreaks of organized violence—not just the shooting of one individual by another, but paramilitary assaults by armed groups—equivalent, more or less, to the fighting in “bleeding Kansas” that did so much to help make the Civil War inevitable.
Another thing to watch for, along the same lines, are glorifications of revolutionary violence on the part of people who haven’t previously taken that plunge. To some extent, that’s already happening. I’m thinking here especially of a recent essay by Rebecca Solnit, which starts off with lavish praise of the French Revolution: “It’s popular to say that the experiment failed,” she says, “but that’s too narrow an interpretation. France never again regressed to an absolutist monarchy”—a statement that will surprise anyone who’s heard of Napoleon, Louis XVII, or Napoleon III. In holding up the French Revolution as a model for today’s radicals, Ms. Solnit also doesn’t happen to mention the Terror, the tyranny of the Directorate, the Napoleonic wars, or any of the other problematic outcomes of the uprising in question. That sort of selective historical memory is common in times like these, and has played a very large role in setting the stage for some of history’s most brutal tragedies.
Meanwhile, back behind these foreground events, the broader trends this blog has been tracking since its outset are moving relentlessly on their own trajectories. The world’s finite supplies of petroleum, along with most other resources on which industrial civilization depends for survival, are depleting further with each day that passes; the ecological consequences of treating the atmosphere as an aerial sewer for the output of our tailpipes and smokestacks, along with all the other frankly brainless ways our civilization maltreats the biosphere that sustains us all, builds apace; caught between these two jaws of a tightening vise, industrial civilization has entered the rising spiral of crisis about which so many environmental scientists tried to warn the world back in the 1970s, and only a very small minority of people out on the fringes of our collective discourse has shown the least willingness to recognize the mess we’re in and start changing their own lives in response: the foundation, it bears repeating, of any constructive response to the crisis of our era.
I’ve heard quite a few people insist hopefully that since 2014 was so bad, 2015 has to be better. I’m sorry to say, though, that I don’t see much likelihood of that, at least here in the US. Quite the contrary, I think that when people recall 2015, they may just think of it as the year in which America got slapped across its collective face with the cold wet mackerel of reality. Come New Year’s Day of 2016, I expect to find the dollar, the Euro, the stock market, and the Super Bowl still functioning, gas in the pumps and products for sale on the grocery store shelves—but the nation in which these things exist will have passed through a traumatic and crisis-ridden year, and the chances of avoiding an even more difficult 2016 don’t seem good just now. Still, we’ll see.
The Cold Wet Mackerel of Reality
To misuse a bit of prose from Charles Dickens, it was neither the best of times nor the worst of times, but I know very few people who will object when, a few hours from now, 2014 gets dragged off to the glue factory. This has not been a good year for most people in the United States. By all accounts, this year’s holiday season was an economic flop of considerable scale—the US media, which normally treats cheery corporate press releases with the same enforced credulity that Pravda used to give to pronouncements from the Politburo in the Soviet era, has had to admit that Black Friday sales were down hard this year, even counting the internet—and plenty of Americans outside the echo chambers of the media have very good reasons to worry about what 2015 will bring.
Mind you, cheerleading of a distinctly Pravda-esque variety can still be heard from those pundits and politicians who are still convinced that people can be talked into ignoring their own experience if they can only be force-fed enough spin-doctored malarkey. That sort of enthusiasm for the glorious capitalist banker’s paradise has plenty of company just now; I’m thinking in particular of the steady drumbeat of articles and essays in the US mass media wondering aloud why so many Americans haven’t noticed the economic recovery of the last four years, and are still behaving as though there’s a recession on.
Of course there’s an explanation for that awkward fact, which is that the recovery in question never happened—outside, that is, of the abstract otherworld of numerical jugglery and spin doctoring that passes for official economic statistics these days. For most Americans, the last four years have been a bleak era of soaring expenses, shrinking incomes and benefits, rising economic insecurity, and increasingly frequent and bitter struggles with dysfunctional institutions that no longer bother even to pretend to serve the public good. That’s the reality people in the United States face when they get out of bed each morning, but it’s not a reality that’s welcome in the American mass media, so endless ingenuity has been expended in explaining why so many people in the US these days haven’t noticed the alleged economic recovery that’s allegedly burgeoning all around them.
I expect to see a good deal more of this sort of twaddle in the weeks immediately ahead, as those mass media pundits who haven’t yet trotted out their predictions for the new year get around to that annual task. For that matter, it’s doubtless safe to assume that out here on the fringes where archdruids lurk, there will be plenty of predictions of a different kind or, rather, several different kinds. There will be another round of claims that this is the year when the global economy will seize up suddenly and leave us all to starve in the dark; there will be another round of claims that this is the year when this or that or the other hot new technology will come swooping in to save the day and let the middle classes maintain their privileged lifestyles; there will be—well, those of my readers who have been following the blogosphere for any length of time can fill in the blanks themselves.
I’ve noted in previous years just how many of these latter predictions get rehashed every single January in the serene conviction that nobody will notice how often they’ve flopped before. Popular though that habit may be, it seems counterproductive to me, since—at least in theory—predictions of the sort we’re discussing is intended to be something more than light entertainment. With this in mind, I’d like to engage in the annual ritual of glancing back over the predictions I posted here at the beginning of the year now ending, and see how well I did. Here’s what I said:
“My prediction for 2014, in turn, is that we’ll see more of the same: another year, that is, of uneven but continued downward movement along the same arc of decline and fall, while official statistics here in the United States will be doctored even more extravagantly than before to manufacture a paper image of prosperity. The number of Americans trying to survive without a job will continue to increase, the effective standard of living for most of the population will continue to decline, and what used to count as the framework of ordinary life in this country will go on unraveling a thread at a time. Even so, the dollar, the Euro, the stock market, and the Super Bowl will still be functioning as 2015 begins; there will still be gas in the gas pumps and food on grocery store shelves, though fewer people will be able to afford to buy either one.
“The fracking bubble has more than lived up to last year’s expectations, filling the mass media with vast amounts of meretricious handwaving about the coming era of abundance: the same talk, for all practical purposes, that surrounded the equally delusional claims made for the housing bubble, the tech bubble, and so on all the way back to the Dutch tulip bubble of 1637. That rhetoric will prove just as dishonest as its predecessors, and the supposed new era of prosperity will come tumbling back down to earth once the bubble pops, taking a good chunk of the American economy with it. Will that happen in 2014? That’s almost impossible to know in advance. Timing the collapse of a bubble is one of the trickiest jobs in economic life; no less a mind than Isaac Newton’s was caught flatfooted by the collapse of the South Sea Bubble in 1720, and the current bubble is far more opaque. My guess is that the collapse will come toward the end of 2014, but it could have another year or so to run first.
“It’s probably a safe bet that weather-related disasters will continue to increase in number and severity. If we get a whopper on the scale of Katrina or Sandy, watch the Federal response; it’s certain to fall short of meeting the needs of the survivors and their communities, but the degree to which it falls short will be a useful measure of just how brittle and weak the national government has become. One of these years—just possibly this year, far more likely later on—that weakness is going to become one of the crucial political facts of our time, and responses to major domestic disasters are among the few good measures we’ll have of how close we are to the inevitable crisis.
“Meanwhile, what won’t happen is at least as important as what will. Despite plenty of enthusiastic pronouncements and no shortage of infomercials disguised as meaningful journalism, there will be no grand breakthroughs on the energy front. Liquid fuels—that is to say, petroleum plus anything else that can be thrown into a gas tank—will keep on being produced at something close to 2013’s rates, though the fraction of the total supply that comes from expensive alternative fuels with lower net energy and higher production costs will continue to rise, tightening a noose around the neck of every other kind of economic activity. Renewables will remain as dependent on government subsidies as they’ve been all along, nuclear power will remain dead in the water, fusion will remain a pipe dream, and more exotic items such as algal biodiesel will continue to soak up their quotas of investment dollars before going belly up in the usual way. Once the fracking bubble starts losing air, expect something else to be scooped up hurriedly by the media and waved around to buttress the claim that peak oil won’t happen, doesn’t matter, and so on; any of my readers who happen to guess correctly what that will be, and manage their investments accordingly, may just make a great deal of money.
“Sudden world-ending catastrophes will also be in short supply in 2014, though talk about them will be anything but...Both the grandiose breakthroughs that never happen and the equally gaudy catastrophes that never happen will thus continue to fill their current role as excuses not to think about, much less do anything about, what’s actually happening around us right now—the long ragged decline and fall of industrial civilization that I’ve called the Long Descent. Given the popularity of both these evasive moves, we can safely assume that one more thing won’t happen in 2014: any meaningful collective response to the rising spiral of crises that’s shredding our societies and our future. As before, anything useful that’s going to happen will be the work of individuals, families, and community groups, using the resources on hand to cope with local conditions.”
As I write these words, the US media is still parroting the fantasy of a fracking-driven “Saudi America” with a mindless repetitiveness that puts broken records to shame, and so the next shiny distraction disguised as a marvelous new energy breakthrough hasn’t yet been trotted out for the usual round of carefully choreographed oohs and aahs. Other than that, once again, I think it’s fair to say I called it. Continuing economic decline, check; a fracking bubble heading toward a world-class bust, check; climate-related disasters on the rise, with government interventions doing less and less to help those affected, check; and a continuing shortage of game-changing breakthroughs, world-ending catastrophes, and meaningful collective responses to the crisis of our age, check-check-check. If this were a bingo game, I’d be walking up to the front of the room with a big smile on my face.
Now of course a case could be made that I’m cheating. After all, it doesn’t take any particular insight to point out that continuing trends tend to continue, or to choose trends that are pretty clearly ongoing and predict that they’ll keep on going for another year. While this is true, it’s also part of the point I’ve been trying to make here for getting on for nine years now: in the real world, by and large, history is what happened when you weren’t looking. Under some circumstances, sudden jarring discontinuities can hit societies like a cold wet mackerel across the face, but close attention to the decade or so before things changed routinely shows that the discontinuity itself was the product of long-established trends, and could have been anticipated if anyone was willing to do so.
That’s a particularly relevant issue just now, because the sort of long-established trends that can lead to sudden jarring discontinuities have been more and more evident in the United States in recent years, and one of the things that made 2014 so wretched for everyone outside the narrowing circle of the privileged well-to-do is precisely that several of those trends seem to be moving toward a flashpoint. I’d like to sketch out a couple of examples, because my predictions for 2015 will center on them.
The first and most obvious is the headlong collapse of the fracking bubble, which I discussed at some length in a post earlier this month. For most of the last decade, Wall Street has been using the fracking industry in all the same ways it used the real estate industry in the runup to the 2008 crash, churning out what we still laughably call “securities” on the back of a rapidly inflating speculative bubble. As the slumping price of oil kicks the props out from under the fracking boom, the vast majority of that paper—the junk bonds issued by fracking-industry firms, the securitized loans those same firms used to make up for the fact that they lost money every single quarter, the chopped and packaged shale leases, the volumetric production agreements, and all the rest of it—will revert to its actual value, which in most cases approximates pretty closely to zero.
It’s important in this context to remember that those highly insecure securities haven’t been cooped up in the financial equivalent of the dog pound where they belong; quite the contrary, they’ve gone roaming all over the neighborhood, leaving an assortment of messes behind. Banks, investment firms, pension funds, university endowments, and many other institutions in the US and abroad snapped this stuff up in gargantuan amounts, because it offered something like what used to count as a normal rate of return on investment. As a result, as the fracking boom goes belly up, it’s not just firms in the fracking industry that will be joining it in that undignified position. In the real estate bust, a great many businesses and institutions that seemingly had nothing to do with real estate found themselves in deep financial trouble; in the fracking bust, we can count on the same thing happening—and a great deal of the resulting bankruptcies, defaults, and assorted financial chaos will likely hit in 2015.
Thus one of the entertainments 2015 has in store for us is a thumping economic crisis here in the US, and in every other country that depends on our economy for its bread and butter. The scale of the crash depends on how many people bet how much of their financial future on the fantasy of an endless frack-propelled boom, but my guess is it’ll be somewhere around the scale of the 2008 real estate bust.
It probably has to be said that this doesn’t work out to the kind of fast-crash fantasy that sees the global economy grind to a sudden stop in a matter of weeks, leaving supermarket shelves bare and so on. The events of the 2008 crash proved, if there was ever any doubt on that score, that the governments of the world are willing to do whatever it takes to keep economic activity going, and if bailing out their pals in the big banks is what’s needed, hey, that’s all in a day’s work. Now of course bailing out the big banks won’t stop the bankruptcies, the layoffs, the steep cuts to pensions, the slashing of local and state government services, and the rest of it, any more than the same thing did in the wake of the 2008 crisis, but it does guarantee that the perfect storms and worst case scenarios beloved of a certain category of collapsitarian thinkers will remain imaginative fictions.
Something else that’s baked into the baby new year’s birthday cake at this point is a rising spiral of political unrest here in the United States. The mass protests over the extrajudicial executions of nonwhite Americans by police were pretty much inevitable, as pressures on the American underclass have been building toward an explosion for decades now. There’s a certain bleak amusement to be had from watching financially comfortable white Americans come up with reasons to insist that this can’t possibly be the case, or for that matter, from hearing them contrive ways to evade the awkward fact that American police seem to have much less difficulty subduing belligerent suspects in nonlethal ways when the skins of the suspects in question are white.
Behind the killings and the protests, though, lies an explosive tangle that nobody on either side of the picket lines seems willing to address. Morale in many police departments across the United States resembles nothing so much as morale among American enlisted men in Vietnam in the last years of US involvement; after decades of budget cuts, grandstanding politicians, bungled reforms, an imploding criminal justice system, and ongoing blowback from misguided economic and social policies, a great many police officers feel that they’re caught between an enemy they can’t defeat and a political leadership that’s more than willing to throw them to the wolves for personal advantage. That the “enemy” they think they’re fighting is indistinguishable from the people they’re supposed to be protecting just adds to the list of troubling parallels.
In Vietnam, collapsing morale led to war crimes, “fragging” of officers by their own men, and worried reports to the Pentagon warning of the possibility of armed mutinies among US troops. We haven’t yet gotten to the fragging stage this time, though the response of New York police to Mayor De Blasio suggests that we’re closer to that than most people think. The routine extrajudicial execution of nonwhite suspects—there are scores if not hundreds of such executions a year—is the My Lai of our era, one of the few warnings that gets through the Five O’Clock Follies of the media to let the rest of us know that the guys on the front lines are cracking under the strain.
The final bitter irony here is that the federal government has been busily worsening the situation by encouraging the militarization of police departments across the United States, to the extent of equipping them with armored personnel carriers and other pieces of hardware that don’t have any possible use in ordinary policing. This is one of a good many data points that has me convinced that the US government is frantically gearing up to fight a major domestic insurgency. What’s more, they’re almost certainly going to get one. For decades now, since the post-Soviet “color revolutions,” the US has been funding and directing mass movements and rebellions against governments we don’t like, with Syria and Ukraine the two most recent beneficiaries of that strategy. We’ve made a lot of enemies in the process; it’s a safe bet that some of those enemies are eager to give us a heaping dose of our own medicine, and there are certainly nations with the means, motive, and opportunity to do just that.
Will an American insurgency funded by one or more hostile foreign powers get under way in 2015? I don’t think so, though I’m prepared to be wrong. More likely, I think, is another year of rising tensions, political gridlock, scattered gunfire, and rhetoric heated to the point of incandescence, while the various players in the game get into position for actual conflict: the sort of thing the United States last saw in the second half of the 1850s, as sectional tensions built toward the bloody opening rounds of the Civil War. One sign to watch for is the first outbreaks of organized violence—not just the shooting of one individual by another, but paramilitary assaults by armed groups—equivalent, more or less, to the fighting in “bleeding Kansas” that did so much to help make the Civil War inevitable.
Another thing to watch for, along the same lines, are glorifications of revolutionary violence on the part of people who haven’t previously taken that plunge. To some extent, that’s already happening. I’m thinking here especially of a recent essay by Rebecca Solnit, which starts off with lavish praise of the French Revolution: “It’s popular to say that the experiment failed,” she says, “but that’s too narrow an interpretation. France never again regressed to an absolutist monarchy”—a statement that will surprise anyone who’s heard of Napoleon, Louis XVII, or Napoleon III. In holding up the French Revolution as a model for today’s radicals, Ms. Solnit also doesn’t happen to mention the Terror, the tyranny of the Directorate, the Napoleonic wars, or any of the other problematic outcomes of the uprising in question. That sort of selective historical memory is common in times like these, and has played a very large role in setting the stage for some of history’s most brutal tragedies.
