http://www.truthdig.com/report/item/why_i_support_the_bds_movement_against_israel_20150726
Why I Support the BDS Movement Against Israel
The Palestinians are poor. They are powerless. They have no voice or influence in the halls of power. They are demonized. They do not have well-heeled lobbyists doling out campaign contributions and pushing through pro-Palestinian legislation. No presidential candidate is appealing to donors—as Hillary Clinton did when she sent a letter to media mogul Haim Saban denouncing critics of Israel—by promising to advance the interests of the Palestinian people. Palestinians, like poor people of color in the United States, are expendable.
Justice for Palestine will never come from the traditional governmental institutions or political parties that administer power. These institutions have surrendered to moneyed interests. Justice will come only from us. And the sole mechanism left to ensure justice for Palestine is the boycott, divestment and sanctions (BDS) movement against Israel. Sanctions brought down the apartheid regime of South Africa. And they are what will bring down the apartheid regime of Israel. BDS is nonviolent. It appeals to conscience. And it works.
All Israeli products including Jaffa citrus fruits, Ahava cosmetics, SodaStream drink machines, Eden Springs bottled water and Israeli wine must be boycotted. We must refuse to do business with Israeli service companies. And we must boycott corporations that do business with Israel, including Caterpillar, HP and Hyundai. We must put pressure on institutions, from churches to universities, to divest from Israeli companies and corporations that have contracts with Israel. The struggle against apartheid in South Africa was long and hard. This struggle will be too.
Gaza, a year after Israel carried out a devastating bombing campaign that lasted almost two months, is in ruins. Most of the water is unsafe to drink. There are power outages for up to 12 hours a day. Forty percent of the 1.8 million inhabitants are unemployed, including 67 percent of the youths—the highest youth unemployment rate in the world. Of the 17,000 homes destroyed by Israel in the siege, not one has been rebuilt. Sixty thousand people remain homeless. Only a quarter of the promised $3.5 billion in aid from international donors has been delivered—much of it diverted to the Palestinian Authority, the Israeli puppet regime that governs the West Bank. And no one in Washington—Republican or Democrat—will defy the Israel lobby. No one will call for justice or stay the Israeli killing machine. U.S. senators, including Bernie Sanders, at the height of the Israeli bombardment last summer voted unanimously to defend the Israeli slaughter of a people with no army, navy, air force, mechanized units, artillery or command and control. It was a vote worthy of the old Soviet Union. Every senator held out his or her tin cup to the Israel lobby and chose naked self-interest over justice.
Israel, like the United States, is poisoned by the psychosis of permanent war. It too is governed by a corrupt oligarchic elite for whom war has become a lucrative business. It too has deluded itself into carrying out war crimes and then playing the role of the victim. Israeli systems of education and the press—again mirrored in the United States—have indoctrinated Israelis into believing that they have a right to kill anyone whom the state condemns as a terrorist. And Israel’s most courageous human rights campaigners, intellectuals and journalists are slandered and censored in their own country, just as American critics such as Norman Finkelstein, Max Blumenthal and Noam Chomsky are in the United States.
Those who become addicted to the wielding of the instruments of war, blinded by hubris and a lust for power, eventually become war’s victims. This is as true for Israel as for the United States.
Israel’s goal is to make life a living hell for all Palestinians, ethnically cleansing as many as it can and subduing those who remain. The peace process is a sham. It has led to Israel’s seizure of more than half the land on the West Bank, including the aquifers, and the herding of Palestinians into squalid, ringed ghettos or Bantustans while turning Palestinian land and homes over to Jewish settlers. Israel is expanding settlements, especially in East Jerusalem. Racial laws, once championed by the right-wing demagogue Meir Kahane, openly discriminate against Israeli Arabs and Palestinians. Ilan Pappe calls the decades-long assault against the Palestinian people “incremental genocide.”
In Gaza, Israel practices an even more extreme form of cruelty. It employs a mathematical formula to limit outside food deliveries to Gaza to keep the caloric levels of the 1.8 million Palestinians just above starvation. This has left 80 percent of the Palestinians in Gaza dependent on Islamic charities and outside aid to survive. And the periodic military assaults on Gaza, euphemistically called “mowing the lawn,” are carried out every few years to ensure that the Palestinians remain broken, terrified and destitute. There have been three Israeli attacks on Gaza since 2008. Each is more violent and indiscriminate than the last. Israeli Foreign Minister Avigdor Lieberman has said that a fourth attack on Gaza is “inevitable.”
During its 51-day siege of Gaza last summer Israel dropped $370 million in ordinance on concrete hovels and refugee camps that hold the most densely packed population on the planet. Two thousand one hundred four Palestinians were killed. Sixty-nine percent—1,462—were civilians. Four hundred ninety-five were children. Ten thousand were injured. (During the attack six Israeli civilians and 66 soldiers were killed.) Four hundred Palestinian businesses were wiped out. Seventy mosques were destroyed and 130 were damaged. Twenty-four medical facilities were bombed, and 16 ambulances were struck, as was Gaza’s only electrical power plant. Israel tallied it up: 390,000 tank shells, 34,000 artillery shells, 4.8 million bullets. Most of the civilians who died were killed in their homes, many of the victims torn to shreds by flechette darts sprayed from tanks. Children were burned with white phosphorous or buried with their families under rubble caused by 2,000-pound iron fragmentation bombs. Others died from dense inert metal explosive, or DIME, bombs—experimental weapons that send out extremely small, carcinogenic particles that cut through both soft tissue and bone. The