Meanwhile, back behind these foreground events, the broader trends this blog has been tracking since its outset are moving relentlessly on their own trajectories. The world’s finite supplies of petroleum, along with most other resources on which industrial civilization depends for survival, are depleting further with each day that passes; the ecological consequences of treating the atmosphere as an aerial sewer for the output of our tailpipes and smokestacks, along with all the other frankly brainless ways our civilization maltreats the biosphere that sustains us all, builds apace; caught between these two jaws of a tightening vise, industrial civilization has entered the rising spiral of crisis about which so many environmental scientists tried to warn the world back in the 1970s, and only a very small minority of people out on the fringes of our collective discourse has shown the least willingness to recognize the mess we’re in and start changing their own lives in response: the foundation, it bears repeating, of any constructive response to the crisis of our era.
I’ve heard quite a few people insist hopefully that since 2014 was so bad, 2015 has to be better. I’m sorry to say, though, that I don’t see much likelihood of that, at least here in the US. Quite the contrary, I think that when people recall 2015, they may just think of it as the year in which America got slapped across its collective face with the cold wet mackerel of reality. Come New Year’s Day of 2016, I expect to find the dollar, the Euro, the stock market, and the Super Bowl still functioning, gas in the pumps and products for sale on the grocery store shelves—but the nation in which these things exist will have passed through a traumatic and crisis-ridden year, and the chances of avoiding an even more difficult 2016 don’t seem good just now. Still, we’ll see.
SC125-3
http://www.resilience.org/stories/2014-12-31/the-peak-oil-crisis
The peak oil crisis
I know that it is getting harder all the time to believe that there really is a “peak oil crisis” lurking out there waiting to engulf our civilization and create all sorts of havoc. Nearly every day now oil and gasoline prices are falling. We are forever told that America is on the verge of independence from foreign energy sources; that the world has decades of whatever we are burning left to burn; and climate change is something for the great-great-grandchildren to worry about. In the last five months, oil prices have fallen 40 dollars a barrel so that we Americans now have about $800 million dollars more each day to spend on something other than oil products. To top it all off, those folks whose governments don’t like us very much — Russia, Iran, Venezuela for example — are really hurting as they slide into deeper economic troubles.
Leaving aside for the moment the possibility that some exotic and as yet not fully understood source of energy will emerge in the near future, saving us from climate change, reviving the global economy, and allowing us to fly further into space, the evidence is very strong that we are still on the verge of a crisis. In fact we probably are already in it and just don’t recognize it for what it is. It is a lot easier to blame troubles on high taxes or government regulation than to admit that shortages of natural resources are driving up prices and/or cutting growth.
It is now generally accepted by those actually studying the issue that production of “conventional oil,” which is what the early “peakists” were talking about 10 or 15 years ago, really did stop growing back in about 2005-2008. Since then official “oil” production numbers have continued to climb slowly, but included in the “official” numbers as put out by the US and international agencies is not all your grandfather’s oil. Instead the compilers of our oil statistics have learned to lump all sorts of liquid hydrocarbons of varying utility together and tell us that oil in the form of “all liquids” continues to grow. Now these hydrocarbons such as natural gas liquids, biofuels, tar sands, and shale oil have uses, but they either cost considerably more to produce than conventional oil, or do not have the same energy content as conventional oil. In at least one case, “refinery gains” which are sort of like whipping up a pint of cream into gallons of whipped cream, have no additional energy in their expanded state at all. They simply fill more barrels and let us pretend we have more energy to use than we actually do.
While the financial press continues to chatter endlessly about the technological breakthroughs that have brought us millions of barrels of new shale oil, sadly they have the basics of the story wrong. It is the high prices that “oil” has been selling for in the last ten years, not the decades-old fracking technology that has allowed very expensive shale oil to be produced that is new. Even with the recent $40 per barrel price decline, oil is still selling for four times what it was going for 12 or 13 years ago. It is the surge in prices to circa $100 a barrel has allowed very expensive oil such as that from fracked shale wells, the Canadian tar sands, and deep offshore oil wells to be produced; now with oil selling for closer to $70 a barrel the question is how long oil that is no longer economic to produce will keep being extracted. The other question is just how much of our oil supply is in danger of being mothballed until prices climb again as they surely will.
The reason for the current fall in prices is still in debate. The “oil” supply has continued to creep up in recent years, but starting last June the demand for $100+ oil was no longer there. While demand in the “rich” OECD countries has been down since the 2008 oil price spike, this year it seems to be the slowing Chinese economy and its reduced demand for raw materials that has been behind the sinking demand. Many of the developing economies have been growing and using more oil each year due to growing trade with the Chinese.
Someday conventional wisdom will conclude that oil at circa $100+ a barrel was simply too much to sustain high rates of economic growth and so the growth fell taking oil demand along with it. As nearly every action has a reactive feedback, we now are likely to see some sort of economic revival in those countries that have had to import a large share of their energy during the time of higher prices. Conversely the many states that have benefited from having large quantities of excess oil to export will not be doing so well for a while.
Where we are going from here is of course the question of the day. It currently looks as if oil prices will continue to fall a bit more. The Saudis say they expect $60 a barrel will be the equilibrium place. If this happens in the next few months, then we clearly will see a reduction in the drilling for high-cost to produce oil. In the case of fracked shale oil, which requires constant drilling just to keep production even, this means we could see a reduction in output next year despite the protestations of many shale oil drillers that this will not happen.
Should US shale oil production actually fall next year, then global “all liquids” production could fall too. A few astute analysts are already mulling whether just perhaps 2014 will someday be recognized as the all-time high for global oil production or in other words “peak oil.” It is still years too early to pronounce that an all-time peak in what we now call “all liquids” has occurred, but it is an interesting thought. The situation may just be worse than it seems.
The peak oil crisis
I know that it is getting harder all the time to believe that there really is a “peak oil crisis” lurking out there waiting to engulf our civilization and create all sorts of havoc. Nearly every day now oil and gasoline prices are falling. We are forever told that America is on the verge of independence from foreign energy sources; that the world has decades of whatever we are burning left to burn; and climate change is something for the great-great-grandchildren to worry about. In the last five months, oil prices have fallen 40 dollars a barrel so that we Americans now have about $800 million dollars more each day to spend on something other than oil products. To top it all off, those folks whose governments don’t like us very much — Russia, Iran, Venezuela for example — are really hurting as they slide into deeper economic troubles.
Leaving aside for the moment the possibility that some exotic and as yet not fully understood source of energy will emerge in the near future, saving us from climate change, reviving the global economy, and allowing us to fly further into space, the evidence is very strong that we are still on the verge of a crisis. In fact we probably are already in it and just don’t recognize it for what it is. It is a lot easier to blame troubles on high taxes or government regulation than to admit that shortages of natural resources are driving up prices and/or cutting growth.
It is now generally accepted by those actually studying the issue that production of “conventional oil,” which is what the early “peakists” were talking about 10 or 15 years ago, really did stop growing back in about 2005-2008. Since then official “oil” production numbers have continued to climb slowly, but included in the “official” numbers as put out by the US and international agencies is not all your grandfather’s oil. Instead the compilers of our oil statistics have learned to lump all sorts of liquid hydrocarbons of varying utility together and tell us that oil in the form of “all liquids” continues to grow. Now these hydrocarbons such as natural gas liquids, biofuels, tar sands, and shale oil have uses, but they either cost considerably more to produce than conventional oil, or do not have the same energy content as conventional oil. In at least one case, “refinery gains” which are sort of like whipping up a pint of cream into gallons of whipped cream, have no additional energy in their expanded state at all. They simply fill more barrels and let us pretend we have more energy to use than we actually do.
While the financial press continues to chatter endlessly about the technological breakthroughs that have brought us millions of barrels of new shale oil, sadly they have the basics of the story wrong. It is the high prices that “oil” has been selling for in the last ten years, not the decades-old fracking technology that has allowed very expensive shale oil to be produced that is new. Even with the recent $40 per barrel price decline, oil is still selling for four times what it was going for 12 or 13 years ago. It is the surge in prices to circa $100 a barrel has allowed very expensive oil such as that from fracked shale wells, the Canadian tar sands, and deep offshore oil wells to be produced; now with oil selling for closer to $70 a barrel the question is how long oil that is no longer economic to produce will keep being extracted. The other question is just how much of our oil supply is in danger of being mothballed until prices climb again as they surely will.
The reason for the current fall in prices is still in debate. The “oil” supply has continued to creep up in recent years, but starting last June the demand for $100+ oil was no longer there. While demand in the “rich” OECD countries has been down since the 2008 oil price spike, this year it seems to be the slowing Chinese economy and its reduced demand for raw materials that has been behind the sinking demand. Many of the developing economies have been growing and using more oil each year due to growing trade with the Chinese.
Someday conventional wisdom will conclude that oil at circa $100+ a barrel was simply too much to sustain high rates of economic growth and so the growth fell taking oil demand along with it. As nearly every action has a reactive feedback, we now are likely to see some sort of economic revival in those countries that have had to import a large share of their energy during the time of higher prices. Conversely the many states that have benefited from having large quantities of excess oil to export will not be doing so well for a while.
Where we are going from here is of course the question of the day. It currently looks as if oil prices will continue to fall a bit more. The Saudis say they expect $60 a barrel will be the equilibrium place. If this happens in the next few months, then we clearly will see a reduction in the drilling for high-cost to produce oil. In the case of fracked shale oil, which requires constant drilling just to keep production even, this means we could see a reduction in output next year despite the protestations of many shale oil drillers that this will not happen.
Should US shale oil production actually fall next year, then global “all liquids” production could fall too. A few astute analysts are already mulling whether just perhaps 2014 will someday be recognized as the all-time high for global oil production or in other words “peak oil.” It is still years too early to pronounce that an all-time peak in what we now call “all liquids” has occurred, but it is an interesting thought. The situation may just be worse than it seems.
SC125-2
http://theeconomiccollapseblog.com/archives/american-people-utterly-clueless-going-happen-enter-2015
The American People Are Utterly Clueless About What Is Going To Happen As We Enter 2015
The American people are feeling really good right about now. For example, Gallup’s economic confidence index has hit the highest level that we have seen since the last recession. In addition, nearly half of all Americans believe that 2015 will be a better year than 2014 was, and only about 10 percent believe that it will be a worse year. And a lot of people are generally feeling quite good about the people that have been leading our nation. According to Gallup, once again this year Hillary Clinton is the most admired woman in America and Barack Obama is the most admired man in America. I don’t know what that says about our nation, but it can’t be good. Unfortunately, when things seem to be going well common sense tends to go out the window. A couple days ago, the Guardian ran an article entitled “Goodbye to one of the best years in history“, and a whole lot of people out there are feeling really optimistic these days. But should they be?
Sadly, what we are experiencing right now is so similar to what we witnessed in 2007 and early 2008. The stock market had been on a great run, people were flipping houses like crazy and most people were convinced that the party would never end.
But then it did end – very painfully.
The signs of trouble were there, but most people chose to ignore them.
Sadly, the exact same thing is happening again.
On Monday, the price of oil hit a brand new five year low. As I write this, U.S. oil is sitting at a price of $53.76 a barrel, which is nearly a 50 percent decline from the peak earlier this year.
There is only one other time in history when the price of oil has declined by more than 50 dollars a barrel in such a short time frame. That was back in the middle of 2008, shortly before the worst stock market crash since the Great Depression.
Unless the price of oil starts really bouncing back, the U.S. economy is going to be hit really hard.
Since 2009, oil industry employment has risen by 50 percent. And jobs in the oil industry pay quite well. One figure that I saw put the average weekly wage at about 1700 dollars.
But now we aren’t going to be gaining those types of jobs. Instead, we are going to rapidly start losing them.
Already, the oil rig count has dropped for three weeks in a row and is now at an 8 month low. And as the oil industry suffers, all of the industries that it supports are also going to start feeling the pain. In fact, Business Insider is reporting that Texas business executives are “freaked out” about what is happening…
Business executives in Texas are worried about the drop in oil prices.
On Monday, the Dallas Fed’s latest manufacturing survey showed that activity in Texas was slowing down.
The latest composite index came in at 4.1, widely missing expectations and down big from November’s reading. Expectations were for the index to come in at 9, down from 10.5 last month.
So while most Americans are feeling really good about the coming year, many of those with an inside view are becoming quite alarmed. One Texas business executive went so far as to say that the stunning decline in oil prices was “going to make things ugly … quickly.“
Meanwhile, the 9 trillion dollar U.S. dollar carry trade is starting to unwind.
The following is an excerpt from a recent Zero Hedge article…
Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.
Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Economies that are closely aligned with commodities (all of which are priced in US Dollars) are getting demolished too.
Just about everything will be hit as well. Most of the “recovery” of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.
If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system.
And that’s assuming NO increased leverage from derivative usage.
Ouch.
And yes, as that last excerpt mentioned, derivatives could soon become a massive problem. The big banks are holding trillions in commodity derivatives that could blow up if the price of oil does not rebound. Overall, there are five U.S. banks that each have more than 40 trillion dollars of exposure to derivatives of all types, and the total global derivatives bubble is at least 700 trillion dollars at this point.
At the same time, many are becoming concerned that the unprecedented bond bubble that we are witnessing could soon implode and trillions of dollars of “wealth” could disappear into thin air.
In fact, Bloomberg says that we should “get ready for a disastrous year” for bonds…
Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.
With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.
That certainly does not sound very optimistic, does it?
Anyone with even a minimal amount of intelligence should be able to see the massive financial bubbles that the central banks of the world have created, and anyone with even a minimal amount of intelligence should be able to see that we are heading for a massive financial implosion which will be extraordinarily painful.
Unfortunately, as I wrote about yesterday, the American people have become “zombiefied“. Instead of thinking for themselves, they let “the matrix” do their thinking for them. And right now “the matrix” is telling them that everything is going to be just fine in 2015.
If you do not think that there is a propaganda machine that tells us what to think, I want you to watch the video posted below very carefully. This video makes it so obvious that even a small child can understand it…
The American People Are Utterly Clueless About What Is Going To Happen As We Enter 2015
The American people are feeling really good right about now. For example, Gallup’s economic confidence index has hit the highest level that we have seen since the last recession. In addition, nearly half of all Americans believe that 2015 will be a better year than 2014 was, and only about 10 percent believe that it will be a worse year. And a lot of people are generally feeling quite good about the people that have been leading our nation. According to Gallup, once again this year Hillary Clinton is the most admired woman in America and Barack Obama is the most admired man in America. I don’t know what that says about our nation, but it can’t be good. Unfortunately, when things seem to be going well common sense tends to go out the window. A couple days ago, the Guardian ran an article entitled “Goodbye to one of the best years in history“, and a whole lot of people out there are feeling really optimistic these days. But should they be?
Sadly, what we are experiencing right now is so similar to what we witnessed in 2007 and early 2008. The stock market had been on a great run, people were flipping houses like crazy and most people were convinced that the party would never end.
But then it did end – very painfully.
The signs of trouble were there, but most people chose to ignore them.
Sadly, the exact same thing is happening again.
On Monday, the price of oil hit a brand new five year low. As I write this, U.S. oil is sitting at a price of $53.76 a barrel, which is nearly a 50 percent decline from the peak earlier this year.
There is only one other time in history when the price of oil has declined by more than 50 dollars a barrel in such a short time frame. That was back in the middle of 2008, shortly before the worst stock market crash since the Great Depression.
Unless the price of oil starts really bouncing back, the U.S. economy is going to be hit really hard.
Since 2009, oil industry employment has risen by 50 percent. And jobs in the oil industry pay quite well. One figure that I saw put the average weekly wage at about 1700 dollars.
But now we aren’t going to be gaining those types of jobs. Instead, we are going to rapidly start losing them.
Already, the oil rig count has dropped for three weeks in a row and is now at an 8 month low. And as the oil industry suffers, all of the industries that it supports are also going to start feeling the pain. In fact, Business Insider is reporting that Texas business executives are “freaked out” about what is happening…
Business executives in Texas are worried about the drop in oil prices.
On Monday, the Dallas Fed’s latest manufacturing survey showed that activity in Texas was slowing down.
The latest composite index came in at 4.1, widely missing expectations and down big from November’s reading. Expectations were for the index to come in at 9, down from 10.5 last month.
So while most Americans are feeling really good about the coming year, many of those with an inside view are becoming quite alarmed. One Texas business executive went so far as to say that the stunning decline in oil prices was “going to make things ugly … quickly.“
Meanwhile, the 9 trillion dollar U.S. dollar carry trade is starting to unwind.
The following is an excerpt from a recent Zero Hedge article…
Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.
Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Economies that are closely aligned with commodities (all of which are priced in US Dollars) are getting demolished too.
Just about everything will be hit as well. Most of the “recovery” of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.
If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system.
And that’s assuming NO increased leverage from derivative usage.
Ouch.
And yes, as that last excerpt mentioned, derivatives could soon become a massive problem. The big banks are holding trillions in commodity derivatives that could blow up if the price of oil does not rebound. Overall, there are five U.S. banks that each have more than 40 trillion dollars of exposure to derivatives of all types, and the total global derivatives bubble is at least 700 trillion dollars at this point.
At the same time, many are becoming concerned that the unprecedented bond bubble that we are witnessing could soon implode and trillions of dollars of “wealth” could disappear into thin air.
In fact, Bloomberg says that we should “get ready for a disastrous year” for bonds…
Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.
With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.
That certainly does not sound very optimistic, does it?
Anyone with even a minimal amount of intelligence should be able to see the massive financial bubbles that the central banks of the world have created, and anyone with even a minimal amount of intelligence should be able to see that we are heading for a massive financial implosion which will be extraordinarily painful.
Unfortunately, as I wrote about yesterday, the American people have become “zombiefied“. Instead of thinking for themselves, they let “the matrix” do their thinking for them. And right now “the matrix” is telling them that everything is going to be just fine in 2015.
If you do not think that there is a propaganda machine that tells us what to think, I want you to watch the video posted below very carefully. This video makes it so obvious that even a small child can understand it…
Friday, December 26, 2014
SC125-1
http://thearchdruidreport.blogspot.com/
Waiting for the Sunrise
By the time many of my readers get to this week’s essay here on The Archdruid Report, it will be Christmas Day. Here in America, that means that we’re finally most of the way through one of the year’s gaudiest orgies of pure vulgar greed, the holiday shopping season, which strikes me as rather an odd way to celebrate the birth of someone whose teachings so resolutely critiqued the mindless pursuit of material goodies. If, as that same person pointed out, it’s impossible to serve both God and Mammon, the demon of wealth, it’s pretty clear which of those two personages most Americans—including no small number who claim to be Christians—really consider the reason for the season.
A long time before that stable in Bethlehem received its most famous tenants, though, the same day was being celebrated across much of the northern temperate zone. The reason has to do with one of those details everyone knew before the invention of electric lighting and few people remember now, the movement of the apparent point of sunrise along the eastern horizon during the year. Before the printing press made calendars ubiquitous, that was a standard way of gauging the changing seasons: the point of sunrise swings from southeast to northeast as winter in the northern hemisphere gives way to summer and from northeast back to southeast as summer gives way again to winter, and if you have a way to track the apparent motion, you can follow the yearly cycle with a fair degree of precision.
This movement is like the swing of a pendulum: it’s very fast in the middle of the arc, and slows to a dead stop on either end. That makes the spring and fall equinoxes easy to identify—if you have a couple of megaliths lined up just right, for example, the shadow of one will fall right on the foot of the other on the days of the equinoxes, and a little to one side or the other one day before or after—but the summer and winter solstices are a different matter. At those times of year, the sun seems to grind to a halt around the 17th of June or December, you wait for about a week, and then finally the sun comes up a little further south on June 25th or a little further north on December 25th, and you know for a fact that the wheel of the seasons is still turning.
That’s why Christmas is when it is. I’ve read, though I don’t have the reference handy, that shepherds in the Levant back in the day kept watch over their flocks in the fields in late summer, not in December, and so—if the New Testament narrative is to be believed—Jesus was something like four months old when the first Christmas rolled around. As far as I know, nobody knows exactly how the present date got put in place, but I suspect the old solar symbolism had a lot to do with it; in those days, the Christian church was less prone to the rigid literalism that’s become common in recent centuries, and also quite aware of seasonal and astronomical cycles—consider the complicated rules for setting the date of Easter, in which movements of the sun and moon both play a part.
I’ve been thinking quite a bit about such things as the holiday shopping season stumbles toward its end and a troubled, weary, and distracted nation prepares to bid a hearty good riddance to 2014. Of course Druids generally think about such things; the seasonal cycle has had an important role in our traditions since those were revived in the eighteenth century. Even so, it’s been more on my mind than usual. In particular, as I think about the shape of things in the world right now, what keeps coming to mind is the image of the old loremasters, waiting in the darkness at the end of a cold winter’s night to see the sunrise begin swinging back in the direction of spring.
Those of my readers who see such an image as hopelessly out of place just now have, I grant, quite a bit of evidence on their side. Most notably, the coming of 2015 marks a full decade since production of conventional petroleum worldwide hit its all-time peak and began to decline. Those who were around in the early days of the peak oil scene, as I was, will doubtless recall how often and eagerly the more optimistic members of that scene insisted that once the peak arrived, political and business interests everywhere would be forced to come to terms with the end of the age of cheap abundant energy. Once that harsh but necessary awakening took place, they argued, the transition to sustainable societies capable of living within the Earth’s annual budget of sunlight would finally get under way.
Of course that’s not what happened. Instead, political and business interests responded to the peak by redefining what counts as crude oil, pouring just about any flammable liquid they could find into the world’s fuel tank—ethanol, vegetable oil, natural gas liquids, “dilbit” (diluted bitumen) from tar sands, you name it—while scraping the bottom of the barrel for petroleum via hydrofracturing, ultradeep offshore wells, and other extreme extraction methods. All of those require much higher inputs of fossil fuel energy per barrel produced than conventional crude does, so that a growing fraction of the world’s fossil fuel supply has had to be burned just to produce more fossil fuel. Did any whisper of this far from minor difficulty find its way into the cheery charts of “all liquids” and the extravagantly rose-colored projections of future production? Did, for example, any of the official agencies tasked with tracking fossil fuel production consider subtracting an estimate for barrels of oil equivalent used in extraction from the production figures, so that we would have at least a rough idea of the world’s net petroleum production? Surely you jest.
The need to redirect an appreciable fraction of the world’s fossil fuel supply into fossil fuel production, in turn, had significant economic costs. Those were shown by the simultaneous presence of prolonged economic dysfunction and sky-high oil prices: a combination, please note, that last appeared during the energy crises of the 1970s, and should have served as a warning sign that something similar was afoot. Instead of paying attention, political and business interests around the world treated the abrupt fraying of the economy as a puzzling anomaly to be drowned in a vat of cheap credit—when, that is, they didn’t treat it as a public relations problem that could be solved by proclaiming a recovery that didn’t happen to exist. Economic imbalances accordingly spun out of control; paper wealth flowed away from those who actually produce goods and service into the hands of those who manipulate fiscal abstractions; the global economy was whipsawed by convulsive fiscal crisis in 2009 and 2009, and shows every sign of plunging into a comparable round of turmoil right now.
I wish I could say that the alternative energy side of the equation had responded to any of this in a way that might point toward a better future, but no such luck. With embarrassingly few exceptions, the things that got funding, or even any significant amount of discussion, were the sorts of overpriced white-elephant systems that only make economic sense in the presence of lavish government subsidies, and are utterly dependent on a technostructure that’s only viable given exactly the sort of cheap abundant fossil fuels that those systems are theoretically going to replace. Grid-tied photovoltaic systems, gargantuan wind turbines, and vast centralized solar-thermal facilities soaked up the attention and the funding, while simple, affordable, thoroughly proven technologies such as solar water heating got another decade of malign neglect. As for using less—the necessary foundation for anything approaching a sustainable future—that remained utterly taboo in polite company.
Back in 2005, a then-famous study done for the Department of Energy by a team headed by Robert Hirsch showed that to get through declining oil supplies without massive crisis, preparations for the descent would have to begin twenty years before the peak arrived. Since the peak of conventional crude oil production had already arrived in 2005, this warning was perhaps a little tardy, but a crash program focusing on conservation and the conversion of energy-intensive infrastructure to less vulnerable technologies might still have done much. Instead, we collectively wasted another decade on daydreams—and all the while, week after dreary week, the mainstream media has kept up a steady drumbeat of articles claiming to prove that this or that or the other thing has disproved peak oil. Given all this, is there any reason to expect anything other than a continuation of the same dysfunctional behavior, with the blind leading the blind until they all tumble together down the long bitter slope ahead?
As it happens, I think there is.
Part of it, oddly enough, is the steady drumbeat of articles just referred to, each claiming to have disproved peak oil once and for all. The last time the subject was shouted down, in the early 1980s, there wasn’t that kind of ongoing barrage; after a few blandly confident denunciations, the subject just got dropped from the media so hard it would have left a dent on a battleship’s armored deck, and was consigned thereafter to a memory hole straight out of George Orwell. Presumably that was the intention this time, too, but something has shifted. In the early 1980s, when the media started spouting the same sort of cornucopian drivel they’re engaged in this time, the vast majority of the people who claimed to be concerned about energy and the environment trotted along after them with scarcely a dissenting bleat. That hasn’t happened in the present case; if I may indulge in a bit of very edgy irony here, this is one of the very few ways in which it really is different this time.
It’s worth glancing back over how that difference unfolded. To be sure, the brief heyday during which media reports took the end of the age of cheap abundant energy seriously stopped abruptly when puffing up the fracking bubble became the order of the day; the aforementioned drumbeat of alleged disproofs got going; those of us who kept on talking about peak oil started getting pressure from mainstream (that is, corporate-funded) environmentalists to drop the subject, get on board with the climate change bandwagon, and join them in the self-defeating rut that’s kept the environmental movement from accomplishing anything worthwhile for the last thirty years. In response, a certain number of bloggers and speakers who had been involved in peak oil discussions did in fact drop the subject, and those peak oil organizations that had committed themselves to a grant-funded organizational model fell on hard times. A fair number of us stayed the course, though. Far more significantly, so did a very substantial portion of our audience.
That latter point is the thing that I find most encouraging. Over the last decade, in the teeth of constant propaganda from the mass media and a giddy assortment of other sources, the number of people in the United States and elsewhere who are aware of the ongoing decline of industrial society, who recognize the impossibility of infinite growth on a finite planet, and who are willing to make changes in their own lives in response to these things, somehow failed to dwindle away to near-irrelevance, as it did the last time around. If anything—though I don’t have hard statistics to back this perception, just a scattering of suggestive proxy measurements—that number seems to have increased.
When I speak to audiences about catabolic collapse and the twilight of the industrial age these days, for example, I don’t get anything like as many blank looks or causal dismissals as those concepts routinely fielded even a few years ago. Books on peak oil and related topics, mine among them, remain steady sellers, and stats on this blog have zigzagged unevenly but relentlessly upwards over the years, regularly topping 300,000 page views a month this autumn. Less quantifiable but more telling, at least to me, are the shifts I’ve watched in people I know. Some who used to reject the whole idea of imminent and ongoing decline with scornful laughter have slowly come around to rueful admissions that, well, maybe we really are in trouble; others, starting from the same place, now denounce any such notion with the sort of brittle rage that you normally see in people who are losing the ability to make themselves keep believing the dogma they’ve committed themselves to defending.
Even more telling are the young people I meet who have sized up the future with cold eyes, and walked away from the officially approved options spread before them like so many snares by a society whose easy promises a great many of them no longer believe. Each year that passes brings me more encounters with people in their late teens and twenties who have recognized that the rules that shaped their parents’ and grandparents’ lives don’t work any more, that most of the jobs they have been promised either don’t exist or won’t exist for much longer, that a college education these days is a one-way ticket to decades of debt peonage, and that most of the other institutions that claim to be there to help them don’t have their best interests in mind. They’re picking up crafts and skilled trades, living with their parents or with groups of other young people, and learning to get by on less, because the price of doing otherwise is more than they’re willing to pay.
More broadly, more and more people seem to be turning their backs on the American dream, or more precisely on the bleak waking nightmare into which the American dream has metastasized over the last few decades. A growing number of people have walked away from the job market and found ways to support themselves outside a mainstream economy that’s increasingly stacked against them. Even among those who are still in the belly of the beast, the sort of unthinking trust in business as usual that used to be tolerably common straight through American society is increasingly rare these days. Outside the narrowing circle of those who benefit from the existing order of society, a crisis of legitimacy is in the making, and it’s not simply the current US political system that’s facing the brunt of that crisis—it’s the entire crumbling edifice of American collective life.
That crisis of legitimacy won’t necessarily lead to better things. It could all too easily head in directions no sane person would wish to go. I’ve written here more than once about the possibility that the abject and ongoing failure of constructive leadership in contemporary America could lay the groundwork for the rise of something closely akin to the fascist regimes of Depression-era Europe, as people desperate for an alternative to the Republicratic consensus frozen into place inside the Washington DC beltway turn to a charismatic demagogue who promises to break the gridlock and bring change. Things could also go in even more destructive directions; a nation that ships tens of thousands of its young people in uniform to an assortment of Middle Eastern countries, teaches them all the latest trends in counterinsurgency warfare, and then dumps them back home in a collapsing economy without the benefits they were promised, has only itself to blame if some of them end up applying their skills in the service of a domestic insurgency against the present US government.
Those possibilities are real, and so are a galaxy of other potential outcomes that are considerably worse than what exists in America today. That said, constructive change is also a possibility. The absurd extravagances that most Americans still think of as an ordinary standard of living were always destined to be a short-term phenomenon, and we’re decades past the point at which a descent from those giddy heights could have been made without massive disruptions; no possible combination of political, social, economic, and environmental transformations at this point can change those unwelcome facts. Even so, there’s much worth doing that can still be done. We can at least stop making things worse than they have to be; we can begin shifting, individually and collectively, to technologies and social forms that will still make sense in a world of tightly constrained energy and resource supplies; we can preserve things of value to the near, middle, and far future that might otherwise be lost; we might, given luck and hard work, be able to revive enough of the moribund traditions of American democracy and voluntary association to provide an alternative down the road to the naked rule of force and fraud.
None of that will be easy, but then all the easy options went whistling down the wind a long time ago. No doubt there will still be voices insisting that Americans can have the lifestyles to which they think they’re entitled if only this, or that, or the other thing were to happen; no doubt the collapse of the fracking bubble will be followed by some equally gaudy and dishonest set of cargo-cult rhetoric meant to convince the rubes that happy days will shortly be here again, just as soon as billions of dollars we don’t happen to have are poured down whatever the next rathole du jour happens to be. If enough of us ignore those claims and do what must be done—and “enough” in this context does not need to equal a majority, or even a large minority, of Americans—there’s still much of value that can be accomplished in the time before us.
To return to the metaphor that opened this post, that first slight shift of sunrise north along the horizon from the solstice point, faint as it is, is a reminder that winter doesn’t last forever, even though the coldest nights and the worst of the winter storms come after that point is past. In the same way, bleak as the immediate prospects may be, there can still be a future worth having on the far side of the crisis of our age, and our actions here and now can further the immense task of bringing such a future into being. In the new year, as I continue the current series of posts on the American future, I plan on talking at quite some length about some of the things that can be done and some of the possibilities that those actions might bring within reach.
And with that, I would like to wish my Christian readers a very merry Christmas, my readers of other faiths, a blessed holiday season, and to all my readers, a happy New Year.
Waiting for the Sunrise
By the time many of my readers get to this week’s essay here on The Archdruid Report, it will be Christmas Day. Here in America, that means that we’re finally most of the way through one of the year’s gaudiest orgies of pure vulgar greed, the holiday shopping season, which strikes me as rather an odd way to celebrate the birth of someone whose teachings so resolutely critiqued the mindless pursuit of material goodies. If, as that same person pointed out, it’s impossible to serve both God and Mammon, the demon of wealth, it’s pretty clear which of those two personages most Americans—including no small number who claim to be Christians—really consider the reason for the season.
A long time before that stable in Bethlehem received its most famous tenants, though, the same day was being celebrated across much of the northern temperate zone. The reason has to do with one of those details everyone knew before the invention of electric lighting and few people remember now, the movement of the apparent point of sunrise along the eastern horizon during the year. Before the printing press made calendars ubiquitous, that was a standard way of gauging the changing seasons: the point of sunrise swings from southeast to northeast as winter in the northern hemisphere gives way to summer and from northeast back to southeast as summer gives way again to winter, and if you have a way to track the apparent motion, you can follow the yearly cycle with a fair degree of precision.
This movement is like the swing of a pendulum: it’s very fast in the middle of the arc, and slows to a dead stop on either end. That makes the spring and fall equinoxes easy to identify—if you have a couple of megaliths lined up just right, for example, the shadow of one will fall right on the foot of the other on the days of the equinoxes, and a little to one side or the other one day before or after—but the summer and winter solstices are a different matter. At those times of year, the sun seems to grind to a halt around the 17th of June or December, you wait for about a week, and then finally the sun comes up a little further south on June 25th or a little further north on December 25th, and you know for a fact that the wheel of the seasons is still turning.
That’s why Christmas is when it is. I’ve read, though I don’t have the reference handy, that shepherds in the Levant back in the day kept watch over their flocks in the fields in late summer, not in December, and so—if the New Testament narrative is to be believed—Jesus was something like four months old when the first Christmas rolled around. As far as I know, nobody knows exactly how the present date got put in place, but I suspect the old solar symbolism had a lot to do with it; in those days, the Christian church was less prone to the rigid literalism that’s become common in recent centuries, and also quite aware of seasonal and astronomical cycles—consider the complicated rules for setting the date of Easter, in which movements of the sun and moon both play a part.
I’ve been thinking quite a bit about such things as the holiday shopping season stumbles toward its end and a troubled, weary, and distracted nation prepares to bid a hearty good riddance to 2014. Of course Druids generally think about such things; the seasonal cycle has had an important role in our traditions since those were revived in the eighteenth century. Even so, it’s been more on my mind than usual. In particular, as I think about the shape of things in the world right now, what keeps coming to mind is the image of the old loremasters, waiting in the darkness at the end of a cold winter’s night to see the sunrise begin swinging back in the direction of spring.
Those of my readers who see such an image as hopelessly out of place just now have, I grant, quite a bit of evidence on their side. Most notably, the coming of 2015 marks a full decade since production of conventional petroleum worldwide hit its all-time peak and began to decline. Those who were around in the early days of the peak oil scene, as I was, will doubtless recall how often and eagerly the more optimistic members of that scene insisted that once the peak arrived, political and business interests everywhere would be forced to come to terms with the end of the age of cheap abundant energy. Once that harsh but necessary awakening took place, they argued, the transition to sustainable societies capable of living within the Earth’s annual budget of sunlight would finally get under way.
Of course that’s not what happened. Instead, political and business interests responded to the peak by redefining what counts as crude oil, pouring just about any flammable liquid they could find into the world’s fuel tank—ethanol, vegetable oil, natural gas liquids, “dilbit” (diluted bitumen) from tar sands, you name it—while scraping the bottom of the barrel for petroleum via hydrofracturing, ultradeep offshore wells, and other extreme extraction methods. All of those require much higher inputs of fossil fuel energy per barrel produced than conventional crude does, so that a growing fraction of the world’s fossil fuel supply has had to be burned just to produce more fossil fuel. Did any whisper of this far from minor difficulty find its way into the cheery charts of “all liquids” and the extravagantly rose-colored projections of future production? Did, for example, any of the official agencies tasked with tracking fossil fuel production consider subtracting an estimate for barrels of oil equivalent used in extraction from the production figures, so that we would have at least a rough idea of the world’s net petroleum production? Surely you jest.
The need to redirect an appreciable fraction of the world’s fossil fuel supply into fossil fuel production, in turn, had significant economic costs. Those were shown by the simultaneous presence of prolonged economic dysfunction and sky-high oil prices: a combination, please note, that last appeared during the energy crises of the 1970s, and should have served as a warning sign that something similar was afoot. Instead of paying attention, political and business interests around the world treated the abrupt fraying of the economy as a puzzling anomaly to be drowned in a vat of cheap credit—when, that is, they didn’t treat it as a public relations problem that could be solved by proclaiming a recovery that didn’t happen to exist. Economic imbalances accordingly spun out of control; paper wealth flowed away from those who actually produce goods and service into the hands of those who manipulate fiscal abstractions; the global economy was whipsawed by convulsive fiscal crisis in 2009 and 2009, and shows every sign of plunging into a comparable round of turmoil right now.
I wish I could say that the alternative energy side of the equation had responded to any of this in a way that might point toward a better future, but no such luck. With embarrassingly few exceptions, the things that got funding, or even any significant amount of discussion, were the sorts of overpriced white-elephant systems that only make economic sense in the presence of lavish government subsidies, and are utterly dependent on a technostructure that’s only viable given exactly the sort of cheap abundant fossil fuels that those systems are theoretically going to replace. Grid-tied photovoltaic systems, gargantuan wind turbines, and vast centralized solar-thermal facilities soaked up the attention and the funding, while simple, affordable, thoroughly proven technologies such as solar water heating got another decade of malign neglect. As for using less—the necessary foundation for anything approaching a sustainable future—that remained utterly taboo in polite company.
Back in 2005, a then-famous study done for the Department of Energy by a team headed by Robert Hirsch showed that to get through declining oil supplies without massive crisis, preparations for the descent would have to begin twenty years before the peak arrived. Since the peak of conventional crude oil production had already arrived in 2005, this warning was perhaps a little tardy, but a crash program focusing on conservation and the conversion of energy-intensive infrastructure to less vulnerable technologies might still have done much. Instead, we collectively wasted another decade on daydreams—and all the while, week after dreary week, the mainstream media has kept up a steady drumbeat of articles claiming to prove that this or that or the other thing has disproved peak oil. Given all this, is there any reason to expect anything other than a continuation of the same dysfunctional behavior, with the blind leading the blind until they all tumble together down the long bitter slope ahead?
As it happens, I think there is.
Part of it, oddly enough, is the steady drumbeat of articles just referred to, each claiming to have disproved peak oil once and for all. The last time the subject was shouted down, in the early 1980s, there wasn’t that kind of ongoing barrage; after a few blandly confident denunciations, the subject just got dropped from the media so hard it would have left a dent on a battleship’s armored deck, and was consigned thereafter to a memory hole straight out of George Orwell. Presumably that was the intention this time, too, but something has shifted. In the early 1980s, when the media started spouting the same sort of cornucopian drivel they’re engaged in this time, the vast majority of the people who claimed to be concerned about energy and the environment trotted along after them with scarcely a dissenting bleat. That hasn’t happened in the present case; if I may indulge in a bit of very edgy irony here, this is one of the very few ways in which it really is different this time.
It’s worth glancing back over how that difference unfolded. To be sure, the brief heyday during which media reports took the end of the age of cheap abundant energy seriously stopped abruptly when puffing up the fracking bubble became the order of the day; the aforementioned drumbeat of alleged disproofs got going; those of us who kept on talking about peak oil started getting pressure from mainstream (that is, corporate-funded) environmentalists to drop the subject, get on board with the climate change bandwagon, and join them in the self-defeating rut that’s kept the environmental movement from accomplishing anything worthwhile for the last thirty years. In response, a certain number of bloggers and speakers who had been involved in peak oil discussions did in fact drop the subject, and those peak oil organizations that had committed themselves to a grant-funded organizational model fell on hard times. A fair number of us stayed the course, though. Far more significantly, so did a very substantial portion of our audience.
That latter point is the thing that I find most encouraging. Over the last decade, in the teeth of constant propaganda from the mass media and a giddy assortment of other sources, the number of people in the United States and elsewhere who are aware of the ongoing decline of industrial society, who recognize the impossibility of infinite growth on a finite planet, and who are willing to make changes in their own lives in response to these things, somehow failed to dwindle away to near-irrelevance, as it did the last time around. If anything—though I don’t have hard statistics to back this perception, just a scattering of suggestive proxy measurements—that number seems to have increased.
When I speak to audiences about catabolic collapse and the twilight of the industrial age these days, for example, I don’t get anything like as many blank looks or causal dismissals as those concepts routinely fielded even a few years ago. Books on peak oil and related topics, mine among them, remain steady sellers, and stats on this blog have zigzagged unevenly but relentlessly upwards over the years, regularly topping 300,000 page views a month this autumn. Less quantifiable but more telling, at least to me, are the shifts I’ve watched in people I know. Some who used to reject the whole idea of imminent and ongoing decline with scornful laughter have slowly come around to rueful admissions that, well, maybe we really are in trouble; others, starting from the same place, now denounce any such notion with the sort of brittle rage that you normally see in people who are losing the ability to make themselves keep believing the dogma they’ve committed themselves to defending.
Even more telling are the young people I meet who have sized up the future with cold eyes, and walked away from the officially approved options spread before them like so many snares by a society whose easy promises a great many of them no longer believe. Each year that passes brings me more encounters with people in their late teens and twenties who have recognized that the rules that shaped their parents’ and grandparents’ lives don’t work any more, that most of the jobs they have been promised either don’t exist or won’t exist for much longer, that a college education these days is a one-way ticket to decades of debt peonage, and that most of the other institutions that claim to be there to help them don’t have their best interests in mind. They’re picking up crafts and skilled trades, living with their parents or with groups of other young people, and learning to get by on less, because the price of doing otherwise is more than they’re willing to pay.
More broadly, more and more people seem to be turning their backs on the American dream, or more precisely on the bleak waking nightmare into which the American dream has metastasized over the last few decades. A growing number of people have walked away from the job market and found ways to support themselves outside a mainstream economy that’s increasingly stacked against them. Even among those who are still in the belly of the beast, the sort of unthinking trust in business as usual that used to be tolerably common straight through American society is increasingly rare these days. Outside the narrowing circle of those who benefit from the existing order of society, a crisis of legitimacy is in the making, and it’s not simply the current US political system that’s facing the brunt of that crisis—it’s the entire crumbling edifice of American collective life.
That crisis of legitimacy won’t necessarily lead to better things. It could all too easily head in directions no sane person would wish to go. I’ve written here more than once about the possibility that the abject and ongoing failure of constructive leadership in contemporary America could lay the groundwork for the rise of something closely akin to the fascist regimes of Depression-era Europe, as people desperate for an alternative to the Republicratic consensus frozen into place inside the Washington DC beltway turn to a charismatic demagogue who promises to break the gridlock and bring change. Things could also go in even more destructive directions; a nation that ships tens of thousands of its young people in uniform to an assortment of Middle Eastern countries, teaches them all the latest trends in counterinsurgency warfare, and then dumps them back home in a collapsing economy without the benefits they were promised, has only itself to blame if some of them end up applying their skills in the service of a domestic insurgency against the present US government.
Those possibilities are real, and so are a galaxy of other potential outcomes that are considerably worse than what exists in America today. That said, constructive change is also a possibility. The absurd extravagances that most Americans still think of as an ordinary standard of living were always destined to be a short-term phenomenon, and we’re decades past the point at which a descent from those giddy heights could have been made without massive disruptions; no possible combination of political, social, economic, and environmental transformations at this point can change those unwelcome facts. Even so, there’s much worth doing that can still be done. We can at least stop making things worse than they have to be; we can begin shifting, individually and collectively, to technologies and social forms that will still make sense in a world of tightly constrained energy and resource supplies; we can preserve things of value to the near, middle, and far future that might otherwise be lost; we might, given luck and hard work, be able to revive enough of the moribund traditions of American democracy and voluntary association to provide an alternative down the road to the naked rule of force and fraud.
None of that will be easy, but then all the easy options went whistling down the wind a long time ago. No doubt there will still be voices insisting that Americans can have the lifestyles to which they think they’re entitled if only this, or that, or the other thing were to happen; no doubt the collapse of the fracking bubble will be followed by some equally gaudy and dishonest set of cargo-cult rhetoric meant to convince the rubes that happy days will shortly be here again, just as soon as billions of dollars we don’t happen to have are poured down whatever the next rathole du jour happens to be. If enough of us ignore those claims and do what must be done—and “enough” in this context does not need to equal a majority, or even a large minority, of Americans—there’s still much of value that can be accomplished in the time before us.
To return to the metaphor that opened this post, that first slight shift of sunrise north along the horizon from the solstice point, faint as it is, is a reminder that winter doesn’t last forever, even though the coldest nights and the worst of the winter storms come after that point is past. In the same way, bleak as the immediate prospects may be, there can still be a future worth having on the far side of the crisis of our age, and our actions here and now can further the immense task of bringing such a future into being. In the new year, as I continue the current series of posts on the American future, I plan on talking at quite some length about some of the things that can be done and some of the possibilities that those actions might bring within reach.
And with that, I would like to wish my Christian readers a very merry Christmas, my readers of other faiths, a blessed holiday season, and to all my readers, a happy New Year.
Sunday, December 14, 2014
SC124-15
http://www.lewrockwell.com/2014/12/david-stockman/duck-and-cover%E2%80%A8/
Duck And Cover——-The Lull Is Breaking, The Storm Is Nigh
September 15, 2008 is the day that Lehman died and the moment that the world’s central banks led by the Fed went all-in. As it has turned out, that was an epochal leap into the most dangerous monetary deformation that the world has ever known.
It needn’t have been. What was really happening at this pregnant moment was that the remnants of honest capital markets were begging for a purge and liquidation of the speculative rot that had built up during the Greenspan era. But the phony depression scholar running the Fed, Ben Bernanke, would have none of it. So he falsely whooped-up a warning that Great Depression 2.0 was at hand—-sending Washington, Wall Street and the rest of the world into an all-out panic.
The next day’s AIG crisis quickly became ground zero—the place where the entire fraudulent narrative of systemic “contagion” was confected. Yet that needn’t have been, either. In truth, AIG was not the bearer of a mysterious financial contagion that had purportedly arrived on a comet from deep space.
As subsequent history has now proven, AIG’s $800 billion globe spanning balance sheet at the time was perfectly solvent at the subsidiary level. Not a single life insurance contract, P&C cover or retirement annuity anywhere in the world was in jeopardy on the morning of September 16th.
The only thing gone awry was that the London-based CDS (credit default swap) operation of AIG’s holding company was monumentally illiquid. Joseph Cassano and the other latter-day geniuses who were running it had spent two decades picking up nickels (CDS premium) in front of a steamroller, while booking nearly the entirety of these winnings as profits—all to the greater good of their fabulous bonuses.
But now, as the underlying securitized mortgage market imploded, they needed to meet huge margin calls on insurance contracts they had written against mortgage CDOs. In truth, however, the whole mountain of CDS was bogus insurance because AIG’s holding company did not have a legal call on the hundreds of billions of cash and liquid assets ensconced in dozens of its major subsidiaries.
From a legal and cash flow point of view, Hank Greenberg’s mighty insurance empire was essentially a mutual fund. Cassano and his posse had been implicitly pledging assets (via AIG’s corporate or consolidated AAA rating) that belonged to someone else—-namely, the insurance subsidiaries and the state insurance commissioners who effectively controlled them.
Yet this scandalous fact was not a world crisis, nor really any crisis at all. Yes, the several hundred billions of CDS contracts sold by the Cassano London operation were bogus and could not be paid off—–since the holding company had no available liquid capital. Nevertheless, they had been purchased almost entirely by a dozen or so of the largest banks in the world, including Deutsche Bank, Barclays, Societe Generale, Bank of America/Merrill Lynch and Goldman Sachs, to name a few of the usual suspects. And as I documented in The Great Deformation, these banks could have readily afforded the hit on the underlying CDOs—– and they deserved it,too.
As to the former point, the combined balance sheet of the impacted big banks was about $20 trillion at the time, and the potential loss on the CDS contracts that AIG’s holding company could not fund was perhaps $80 billion at the outside. After all, most of the CDO paper which these mega-banks had purchased and then magically transformed into AAA credits (and thereby could hold without posting a dime of capital) consisted of the so-called “super-senior” tranches. The really nasty crud at the bottom of the CDO capital structures—which did generate deep losses—- had been pawned off to institutional investors and trust funds for Norwegian fishing villages and the like.
So the day of reckoning for AIG’s CDS fraud presented no danger to the world’s banking system. The loss might have amounted to 0.5% of their combined footings—–a one-time hit that Wall Street brokers would have counseled to ignore and which might have zapped banker bonuses for the next year or even less.
And those foolish bankers did need to be punished for negligence, stupidity and unseemly greed. In point of fact, Cassano was never indicted for his bulging book of bogus CDS insurance because it amounted to fraud in plain sight. Any one who read AIG’s 10K could have seen that the consolidated balance sheet of AIG was riddled with dividend stoppers and capital conservation limits imposed by the insurance regulators at the subsidiary level. Cassano never, ever had the cash to meet margin calls or pay-off the supposedly remote risk of actual claims; his policies had been purchased all along by the proverbial greater fools.
But this calamity of stupidity and negligence has turned out to be a really big thing in the history of the modern financial era; it was indeed the Rubicon. By falsely transforming a negligible hit to the balance sheet of the world’s mega-banks—-most of which were quasi-socialist institutions in Europe and would have been bailed out by their governments anyway—-into the alleged collapse of the mighty AIG, Secretary Paulson, Bernanke and their cabal of Wall Street henchman opened the door in one fell swoop to the present global monetary madness.
At that fraught moment in time, AIG was the financial gold standard—–the massive AAA balance sheet that anchored the entire financial market. So when out of the blue—literally without even a few days notice to even the attentive public—–it had apparently descended into a $180 billion black hole, the myth of systemic breakdown and all-consuming financial “contagion” was not only born; it gained instant resonance throughout Wall Street and Washington.
The rest is history, as they say. And what a fantastic, but lamentable history it was. Owing to the cursed recency bias that now animates the mainstream narrative, it has already been forgotten that today’s elephantine central bank balance sheets did not remotely exist just six years ago. Indeed, they could not have been imagined back then—not even by Bernanke himself.
But upon the eruption of the AIG catalyst, the mad money printing dash was on. As shown below, it had taken the first 94 years of the Fed’s existence to grow its balance sheet footings to $900 billion—-something achieved by steadily plucking new credits out of thin air over the years and decades. But within six weeks of the so-called AIG meltdown, Bernanke had replicated what had taken his predecessors nigh on to a century to accomplish.
And then he didn’t stop. Fighting the fabricated enemy of “contagion” and thereby thwarting Wall Street’s desperate need for a cleansing financial enema, he had nearly tripled the Fed’s historic balance sheet by year-end 2008, and on it went from there.
And of course it was not just the Fed running the printing presses red hot. Owing to both Keynesian ideology and defensive necessity, the other major central banks of the world followed suit. At the time of the crisis, the combined balance sheet of the Fed, ECB and BOJ was $3.5 trillion or about 11% of GDP. In short order that number will reach $11 trillion and 30% of the combined GDP of the so-called G-3.
Throw in the BOE, the People’s Printing Press of China, the bloated central banks of the oil exporters and Russia and assorted others like the reserve banks of India and Australia and you have total central banks footings in excess of $16 trillion or roughly triple the pre-crisis level.
This tsunami of central bank credit did little for the real economy in places where the private sector was already at “peak debt” such as the US and Europe; and it did fuel one final blast of the malinvestment boom in places that still had balance sheet runway available like China, Brazil and much of the rest of the EM world.
But what it did do universally and thunderously was to fuel a financial asset inflation the likes of which the world had never before seen.
Prior to their recent stumble, the combined equity markets of the world had reached a capitalization of nearly $75 trillion compared to barely $25 trillion at the dark bottom in March 2009. And, yes, $50 trillion of gain in a comparative historical heartbeat did wonders for the net worth of the global 1%.
But it also did something else; it destroyed the remaining vestiges of financial market stability and honest price discovery. After 6-years of the central bank tsunami, two-way markets were gone; the shorts were dead; skeptics were out of business; greybeard investors had retired; speculators regularly bought downside “protection” (i.e. puts on the S&P 500) for chump change; and the law of “buy the dips” became unassailable.
Even more crucially, capital markets were transformed into rank casinos that were virtually devoid of all economic information……except, except the word clouds, leaks and sound bites of central bank speakers and their tools in the press and monitors in the banks, brokerage houses and hedge funds. At length, this meant that the only reason to buy was that virtually every risk asset class was rising; and it also meant that the only risk worth worrying about in a day-trading market was from the verbal emissions of central bankers and their Wall Street accomplices and stooges.
So as long as the central bank con job lasted, there was no reason not to buy, buy, buy. The financial world’s greatest clown, Jim Cramer of CNBC, became a prophet in his own time. Indeed, the man’s stupendous insouciance became embedded in the casino itself.
And the VIX is the smoking gun of proof. Over the span of approximately 72 months, the world’s raging central bankers simply drove risk right out of the casino.
^VIX Chart
Except they didn’t actually banish financial risk; they just drove it underground. When every financial asset is rising, the casino creates its own marginable collateral. Yesterday’s gain becomes tomorrow’s repo and re-hypothecated security against the next day’s round of buying. And as long as asset values are inflating, the inherent risk in these daisy chains is muffled and discounted.
Yet that’s exactly why the present mother of all financial bubbles is so dangerous and palpably unstable. The marginal “bid” is dependent upon wildly inflated collateral which is tucked away in the warp and woof of the entire global financial system. When the Chinese stock market hit a 5.5% air pocket within a few minutes two nights ago, for example, it was because the financial authorities there said icksnay to the repo of bonds issued by essentially bankrupt local development agencies.
Stated differently, there are financial time bombs planted everywhere in the world economy because central bank financial repression has caused drastic mispricing of nearly every class of financial asset, which is to say, every layer of collateral which has ratcheted-up the entire edifice.
As the redoubtable Ambrose Evans-Prichard so cogently noted, central bank ZIRP has radically compressed the debt markets of the world. This means that cap rates—-the basis for valuation of tens of trillions of fixed income securities and real estate around the world—are now so aberrantly low as to be downright stupid:
What is clear is that the world has become addicted to central bank stimulus.Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.
Needless to say, this drastic central bank driven financial repression has unleashed a mindless pursuit of “yield” or short-term trading gains that give the concept of “irrational exuberance” an entirely new definition. Consider for example, the hapless mutual fund investors or institutional managers who have been buying energy sector CLOs. What is the collateral for the 5% yields advertised by these fly-by-night funds—–often issued and managed by the same folks who sold housing sector CLOs and CDOs last time around?
Why its the leveraged loans issued by E&P operators in the shale patches. The collateral for these leveraged loans, in turn, is shale rocks 4,000-9,000 feet down under that have been worthless until approximately 2005 and would be worthless today without dramatically over-priced crude oil and drastically underpriced debt capital.
That is to say, the vaunted collateral in the shale patch craps out after about two-years unless new money is poured down the well bore and oil prices are above $75-$80 per barrel on the WTI marker price to cushion the sharp discounts back to the wellhead. But with marker price now plunging into the $50s, the drilling will soon stop, the production will crap-out, the shale rock collateral value will regress toward the zero bound, the E&P borrowers will default, the energy CLO’s will implode and the hapless yield chasers will be left high, dry and panicked.
Cannot the same thing be said of Italian bonds at 2%? As reminded below, the Italian economy has not grown for six years, its debt-to-GDP ratio has gone critical and its political system is disintegrating.
Historical Data Chart
Italy Government Debt to GDP
So from whence did the “bid” arise after Draghi’s “whatever it takes” ukase, which in just 24 months drove the yield on this sovereign junk from 7% to 2%?
Well, it came from its own bootstraps, that’s what. The front-running speculators who backed up their trucks to Draghi’s pronouncement where not sitting on a pile of cash looking for “value”. Instead, they bought a pile of Italian bonds and then margined their purchases in the repo market. Yes, central bank ZIRP means essentially zero cost of carry; its the source of the bid that never asks whether 2% is enough. When bonds are held by the day or even hour, its far more than enough as long as the repo can be rolled and bond prices keep inflating.
Until the don’t. Are the international dollar bonds of Turkish banks—one example of the $9 trillion EM debt market—– issued against their loan books any different? Just consider the daisy chain of collateral there. Istanbul is comprised of miles of empty apartment and commercial buildings which are collateral for the Turkish bank loans. Yet what is the equity of the real estate developer borrowers of these generously leveraged loans—-other than their “investments” in the Erdogan regime? More often than not its the down-payments on newly built space made by speculators who borrowed the money from the very same banks.
Indeed, in a ZIRP world the collateral chains extend so deep into the netherworld of speculation that no one can possibly trace them. That is, until after they erupt. Then we will learn all about the “risk” that was driven below the surface during the great bubble of the past 6 years just like we did in September 2008.
In short, what is happening now is that risk is coming out of hiding; the collateral chains are buckling; the financial time bombs are beginning to explode.
There is nothing especially new about this development—its the third occurrence this century. But there is possibly something different this time around the block.
This time the carnage could be much worse because the most recent tsunami of central bank credit was orders of magnitude larger and more virulent than during the run-up to the Lehman event or the dotcom implosion.
Moreover, the central banks are now out of dry powder—– impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to “stimulate” the macro-economy by temporarily driving interest rates to “extraordinarily” low levels. They are already there.
Instead, a Bernanke style balance sheet explosion like that which stopped the financial meltdown in the fall and winter of 2008-2009 will be seen for exactly what it is—-an exercise in pure monetary desperation and quackery.
So duck and cover. This storm could be a monster.
Duck And Cover——-The Lull Is Breaking, The Storm Is Nigh
September 15, 2008 is the day that Lehman died and the moment that the world’s central banks led by the Fed went all-in. As it has turned out, that was an epochal leap into the most dangerous monetary deformation that the world has ever known.
It needn’t have been. What was really happening at this pregnant moment was that the remnants of honest capital markets were begging for a purge and liquidation of the speculative rot that had built up during the Greenspan era. But the phony depression scholar running the Fed, Ben Bernanke, would have none of it. So he falsely whooped-up a warning that Great Depression 2.0 was at hand—-sending Washington, Wall Street and the rest of the world into an all-out panic.
The next day’s AIG crisis quickly became ground zero—the place where the entire fraudulent narrative of systemic “contagion” was confected. Yet that needn’t have been, either. In truth, AIG was not the bearer of a mysterious financial contagion that had purportedly arrived on a comet from deep space.
As subsequent history has now proven, AIG’s $800 billion globe spanning balance sheet at the time was perfectly solvent at the subsidiary level. Not a single life insurance contract, P&C cover or retirement annuity anywhere in the world was in jeopardy on the morning of September 16th.
The only thing gone awry was that the London-based CDS (credit default swap) operation of AIG’s holding company was monumentally illiquid. Joseph Cassano and the other latter-day geniuses who were running it had spent two decades picking up nickels (CDS premium) in front of a steamroller, while booking nearly the entirety of these winnings as profits—all to the greater good of their fabulous bonuses.
But now, as the underlying securitized mortgage market imploded, they needed to meet huge margin calls on insurance contracts they had written against mortgage CDOs. In truth, however, the whole mountain of CDS was bogus insurance because AIG’s holding company did not have a legal call on the hundreds of billions of cash and liquid assets ensconced in dozens of its major subsidiaries.
From a legal and cash flow point of view, Hank Greenberg’s mighty insurance empire was essentially a mutual fund. Cassano and his posse had been implicitly pledging assets (via AIG’s corporate or consolidated AAA rating) that belonged to someone else—-namely, the insurance subsidiaries and the state insurance commissioners who effectively controlled them.
Yet this scandalous fact was not a world crisis, nor really any crisis at all. Yes, the several hundred billions of CDS contracts sold by the Cassano London operation were bogus and could not be paid off—–since the holding company had no available liquid capital. Nevertheless, they had been purchased almost entirely by a dozen or so of the largest banks in the world, including Deutsche Bank, Barclays, Societe Generale, Bank of America/Merrill Lynch and Goldman Sachs, to name a few of the usual suspects. And as I documented in The Great Deformation, these banks could have readily afforded the hit on the underlying CDOs—– and they deserved it,too.
As to the former point, the combined balance sheet of the impacted big banks was about $20 trillion at the time, and the potential loss on the CDS contracts that AIG’s holding company could not fund was perhaps $80 billion at the outside. After all, most of the CDO paper which these mega-banks had purchased and then magically transformed into AAA credits (and thereby could hold without posting a dime of capital) consisted of the so-called “super-senior” tranches. The really nasty crud at the bottom of the CDO capital structures—which did generate deep losses—- had been pawned off to institutional investors and trust funds for Norwegian fishing villages and the like.
So the day of reckoning for AIG’s CDS fraud presented no danger to the world’s banking system. The loss might have amounted to 0.5% of their combined footings—–a one-time hit that Wall Street brokers would have counseled to ignore and which might have zapped banker bonuses for the next year or even less.
And those foolish bankers did need to be punished for negligence, stupidity and unseemly greed. In point of fact, Cassano was never indicted for his bulging book of bogus CDS insurance because it amounted to fraud in plain sight. Any one who read AIG’s 10K could have seen that the consolidated balance sheet of AIG was riddled with dividend stoppers and capital conservation limits imposed by the insurance regulators at the subsidiary level. Cassano never, ever had the cash to meet margin calls or pay-off the supposedly remote risk of actual claims; his policies had been purchased all along by the proverbial greater fools.
But this calamity of stupidity and negligence has turned out to be a really big thing in the history of the modern financial era; it was indeed the Rubicon. By falsely transforming a negligible hit to the balance sheet of the world’s mega-banks—-most of which were quasi-socialist institutions in Europe and would have been bailed out by their governments anyway—-into the alleged collapse of the mighty AIG, Secretary Paulson, Bernanke and their cabal of Wall Street henchman opened the door in one fell swoop to the present global monetary madness.
At that fraught moment in time, AIG was the financial gold standard—–the massive AAA balance sheet that anchored the entire financial market. So when out of the blue—literally without even a few days notice to even the attentive public—–it had apparently descended into a $180 billion black hole, the myth of systemic breakdown and all-consuming financial “contagion” was not only born; it gained instant resonance throughout Wall Street and Washington.
The rest is history, as they say. And what a fantastic, but lamentable history it was. Owing to the cursed recency bias that now animates the mainstream narrative, it has already been forgotten that today’s elephantine central bank balance sheets did not remotely exist just six years ago. Indeed, they could not have been imagined back then—not even by Bernanke himself.
But upon the eruption of the AIG catalyst, the mad money printing dash was on. As shown below, it had taken the first 94 years of the Fed’s existence to grow its balance sheet footings to $900 billion—-something achieved by steadily plucking new credits out of thin air over the years and decades. But within six weeks of the so-called AIG meltdown, Bernanke had replicated what had taken his predecessors nigh on to a century to accomplish.
And then he didn’t stop. Fighting the fabricated enemy of “contagion” and thereby thwarting Wall Street’s desperate need for a cleansing financial enema, he had nearly tripled the Fed’s historic balance sheet by year-end 2008, and on it went from there.
And of course it was not just the Fed running the printing presses red hot. Owing to both Keynesian ideology and defensive necessity, the other major central banks of the world followed suit. At the time of the crisis, the combined balance sheet of the Fed, ECB and BOJ was $3.5 trillion or about 11% of GDP. In short order that number will reach $11 trillion and 30% of the combined GDP of the so-called G-3.
Throw in the BOE, the People’s Printing Press of China, the bloated central banks of the oil exporters and Russia and assorted others like the reserve banks of India and Australia and you have total central banks footings in excess of $16 trillion or roughly triple the pre-crisis level.
This tsunami of central bank credit did little for the real economy in places where the private sector was already at “peak debt” such as the US and Europe; and it did fuel one final blast of the malinvestment boom in places that still had balance sheet runway available like China, Brazil and much of the rest of the EM world.
But what it did do universally and thunderously was to fuel a financial asset inflation the likes of which the world had never before seen.
Prior to their recent stumble, the combined equity markets of the world had reached a capitalization of nearly $75 trillion compared to barely $25 trillion at the dark bottom in March 2009. And, yes, $50 trillion of gain in a comparative historical heartbeat did wonders for the net worth of the global 1%.
But it also did something else; it destroyed the remaining vestiges of financial market stability and honest price discovery. After 6-years of the central bank tsunami, two-way markets were gone; the shorts were dead; skeptics were out of business; greybeard investors had retired; speculators regularly bought downside “protection” (i.e. puts on the S&P 500) for chump change; and the law of “buy the dips” became unassailable.
Even more crucially, capital markets were transformed into rank casinos that were virtually devoid of all economic information……except, except the word clouds, leaks and sound bites of central bank speakers and their tools in the press and monitors in the banks, brokerage houses and hedge funds. At length, this meant that the only reason to buy was that virtually every risk asset class was rising; and it also meant that the only risk worth worrying about in a day-trading market was from the verbal emissions of central bankers and their Wall Street accomplices and stooges.
So as long as the central bank con job lasted, there was no reason not to buy, buy, buy. The financial world’s greatest clown, Jim Cramer of CNBC, became a prophet in his own time. Indeed, the man’s stupendous insouciance became embedded in the casino itself.
And the VIX is the smoking gun of proof. Over the span of approximately 72 months, the world’s raging central bankers simply drove risk right out of the casino.
^VIX Chart
Except they didn’t actually banish financial risk; they just drove it underground. When every financial asset is rising, the casino creates its own marginable collateral. Yesterday’s gain becomes tomorrow’s repo and re-hypothecated security against the next day’s round of buying. And as long as asset values are inflating, the inherent risk in these daisy chains is muffled and discounted.
Yet that’s exactly why the present mother of all financial bubbles is so dangerous and palpably unstable. The marginal “bid” is dependent upon wildly inflated collateral which is tucked away in the warp and woof of the entire global financial system. When the Chinese stock market hit a 5.5% air pocket within a few minutes two nights ago, for example, it was because the financial authorities there said icksnay to the repo of bonds issued by essentially bankrupt local development agencies.
Stated differently, there are financial time bombs planted everywhere in the world economy because central bank financial repression has caused drastic mispricing of nearly every class of financial asset, which is to say, every layer of collateral which has ratcheted-up the entire edifice.
As the redoubtable Ambrose Evans-Prichard so cogently noted, central bank ZIRP has radically compressed the debt markets of the world. This means that cap rates—-the basis for valuation of tens of trillions of fixed income securities and real estate around the world—are now so aberrantly low as to be downright stupid:
What is clear is that the world has become addicted to central bank stimulus.Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.
Needless to say, this drastic central bank driven financial repression has unleashed a mindless pursuit of “yield” or short-term trading gains that give the concept of “irrational exuberance” an entirely new definition. Consider for example, the hapless mutual fund investors or institutional managers who have been buying energy sector CLOs. What is the collateral for the 5% yields advertised by these fly-by-night funds—–often issued and managed by the same folks who sold housing sector CLOs and CDOs last time around?
Why its the leveraged loans issued by E&P operators in the shale patches. The collateral for these leveraged loans, in turn, is shale rocks 4,000-9,000 feet down under that have been worthless until approximately 2005 and would be worthless today without dramatically over-priced crude oil and drastically underpriced debt capital.
That is to say, the vaunted collateral in the shale patch craps out after about two-years unless new money is poured down the well bore and oil prices are above $75-$80 per barrel on the WTI marker price to cushion the sharp discounts back to the wellhead. But with marker price now plunging into the $50s, the drilling will soon stop, the production will crap-out, the shale rock collateral value will regress toward the zero bound, the E&P borrowers will default, the energy CLO’s will implode and the hapless yield chasers will be left high, dry and panicked.
Cannot the same thing be said of Italian bonds at 2%? As reminded below, the Italian economy has not grown for six years, its debt-to-GDP ratio has gone critical and its political system is disintegrating.
Historical Data Chart
Italy Government Debt to GDP
So from whence did the “bid” arise after Draghi’s “whatever it takes” ukase, which in just 24 months drove the yield on this sovereign junk from 7% to 2%?
Well, it came from its own bootstraps, that’s what. The front-running speculators who backed up their trucks to Draghi’s pronouncement where not sitting on a pile of cash looking for “value”. Instead, they bought a pile of Italian bonds and then margined their purchases in the repo market. Yes, central bank ZIRP means essentially zero cost of carry; its the source of the bid that never asks whether 2% is enough. When bonds are held by the day or even hour, its far more than enough as long as the repo can be rolled and bond prices keep inflating.
Until the don’t. Are the international dollar bonds of Turkish banks—one example of the $9 trillion EM debt market—– issued against their loan books any different? Just consider the daisy chain of collateral there. Istanbul is comprised of miles of empty apartment and commercial buildings which are collateral for the Turkish bank loans. Yet what is the equity of the real estate developer borrowers of these generously leveraged loans—-other than their “investments” in the Erdogan regime? More often than not its the down-payments on newly built space made by speculators who borrowed the money from the very same banks.
Indeed, in a ZIRP world the collateral chains extend so deep into the netherworld of speculation that no one can possibly trace them. That is, until after they erupt. Then we will learn all about the “risk” that was driven below the surface during the great bubble of the past 6 years just like we did in September 2008.
In short, what is happening now is that risk is coming out of hiding; the collateral chains are buckling; the financial time bombs are beginning to explode.
There is nothing especially new about this development—its the third occurrence this century. But there is possibly something different this time around the block.
This time the carnage could be much worse because the most recent tsunami of central bank credit was orders of magnitude larger and more virulent than during the run-up to the Lehman event or the dotcom implosion.
Moreover, the central banks are now out of dry powder—– impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to “stimulate” the macro-economy by temporarily driving interest rates to “extraordinarily” low levels. They are already there.
Instead, a Bernanke style balance sheet explosion like that which stopped the financial meltdown in the fall and winter of 2008-2009 will be seen for exactly what it is—-an exercise in pure monetary desperation and quackery.
So duck and cover. This storm could be a monster.
SC124-14
http://www.globalresearch.ca/on-the-brink-of-war-and-economic-collapse/5419685
On the Brink of War and Economic Collapse
On occasion a reader will ask if I can give readers some good news. The answer is: not unless I lie to you like “your” government and the mainstream media do. If you want faked “good news,” you need to retreat into The Matrix. In exchange for less stress and worry, you will be led unknowingly into financial ruin and nuclear armageddon.
If you want to be forewarned, and possibly prepared, for what “your” government is bringing you, and have some small chance of redirecting the course of events, read and support this site. It is your site. I already know these things. I write for you.
The neoconservatives, a small group of warmongers strongly allied with the military/industrial complex and Israel, gave us Granada and the Contras affair in Nicaragua. President Reagan fired them, and they were prosecuted, but subsequently pardoned by Reagan’s successor, George H.W. Bush.
Ensconced in think tanks and protected by Israeli and military/security complex money, the neoconservatives reemerged in the Clinton administration and engineered the breakup of Yugoslavia, the war against Serbia, and the expansion of NATO to Russia’s borders.
Neoconservatives dominated the George W. Bush regime. They controlled the Pentagon, the National Security Council, the Office of the Vice President, and much else. Neoconservatives gave us 9/11 and its coverup, the invasions of Afghanistan and Iraq, the beginning of the destabilizations of Pakistan and Yemen, the U.S. Africa Command, the invasion of South Ossetia by Georgia, the demise of the anti-ABM Treaty, unconstitutional and illegal spying on American citizens without warrants, loss of constitutional protections, torture, and the unaccountability of the executive branch to law, Congress, and the judiciary. In short, the neoconservatives laid the foundation for dictatorship and for WW III.
The Obama regime held no one accountable for the crimes of the Bush regime, thus creating the precedent that the executive branch is above the law. Instead, the Obama regime prosecuted whistleblowers who told the truth about government crimes.
Neoconservatives remain very influential in the Obama regime. As examples, Obama appointed neoconservative Susan Rice as his National Security Advisor. Obama appointed neoconservative Smantha Power as U.S. Ambassador to the United Nations. Obama appointed neoconservative Victoria Nuland as Assistant Secretary of State. Nuland’s office, working with the CIA and Washington-financed NGOs, organized the U.S. coup in Ukraine.
Neoconservatism is the only extant political ideology. The ideology is “America uber alles.” Neoconservatives believe that History has chosen the United States to exercise hegemony over the world, thereby making the U.S. “exceptional” and “indispensable.” Obama himself has declared as much. This ideology gives neoconservatives tremendous confidence and drive, just as Karl Marx’s conclusion that history had chosen the workers to be the ruling class gave early communists confidence and drive.
This confidence and drive makes the neoconservatives reckless.
To advance their agenda neoconservatives propagandize the populations of the U.S. and Washington’s vassal states. The presstitutes deliver the neoconservatives’ lies to the unsuspecting public: Russia has invaded and annexed Ukrainian provinces; Putin intends to reconstitute the Soviet Empire; Russia is a gangster state without democracy; Russia is a threat to the Baltics, Poland, and all of Europe, necessitating a U.S./NATO military buildup on Russia’s borders; China, a Russian ally, must be militarily contained with new U.S. naval and air bases surrounding China and controlling Chinese sea lanes.
The neoconservatives and President Obama have made it completely clear that the U.S. will not accept Russia and China as sovereign countries with economic and foreign policies independent of the interests of Washington.
Russia and China are acceptable only as vassal states, like the UK, Europe, Japan, Canada, and Australia.
Clearly, the neoconservative formula is a formula for the final war.
All of humanity is endangered by a handful of evil men and women ensconced in positions of power in Washington.
Anti-Russia propaganda has gone into high gear. Putin is the “new Hitler.”
Daniel Zubov reports on a joint conference held by three U.S. think tanks.
The conference blamed Russia for the failures of Washington’s foreign policy. Read this article: to see how neoconservatives operate in order to control the explanations. Even Henry Kissinger is under attack for stating the obvious truth that Russia has a legitimate interest in Ukraine, a land long part of Russia and located in Russia’s legitimate sphere of influence.
Since the Clinton regime, Washington has been acting against Russian interests. In his forthcoming book, The Globalization of War: America’s Long War against Humanity, Professor Michel Chossudovsky presents a realistic appraisal of how close Washington has brought the world to its demise in nuclear war. This passage is from the Preface:
“The ‘globalization of war’ is a hegemonic project. Major military and covert intelligence operations are being undertaken simultaneously in the Middle East, Eastern Europe, sub-Saharan Africa, Central Asia and the Far East. The US military agenda combines both major theater operations as well as covert actions geared towards destabilizing sovereign states.
“Under a global military agenda, the actions undertaken by the Western military alliance (US-NATO-Israel) in Afghanistan, Pakistan, Palestine, Ukraine, Syria and Iraq are coordinated at the highest levels of the military hierarchy. We are not dealing with piecemeal military and intelligence operations. The July-August 2014 attack on Gaza by Israeli forces was undertaken in close consultation with the United States and NATO. In turn, the actions in Ukraine and their timing coincided with the onslaught of the attack on Gaza.
“In turn, military undertakings are closely coordinated with a process of economic warfare which consists not only in imposing sanctions on sovereign countries but also in deliberate acts of destabilization of financial and currency markets, with a view to undermining the enemies’ national economies.
“The United States and its allies have launched a military adventure which threatens the future of humanity. As we go to press, US and NATO forces have been deployed in Eastern Europe. US military intervention under a humanitarian mandate is proceeding in sub-Saharan Africa. The US and its allies are threatening China under President Obama’s
‘Pivot to Asia’.
“In turn, military maneuvers are being conducted at Russia’s doorstep which could lead to escalation. “The US airstrikes initiated in September 2014 directed against Iraq and Syria under the pretext of going after the Islamic State are part of a scenario of military escalation extending from North Africa and the Eastern Mediterranean to Central and South Asia.
The Western military alliance is in an advanced state of readiness.
“And so is Russia.”
As I have often remarked, Americans are an insouciant people. They are simply unaware. Suppose they were aware, suppose that the entire population understood the peril, could anything be done, or have the insouciant Americans fallen under the control of the police state that Washington has created?
I don’t think there is much hope from the American people. The American people cannot tell genuine from fake leadership, and the ruling private elites will not permit real leaders to emerge. Moreover, there is no organized movement in opposition to the neoconservatives.
The hope comes from outside the political system. The hope is that the House of Cards and rigged markets erected by policymakers for the benefit of the One Percent collapses. David Stockman regards this outcome as a highly likely one. The collapse that Stockman sees as being on its way is the same collapse about which I have warned. Moreover, the number of Black Swans which can originate collapse are even more numerous than the ones Stockman correctly identifies. Some financial organizations are worried about a lack of liquidity in the fixed income (bonds) and derivatives markets. Barbara Novack, co-chair of Black Rock, is lobbying hard for a derivatives bailout mechanism.
David Stockman’s article is important. Read it until you understand it, and you will know more than most everyone. http://www.lewrockwell.com/2014/12/david-stockman/duck-and-cover%E2%80%A8/
Many will ask: If the wealth of the One Percent is vulnerable to economic collapse, will war be initiated to protect this wealth and to blame the Russians or Chinese for the hardships that engulf the American population? My answer is that the kind of collapse that I expect, and that David Stockman, Nomi Prins, Pam Martens, Dave Kranzler, and no doubt others expect, presents government with such social, political, and economic insecurity that organizing for a major war becomes impossible.
Whereas the political impotence of the American people and the vassalage of the Western World impose no constraints on Washington, economic collapse brings revolutions and the demise of the existing order.
As hard as collapse would make it for people to survive, the chances for survival are higher than in the event of nuclear war.
On the Brink of War and Economic Collapse
On occasion a reader will ask if I can give readers some good news. The answer is: not unless I lie to you like “your” government and the mainstream media do. If you want faked “good news,” you need to retreat into The Matrix. In exchange for less stress and worry, you will be led unknowingly into financial ruin and nuclear armageddon.
If you want to be forewarned, and possibly prepared, for what “your” government is bringing you, and have some small chance of redirecting the course of events, read and support this site. It is your site. I already know these things. I write for you.
The neoconservatives, a small group of warmongers strongly allied with the military/industrial complex and Israel, gave us Granada and the Contras affair in Nicaragua. President Reagan fired them, and they were prosecuted, but subsequently pardoned by Reagan’s successor, George H.W. Bush.
Ensconced in think tanks and protected by Israeli and military/security complex money, the neoconservatives reemerged in the Clinton administration and engineered the breakup of Yugoslavia, the war against Serbia, and the expansion of NATO to Russia’s borders.
Neoconservatives dominated the George W. Bush regime. They controlled the Pentagon, the National Security Council, the Office of the Vice President, and much else. Neoconservatives gave us 9/11 and its coverup, the invasions of Afghanistan and Iraq, the beginning of the destabilizations of Pakistan and Yemen, the U.S. Africa Command, the invasion of South Ossetia by Georgia, the demise of the anti-ABM Treaty, unconstitutional and illegal spying on American citizens without warrants, loss of constitutional protections, torture, and the unaccountability of the executive branch to law, Congress, and the judiciary. In short, the neoconservatives laid the foundation for dictatorship and for WW III.
The Obama regime held no one accountable for the crimes of the Bush regime, thus creating the precedent that the executive branch is above the law. Instead, the Obama regime prosecuted whistleblowers who told the truth about government crimes.
Neoconservatives remain very influential in the Obama regime. As examples, Obama appointed neoconservative Susan Rice as his National Security Advisor. Obama appointed neoconservative Smantha Power as U.S. Ambassador to the United Nations. Obama appointed neoconservative Victoria Nuland as Assistant Secretary of State. Nuland’s office, working with the CIA and Washington-financed NGOs, organized the U.S. coup in Ukraine.
Neoconservatism is the only extant political ideology. The ideology is “America uber alles.” Neoconservatives believe that History has chosen the United States to exercise hegemony over the world, thereby making the U.S. “exceptional” and “indispensable.” Obama himself has declared as much. This ideology gives neoconservatives tremendous confidence and drive, just as Karl Marx’s conclusion that history had chosen the workers to be the ruling class gave early communists confidence and drive.
This confidence and drive makes the neoconservatives reckless.
To advance their agenda neoconservatives propagandize the populations of the U.S. and Washington’s vassal states. The presstitutes deliver the neoconservatives’ lies to the unsuspecting public: Russia has invaded and annexed Ukrainian provinces; Putin intends to reconstitute the Soviet Empire; Russia is a gangster state without democracy; Russia is a threat to the Baltics, Poland, and all of Europe, necessitating a U.S./NATO military buildup on Russia’s borders; China, a Russian ally, must be militarily contained with new U.S. naval and air bases surrounding China and controlling Chinese sea lanes.
The neoconservatives and President Obama have made it completely clear that the U.S. will not accept Russia and China as sovereign countries with economic and foreign policies independent of the interests of Washington.
Russia and China are acceptable only as vassal states, like the UK, Europe, Japan, Canada, and Australia.
Clearly, the neoconservative formula is a formula for the final war.
All of humanity is endangered by a handful of evil men and women ensconced in positions of power in Washington.
Anti-Russia propaganda has gone into high gear. Putin is the “new Hitler.”
Daniel Zubov reports on a joint conference held by three U.S. think tanks.
The conference blamed Russia for the failures of Washington’s foreign policy. Read this article: to see how neoconservatives operate in order to control the explanations. Even Henry Kissinger is under attack for stating the obvious truth that Russia has a legitimate interest in Ukraine, a land long part of Russia and located in Russia’s legitimate sphere of influence.
Since the Clinton regime, Washington has been acting against Russian interests. In his forthcoming book, The Globalization of War: America’s Long War against Humanity, Professor Michel Chossudovsky presents a realistic appraisal of how close Washington has brought the world to its demise in nuclear war. This passage is from the Preface:
“The ‘globalization of war’ is a hegemonic project. Major military and covert intelligence operations are being undertaken simultaneously in the Middle East, Eastern Europe, sub-Saharan Africa, Central Asia and the Far East. The US military agenda combines both major theater operations as well as covert actions geared towards destabilizing sovereign states.
“Under a global military agenda, the actions undertaken by the Western military alliance (US-NATO-Israel) in Afghanistan, Pakistan, Palestine, Ukraine, Syria and Iraq are coordinated at the highest levels of the military hierarchy. We are not dealing with piecemeal military and intelligence operations. The July-August 2014 attack on Gaza by Israeli forces was undertaken in close consultation with the United States and NATO. In turn, the actions in Ukraine and their timing coincided with the onslaught of the attack on Gaza.
“In turn, military undertakings are closely coordinated with a process of economic warfare which consists not only in imposing sanctions on sovereign countries but also in deliberate acts of destabilization of financial and currency markets, with a view to undermining the enemies’ national economies.
“The United States and its allies have launched a military adventure which threatens the future of humanity. As we go to press, US and NATO forces have been deployed in Eastern Europe. US military intervention under a humanitarian mandate is proceeding in sub-Saharan Africa. The US and its allies are threatening China under President Obama’s
‘Pivot to Asia’.
“In turn, military maneuvers are being conducted at Russia’s doorstep which could lead to escalation. “The US airstrikes initiated in September 2014 directed against Iraq and Syria under the pretext of going after the Islamic State are part of a scenario of military escalation extending from North Africa and the Eastern Mediterranean to Central and South Asia.
The Western military alliance is in an advanced state of readiness.
“And so is Russia.”
As I have often remarked, Americans are an insouciant people. They are simply unaware. Suppose they were aware, suppose that the entire population understood the peril, could anything be done, or have the insouciant Americans fallen under the control of the police state that Washington has created?
I don’t think there is much hope from the American people. The American people cannot tell genuine from fake leadership, and the ruling private elites will not permit real leaders to emerge. Moreover, there is no organized movement in opposition to the neoconservatives.
The hope comes from outside the political system. The hope is that the House of Cards and rigged markets erected by policymakers for the benefit of the One Percent collapses. David Stockman regards this outcome as a highly likely one. The collapse that Stockman sees as being on its way is the same collapse about which I have warned. Moreover, the number of Black Swans which can originate collapse are even more numerous than the ones Stockman correctly identifies. Some financial organizations are worried about a lack of liquidity in the fixed income (bonds) and derivatives markets. Barbara Novack, co-chair of Black Rock, is lobbying hard for a derivatives bailout mechanism.
David Stockman’s article is important. Read it until you understand it, and you will know more than most everyone. http://www.lewrockwell.com/2014/12/david-stockman/duck-and-cover%E2%80%A8/
Many will ask: If the wealth of the One Percent is vulnerable to economic collapse, will war be initiated to protect this wealth and to blame the Russians or Chinese for the hardships that engulf the American population? My answer is that the kind of collapse that I expect, and that David Stockman, Nomi Prins, Pam Martens, Dave Kranzler, and no doubt others expect, presents government with such social, political, and economic insecurity that organizing for a major war becomes impossible.
Whereas the political impotence of the American people and the vassalage of the Western World impose no constraints on Washington, economic collapse brings revolutions and the demise of the existing order.
As hard as collapse would make it for people to survive, the chances for survival are higher than in the event of nuclear war.
Monday, December 1, 2014
SC124-13
http://truth-out.org/news/item/27714-are-humans-going-extinct
Are Humans Going Extinct?
Some scientists, Guy McPherson included, fear that climate disruption is so serious, with so many self-reinforcing feedback loops already in play, that humans are in the process of causing our own extinction.
August, September and October were each the hottest months ever recorded, respectively. Including this year, which is on track to become the hottest year ever recorded, 13 of the hottest years on record have all occurred in the last 16 years.
See more stories like this at Truthout's "Planet or Profit" landing page.
Coal will likely overtake oil as the dominant energy source by 2017, and without a major shift away from coal, average global temperatures could rise by 6 degrees Celsius by 2050, leading to devastating climate change.
"Across two decades and thousands of pages of reports, the world's most authoritative voice on climate science has consistently understated the rate and intensity of climate change and the danger those impacts represent."
This is dramatically worse than even the most dire predictions from the Intergovernmental Panel on Climate Change (IPCC), which predicts at least a 5-degree Celsius increase by 2100 as its worst-case scenario, if business continues as usual with no major mitigation efforts.
Yet things continue growing worse faster than even the IPCC can keep up with.
Scientific American has said of the IPCC: "Across two decades and thousands of pages of reports, the world's most authoritative voice on climate science has consistently understated the rate and intensity of climate change and the danger those impacts represent."
And there is nothing to indicate, in the political or corporate world, that there will be anything like a major shift in policy aimed at dramatically mitigating runaway anthropogenic climate disruption (ACD).
Guy McPherson is a professor emeritus of natural resources, and ecology and evolutionary biology, with the University of Arizona, who has been studying ACD for nearly 30 years.
Near-term human extinction could eventually result from losing the Arctic sea ice, which is one of the 40 self-reinforcing feedback loops of ACD.
His blog Nature Bats Last has developed a large readership that continues to grow, and for six years McPherson has been traveling around the world giving lectures about a topic that, even for the initiated, is both shocking and controversial: the possibility of near-term human extinction due to runaway ACD.
As McPherson has told Truthout: "We've never been here as a species, and the implications are truly dire and profound for our species and the rest of the living planet." He told Truthout that he believes that near-term human extinction could eventually result from losing the Arctic sea ice, which is one of the 40 self-reinforcing feedback loops of ACD. "A world without Arctic ice will be completely new to humans," he said.
At the time of our interview less than one year ago, McPherson had identified 24 self-reinforcing positive feedback loops. Today that number has grown to 40.
A self-reinforcing feedback loop can also be thought of as a vicious circle, in that it accelerates the impacts of ACD. An example would be methane releases in the Arctic. Massive amounts of methane are currently locked in the permafrost, which is now melting rapidly. As the permafrost melts, methane, a greenhouse gas 100 times more potent than carbon dioxide on a short timescale, is released into the atmosphere, warming it, which in turn causes more permafrost to melt, and so on.
In the near term, earth's climate will change 10 times faster than during any other moment in the last 65 million years.
While McPherson's perspective might sound way-out and like the stuff of science fiction, similar things have happened on this planet in the past. Fifty-five million years ago, a 5-degree Celsius rise in average global temperatures seems to have occurred in just 13 years, according to a study published in the October 2013 issue of the Proceedings of the National Academy of Sciences. A report in the August 2013 issue of Science revealed that in the near term, earth's climate will change 10 times faster than during any other moment in the last 65 million years.
Prior to that, the Permian mass extinction that occurred 250 million years ago, also known as "The Great Dying," was triggered by a massive lava flow in an area of Siberia that led to an increase in global temperatures of 6 degrees Celsius. That, in turn, caused the melting of frozen methane deposits under the seas. Released into the atmosphere, those gases caused temperatures to skyrocket further. All of this occurred over a period of approximately 80,000 years. The change in climate is thought to be the key to what caused the extinction of most species on the planet. In that extinction episode, it is estimated that 95 percent of all species were wiped out.
Today's current scientific and observable evidence strongly suggests we are in the midst of the same process - only this time it is anthropogenic, and happening exponentially faster than the Permian mass extinction did.
We are likely to begin seeing periods of an ice-free Arctic by as soon as this coming summer, or the summer of 2016 at the latest.
Once the summer ice begins melting, methane releases will worsen dramatically.
Our current extinction event is already greatly exceeding the speed, and might eventually even exceed the intensity, of the Permian mass extinction event.
We are currently in the midst of what most scientists consider the sixth mass extinction in planetary history, with between 150 and 200 species going extinct daily - a pace 1,000 times greater than the "natural" or "background" extinction rate. Our current extinction event is already greatly exceeding the speed, and might eventually even exceed the intensity, of the Permian mass extinction event. The difference is that ours is human caused, isn't going to take 80,000 years, has so far lasted just a few centuries and is now gaining speed in a nonlinear fashion.
Is it possible that, on top of the vast quantities of carbon dioxide from fossil fuels that continue to enter the atmosphere in record amounts yearly, an increased release of methane could signal the beginning of the sort of process that led to the Great Dying? Some scientists, McPherson included, fear that the situation is already so serious and so many self-reinforcing feedback loops are already in play that we are in the process of causing our own extinction. Worse yet, some are convinced that it could happen far more quickly than generally believed possible - even in the course of just the next few decades.
Truthout caught up with McPherson at the Earth at Risk conference in San Francisco recently to ask him about his prediction of human extinction, and what that means for our lives today.
Dahr Jamail: What are some of the current signs and reports you're seeing that are disconcerting, and really give you pause?
Guy McPherson: I've been traveling, so I'm out of date for the last 10 days. But starting with the snowstorm in Buffalo, New York, that was the biggest snowstorm ever recorded in Buffalo, at 6 feet 4 inches in 24 hours. It's the largest one ever recorded in the United States.
Australia, meanwhile, is on fire. I just came back from New Zealand, and spring had just turned there because it's the Southern Hemisphere. The whole time I was there people were commenting on how hot it was, and "how far into summer we already are," and it was early to mid-spring when I was there.
So there's all kinds of observational evidence.
"It's hard for me to imagine we make it into the 2030s as a species."
We triggered another self-reinforcing feedback loop, number 40, just about two weeks ago; then just a week ago there was a [scientific] paper that came out indicating that for every 1-degree temperature rise, there is 7 percent more lightning strikes. So that contributes to a previously existing self-reinforcing feedback loop, that of fires, especially in the Northern Hemisphere, and especially in the boreal forests. So, as it gets warmer and drier, there are more and bigger fires, and that kicks more carbon into the atmosphere, which of course contributes to ongoing, accelerating climate disruption.
So lightning is yet another piece of that. As there is more moisture in the atmosphere and more heat going into the atmosphere and warming the planet, we have more lightning. The whole atmosphere becomes more dynamic. So, those are things that come to mind.
From your analysis, how long do you think humanity has before extinction occurs?
That's such a hard question, and we are such a clever species. It's clear that abrupt climate change is underway. Methane has gone exponential in the atmosphere. Paul Beckwith, climate scientist at University of Ottawa, indicates we could experience a 6-degree Celsius temperature rise in the span of a decade. He thinks we'll survive that. I can't imagine how that could be. He's a laser physicist and engineer, so I think he doesn't understand biology and requisite habitat that we need to survive.
So it's difficult for me to imagine a scenario where we'll survive even a 4-degree Celsius [above pre-industrial baseline] temperature rise, and we'll be there in the very near future, like by 2030, plus or minus. So it's hard for me to imagine we make it into the 2030s as a species.
But when I deliver public presentations I try not to focus on any particular date; I just try to remind people that they are mortal. That birth is lethal, and that we don't have long on this planet even if we live to be 100, so we might want to pursue what we love, instead of pursuing the next dollar.
A more micro-look from that question - what do you see happening in the US, if Beckwith and other scientists who are predicting that rapid a rise of temperatures in such a short time frame are correct?
The interior of continents heats at least twice as fast as the global average. So a 6-degree Celsius rise in the global average means at least 12 degrees Celsius in the interior of continents - that means no question there is no habitat for humans in the interior. So you would have to be in a maritime environment.
"It's difficult for me to imagine a situation in which plants, even land plants survive, because they can't get up and move."
I think even before we get to 6 degrees Celsius above baseline, we lose all habitats. We lose all or nearly all the phytoplankton in the oceans, which are in serious decline already as the result of an increasingly acidified ocean environment. It's difficult for me to imagine a situation in which plants, even land plants survive, because they can't get up and move. So without plants there is no habitat.
At a 6-degree Celsius temperature rise in the span of decades, there's no way for evolution by natural selection to keep up with that. Already, climate change - which at this point has been pretty slow and what we would call linear change - already climate change is outpacing evolution by natural selection by at least a factor of 10,000, so I don't see any way the planet is going to keep up.
We're clever. We'll be able to move around. And if somebody has a bunch of food stored they might be able to persist on that for awhile, but climate change leads to social breakdown, or maybe social breakdown contributes further to climate change . . . in any event, when we stop putting sulfates into the atmosphere, even at the level of the US or Europe or China, that's going to cause a very rapid global average increase in planetary temperature. According to journal literature, a reduction of 35 to 80 percent in sulfates causes a 1-degree Celsius temperature rise. And in a matter of days, maybe weeks. So when the system comes down, that means we're above the ridiculous, politically constructed target of 2 degrees Celsius, which has never been a scientific target despite what Michael Mann and other allegedly premier climate scientists say. One degree Celsius has been a scientific target since the UN group on measured greenhouse gases established that as a scientific target in 1990.
Well, it gets worse. According to David Spratt, in a presentation delivered recently, 1 degree Celsius was ridiculous, .8 degrees Celsius apparently was a more reasonable target, and by his estimation .5 degrees Celsius was the Rubicon we should not have crossed. Well, we crossed that Rubicon a long time ago, half a century ago, and he points out that we've passed all these tipping points, all these self-reinforcing feedback loops, and that 1 degree is nonsense, and that half a degree is more like it, and that's in the rearview mirror, and has been for a long time.
What would you say to young couples now who are having children, or are trying to get pregnant?
We have means of preventing that. [McPherson smiles and pauses]
I try to encourage people to pursue their passion, to do what they love, and apparently some people love having children.
"I think our social responsibility is to live here, now, and contribute to joyous lives for those around us. It's as if we're in a hospice situation."
Obviously I think that's a terrible strategy, given how little time we have on this planet as a species, but who am I to interrupt somebody else's reproductive rights?
So if you love having children, have children and love them, and no matter how long their lives are, try to make them be joyous years. I think that goes for all of us, and if that means you want to bring children into the world, who am I to stop you from pursuing what you love? That's what I try to encourage people to do.
Given that we've already gone over the cliff, what is our social and spiritual responsibility to ourselves, and to one another, and to the planet, as our extinction approaches?
I think our social responsibility is to live here, now, and contribute to joyous lives for those around us. It's as if we're in a hospice situation. I think we should be serving as witnesses to our own demise, as well as to the demise of the many other species we are driving to extinction.
In addition, I believe we have an obligation to not keep making things worse for every other species on the planet. It appears that we've thrown ourselves into the abyss, but we don't need to drag every other species on the planet down with us.
So that's why I so much appreciate what is going on here, at Earth at Risk, because it keeps the focus on species beyond ours, and the focus on cultures and societies beyond ours. We think it's all about us, whatever "us" is, and from a cosmological perspective our species just showed up really quite recently, and yet we think it's all about us.
So maybe we could, for a change, make it not about us, for starters.
Do you feel that the reality of how far along we are with ACD, the reality that you've been talking about for years now, is beginning to enter mainstream consciousness?
In a very limited way. Every now and then I see an article or a report in the mainstream media indicating that we may be ahead of some tipping point. So you see reference to the western Antarctic ice shelf falling into the ocean in the not so distant future. You see something about Greenland and the ice melting there very quickly.
"We have a corporate media, and we have a corporate government, and what Mussolini defined as fascism."
But we don't have a 24-hour news cycle; we have a 24-second news cycle. So those things come and go very quickly and then boom, we are back on the Kardashians again; we're back on some aspect of celebrity culture.
And so it's hard to get this culture focused in any meaningful way on the topics that matter for any period of time.
Why is the discussion about ACD not louder and more widespread? It should be the central conversation we're all having . . . the entire planet should be basically saying, "What in the hell are we going to do?" and acting on those questions . . . but it isn't. Why not?
It's a corporate media. There are a handful of corporations that control more than 90 percent of the media in the country, and to only a slightly lesser extent, the world. So we have a corporate media, and we have a corporate government, and what Mussolini defined as fascism.
There's no financial benefit to pointing out that people's lives are short. Instead, there's financial benefit to selling products that people don't need, can't afford and just contribute to further lining the pockets of the CEOs of the corporations. So I think it all comes down to the corporations exerting such profoundly strong control over the messages we are receiving everyday.
Your prediction of near-term extinction is, needless to say, controversial to most people. What do you say to people who call you extreme for talking about this?
I'm just reporting the results from other scientists. Nearly all of these results are published in established literature. I don't think anybody is taking issue with NASA or Nature, or Science, or the Proceedings of National Sciences . . . the others I report are reasonably well-known and come from legitimate sources like NOAA [National Oceanic and Atmospheric Administration], other NASA sources etc. . . . I'm not making this information up. I'm just connecting a couple of dots, and it's something many people have difficulty with.
For you, what now and why bother? What keeps you going?
I can't help myself. When I was 6 years old I came home with a Dick and Jane primer, showed it to my 4-year-old sister, pointed to a page, [and] said, "What's that?" She said, "That's a dog," and in total disgust I said, "No, that's Spot." I was already outraged because she didn't know the answer. I turned the page and said, "What's that?" She said, "That's a cat." In a disgusted tone of voice I said, "No, it's Puff!" I was teaching when I was 6. It's not what I do; it's who I am. I can't seem to help myself.
So serving as a witness, giving this information out, connecting ways that the mainstream media have given up on seems to be what is within me.
And what's next is moving the next step beyond uber-geek, left-brain science guy presenting the information and reminding people that their lives are short, and instead moving into the heart space, or what some people call the spiritual space of how do we deal with this? What do we do now? How do I act as a human being? What kind of my humanity comes up as a reminder of the fact that our lives are short? Maybe we ought not focus on materialism at the expense of everything else.
So that's what's next. And that's what's been going on for the last several months, and I'm trying to refine and hone that message and get it out more broadly, and engage with more allies to get that message out, because it's the most important message left to our species.
Have you seen, through your work, a shift from your going out and presenting all the facts and showing people where we are as a species, to more into what you just described?
Yes, absolutely. And there are a couple of things that are going on there. One, when I started delivering this information, I was the medical doctor with poor bedside manner.
So I would show up in the exam room, looking through my charts, barely making eye contact with the patient, tell them, "It looks like you have six weeks to live; be sure to pay the receptionist on your way out, and I've got a golf game to catch, so see you next week, maybe, if you're still alive then." And then I'd just leave.
So that was me when I'd deliver a presentation. And people pointed out to me along the way that that's really, really inappropriate behavior, and for this left-brained science guy that was a difficult pill for me to swallow, but I see that now.
And it was very helpful that a little less than a year ago I participated in a grief recovery workshop, and I realized that what I was experiencing was grief, and specifically anticipatory grief. So the next step is to try to scale up the notion of anticipatory grief, and have it reach more people as well as pointing out that this is what is. That we can't be stuck any more in what "should be," we can't be bogged down by the world of "should."
Instead, as Byron Katie points out in her latest book, we need to love what "is." And what "is" is reality. So let's embrace that, and love this living planet, even as we cause it to become a lot less lively. And experience and bring moments of joy to those around us.
Are Humans Going Extinct?
Some scientists, Guy McPherson included, fear that climate disruption is so serious, with so many self-reinforcing feedback loops already in play, that humans are in the process of causing our own extinction.
August, September and October were each the hottest months ever recorded, respectively. Including this year, which is on track to become the hottest year ever recorded, 13 of the hottest years on record have all occurred in the last 16 years.
See more stories like this at Truthout's "Planet or Profit" landing page.
Coal will likely overtake oil as the dominant energy source by 2017, and without a major shift away from coal, average global temperatures could rise by 6 degrees Celsius by 2050, leading to devastating climate change.
"Across two decades and thousands of pages of reports, the world's most authoritative voice on climate science has consistently understated the rate and intensity of climate change and the danger those impacts represent."
This is dramatically worse than even the most dire predictions from the Intergovernmental Panel on Climate Change (IPCC), which predicts at least a 5-degree Celsius increase by 2100 as its worst-case scenario, if business continues as usual with no major mitigation efforts.
Yet things continue growing worse faster than even the IPCC can keep up with.
Scientific American has said of the IPCC: "Across two decades and thousands of pages of reports, the world's most authoritative voice on climate science has consistently understated the rate and intensity of climate change and the danger those impacts represent."
And there is nothing to indicate, in the political or corporate world, that there will be anything like a major shift in policy aimed at dramatically mitigating runaway anthropogenic climate disruption (ACD).
Guy McPherson is a professor emeritus of natural resources, and ecology and evolutionary biology, with the University of Arizona, who has been studying ACD for nearly 30 years.
Near-term human extinction could eventually result from losing the Arctic sea ice, which is one of the 40 self-reinforcing feedback loops of ACD.
His blog Nature Bats Last has developed a large readership that continues to grow, and for six years McPherson has been traveling around the world giving lectures about a topic that, even for the initiated, is both shocking and controversial: the possibility of near-term human extinction due to runaway ACD.
As McPherson has told Truthout: "We've never been here as a species, and the implications are truly dire and profound for our species and the rest of the living planet." He told Truthout that he believes that near-term human extinction could eventually result from losing the Arctic sea ice, which is one of the 40 self-reinforcing feedback loops of ACD. "A world without Arctic ice will be completely new to humans," he said.
At the time of our interview less than one year ago, McPherson had identified 24 self-reinforcing positive feedback loops. Today that number has grown to 40.
A self-reinforcing feedback loop can also be thought of as a vicious circle, in that it accelerates the impacts of ACD. An example would be methane releases in the Arctic. Massive amounts of methane are currently locked in the permafrost, which is now melting rapidly. As the permafrost melts, methane, a greenhouse gas 100 times more potent than carbon dioxide on a short timescale, is released into the atmosphere, warming it, which in turn causes more permafrost to melt, and so on.
In the near term, earth's climate will change 10 times faster than during any other moment in the last 65 million years.
While McPherson's perspective might sound way-out and like the stuff of science fiction, similar things have happened on this planet in the past. Fifty-five million years ago, a 5-degree Celsius rise in average global temperatures seems to have occurred in just 13 years, according to a study published in the October 2013 issue of the Proceedings of the National Academy of Sciences. A report in the August 2013 issue of Science revealed that in the near term, earth's climate will change 10 times faster than during any other moment in the last 65 million years.
Prior to that, the Permian mass extinction that occurred 250 million years ago, also known as "The Great Dying," was triggered by a massive lava flow in an area of Siberia that led to an increase in global temperatures of 6 degrees Celsius. That, in turn, caused the melting of frozen methane deposits under the seas. Released into the atmosphere, those gases caused temperatures to skyrocket further. All of this occurred over a period of approximately 80,000 years. The change in climate is thought to be the key to what caused the extinction of most species on the planet. In that extinction episode, it is estimated that 95 percent of all species were wiped out.
Today's current scientific and observable evidence strongly suggests we are in the midst of the same process - only this time it is anthropogenic, and happening exponentially faster than the Permian mass extinction did.
We are likely to begin seeing periods of an ice-free Arctic by as soon as this coming summer, or the summer of 2016 at the latest.
Once the summer ice begins melting, methane releases will worsen dramatically.
Our current extinction event is already greatly exceeding the speed, and might eventually even exceed the intensity, of the Permian mass extinction event.
We are currently in the midst of what most scientists consider the sixth mass extinction in planetary history, with between 150 and 200 species going extinct daily - a pace 1,000 times greater than the "natural" or "background" extinction rate. Our current extinction event is already greatly exceeding the speed, and might eventually even exceed the intensity, of the Permian mass extinction event. The difference is that ours is human caused, isn't going to take 80,000 years, has so far lasted just a few centuries and is now gaining speed in a nonlinear fashion.
Is it possible that, on top of the vast quantities of carbon dioxide from fossil fuels that continue to enter the atmosphere in record amounts yearly, an increased release of methane could signal the beginning of the sort of process that led to the Great Dying? Some scientists, McPherson included, fear that the situation is already so serious and so many self-reinforcing feedback loops are already in play that we are in the process of causing our own extinction. Worse yet, some are convinced that it could happen far more quickly than generally believed possible - even in the course of just the next few decades.
Truthout caught up with McPherson at the Earth at Risk conference in San Francisco recently to ask him about his prediction of human extinction, and what that means for our lives today.
Dahr Jamail: What are some of the current signs and reports you're seeing that are disconcerting, and really give you pause?
Guy McPherson: I've been traveling, so I'm out of date for the last 10 days. But starting with the snowstorm in Buffalo, New York, that was the biggest snowstorm ever recorded in Buffalo, at 6 feet 4 inches in 24 hours. It's the largest one ever recorded in the United States.
Australia, meanwhile, is on fire. I just came back from New Zealand, and spring had just turned there because it's the Southern Hemisphere. The whole time I was there people were commenting on how hot it was, and "how far into summer we already are," and it was early to mid-spring when I was there.
So there's all kinds of observational evidence.
"It's hard for me to imagine we make it into the 2030s as a species."
We triggered another self-reinforcing feedback loop, number 40, just about two weeks ago; then just a week ago there was a [scientific] paper that came out indicating that for every 1-degree temperature rise, there is 7 percent more lightning strikes. So that contributes to a previously existing self-reinforcing feedback loop, that of fires, especially in the Northern Hemisphere, and especially in the boreal forests. So, as it gets warmer and drier, there are more and bigger fires, and that kicks more carbon into the atmosphere, which of course contributes to ongoing, accelerating climate disruption.
So lightning is yet another piece of that. As there is more moisture in the atmosphere and more heat going into the atmosphere and warming the planet, we have more lightning. The whole atmosphere becomes more dynamic. So, those are things that come to mind.
From your analysis, how long do you think humanity has before extinction occurs?
That's such a hard question, and we are such a clever species. It's clear that abrupt climate change is underway. Methane has gone exponential in the atmosphere. Paul Beckwith, climate scientist at University of Ottawa, indicates we could experience a 6-degree Celsius temperature rise in the span of a decade. He thinks we'll survive that. I can't imagine how that could be. He's a laser physicist and engineer, so I think he doesn't understand biology and requisite habitat that we need to survive.
So it's difficult for me to imagine a scenario where we'll survive even a 4-degree Celsius [above pre-industrial baseline] temperature rise, and we'll be there in the very near future, like by 2030, plus or minus. So it's hard for me to imagine we make it into the 2030s as a species.
But when I deliver public presentations I try not to focus on any particular date; I just try to remind people that they are mortal. That birth is lethal, and that we don't have long on this planet even if we live to be 100, so we might want to pursue what we love, instead of pursuing the next dollar.
A more micro-look from that question - what do you see happening in the US, if Beckwith and other scientists who are predicting that rapid a rise of temperatures in such a short time frame are correct?
The interior of continents heats at least twice as fast as the global average. So a 6-degree Celsius rise in the global average means at least 12 degrees Celsius in the interior of continents - that means no question there is no habitat for humans in the interior. So you would have to be in a maritime environment.
"It's difficult for me to imagine a situation in which plants, even land plants survive, because they can't get up and move."
I think even before we get to 6 degrees Celsius above baseline, we lose all habitats. We lose all or nearly all the phytoplankton in the oceans, which are in serious decline already as the result of an increasingly acidified ocean environment. It's difficult for me to imagine a situation in which plants, even land plants survive, because they can't get up and move. So without plants there is no habitat.
At a 6-degree Celsius temperature rise in the span of decades, there's no way for evolution by natural selection to keep up with that. Already, climate change - which at this point has been pretty slow and what we would call linear change - already climate change is outpacing evolution by natural selection by at least a factor of 10,000, so I don't see any way the planet is going to keep up.
We're clever. We'll be able to move around. And if somebody has a bunch of food stored they might be able to persist on that for awhile, but climate change leads to social breakdown, or maybe social breakdown contributes further to climate change . . . in any event, when we stop putting sulfates into the atmosphere, even at the level of the US or Europe or China, that's going to cause a very rapid global average increase in planetary temperature. According to journal literature, a reduction of 35 to 80 percent in sulfates causes a 1-degree Celsius temperature rise. And in a matter of days, maybe weeks. So when the system comes down, that means we're above the ridiculous, politically constructed target of 2 degrees Celsius, which has never been a scientific target despite what Michael Mann and other allegedly premier climate scientists say. One degree Celsius has been a scientific target since the UN group on measured greenhouse gases established that as a scientific target in 1990.
Well, it gets worse. According to David Spratt, in a presentation delivered recently, 1 degree Celsius was ridiculous, .8 degrees Celsius apparently was a more reasonable target, and by his estimation .5 degrees Celsius was the Rubicon we should not have crossed. Well, we crossed that Rubicon a long time ago, half a century ago, and he points out that we've passed all these tipping points, all these self-reinforcing feedback loops, and that 1 degree is nonsense, and that half a degree is more like it, and that's in the rearview mirror, and has been for a long time.
What would you say to young couples now who are having children, or are trying to get pregnant?
We have means of preventing that. [McPherson smiles and pauses]
I try to encourage people to pursue their passion, to do what they love, and apparently some people love having children.
"I think our social responsibility is to live here, now, and contribute to joyous lives for those around us. It's as if we're in a hospice situation."
Obviously I think that's a terrible strategy, given how little time we have on this planet as a species, but who am I to interrupt somebody else's reproductive rights?
So if you love having children, have children and love them, and no matter how long their lives are, try to make them be joyous years. I think that goes for all of us, and if that means you want to bring children into the world, who am I to stop you from pursuing what you love? That's what I try to encourage people to do.
Given that we've already gone over the cliff, what is our social and spiritual responsibility to ourselves, and to one another, and to the planet, as our extinction approaches?
I think our social responsibility is to live here, now, and contribute to joyous lives for those around us. It's as if we're in a hospice situation. I think we should be serving as witnesses to our own demise, as well as to the demise of the many other species we are driving to extinction.
In addition, I believe we have an obligation to not keep making things worse for every other species on the planet. It appears that we've thrown ourselves into the abyss, but we don't need to drag every other species on the planet down with us.
So that's why I so much appreciate what is going on here, at Earth at Risk, because it keeps the focus on species beyond ours, and the focus on cultures and societies beyond ours. We think it's all about us, whatever "us" is, and from a cosmological perspective our species just showed up really quite recently, and yet we think it's all about us.
So maybe we could, for a change, make it not about us, for starters.
Do you feel that the reality of how far along we are with ACD, the reality that you've been talking about for years now, is beginning to enter mainstream consciousness?
In a very limited way. Every now and then I see an article or a report in the mainstream media indicating that we may be ahead of some tipping point. So you see reference to the western Antarctic ice shelf falling into the ocean in the not so distant future. You see something about Greenland and the ice melting there very quickly.
"We have a corporate media, and we have a corporate government, and what Mussolini defined as fascism."
But we don't have a 24-hour news cycle; we have a 24-second news cycle. So those things come and go very quickly and then boom, we are back on the Kardashians again; we're back on some aspect of celebrity culture.
And so it's hard to get this culture focused in any meaningful way on the topics that matter for any period of time.
Why is the discussion about ACD not louder and more widespread? It should be the central conversation we're all having . . . the entire planet should be basically saying, "What in the hell are we going to do?" and acting on those questions . . . but it isn't. Why not?
It's a corporate media. There are a handful of corporations that control more than 90 percent of the media in the country, and to only a slightly lesser extent, the world. So we have a corporate media, and we have a corporate government, and what Mussolini defined as fascism.
There's no financial benefit to pointing out that people's lives are short. Instead, there's financial benefit to selling products that people don't need, can't afford and just contribute to further lining the pockets of the CEOs of the corporations. So I think it all comes down to the corporations exerting such profoundly strong control over the messages we are receiving everyday.
Your prediction of near-term extinction is, needless to say, controversial to most people. What do you say to people who call you extreme for talking about this?
I'm just reporting the results from other scientists. Nearly all of these results are published in established literature. I don't think anybody is taking issue with NASA or Nature, or Science, or the Proceedings of National Sciences . . . the others I report are reasonably well-known and come from legitimate sources like NOAA [National Oceanic and Atmospheric Administration], other NASA sources etc. . . . I'm not making this information up. I'm just connecting a couple of dots, and it's something many people have difficulty with.
For you, what now and why bother? What keeps you going?
I can't help myself. When I was 6 years old I came home with a Dick and Jane primer, showed it to my 4-year-old sister, pointed to a page, [and] said, "What's that?" She said, "That's a dog," and in total disgust I said, "No, that's Spot." I was already outraged because she didn't know the answer. I turned the page and said, "What's that?" She said, "That's a cat." In a disgusted tone of voice I said, "No, it's Puff!" I was teaching when I was 6. It's not what I do; it's who I am. I can't seem to help myself.
So serving as a witness, giving this information out, connecting ways that the mainstream media have given up on seems to be what is within me.
And what's next is moving the next step beyond uber-geek, left-brain science guy presenting the information and reminding people that their lives are short, and instead moving into the heart space, or what some people call the spiritual space of how do we deal with this? What do we do now? How do I act as a human being? What kind of my humanity comes up as a reminder of the fact that our lives are short? Maybe we ought not focus on materialism at the expense of everything else.
So that's what's next. And that's what's been going on for the last several months, and I'm trying to refine and hone that message and get it out more broadly, and engage with more allies to get that message out, because it's the most important message left to our species.
Have you seen, through your work, a shift from your going out and presenting all the facts and showing people where we are as a species, to more into what you just described?
Yes, absolutely. And there are a couple of things that are going on there. One, when I started delivering this information, I was the medical doctor with poor bedside manner.
So I would show up in the exam room, looking through my charts, barely making eye contact with the patient, tell them, "It looks like you have six weeks to live; be sure to pay the receptionist on your way out, and I've got a golf game to catch, so see you next week, maybe, if you're still alive then." And then I'd just leave.
So that was me when I'd deliver a presentation. And people pointed out to me along the way that that's really, really inappropriate behavior, and for this left-brained science guy that was a difficult pill for me to swallow, but I see that now.
And it was very helpful that a little less than a year ago I participated in a grief recovery workshop, and I realized that what I was experiencing was grief, and specifically anticipatory grief. So the next step is to try to scale up the notion of anticipatory grief, and have it reach more people as well as pointing out that this is what is. That we can't be stuck any more in what "should be," we can't be bogged down by the world of "should."
Instead, as Byron Katie points out in her latest book, we need to love what "is." And what "is" is reality. So let's embrace that, and love this living planet, even as we cause it to become a lot less lively. And experience and bring moments of joy to those around us.
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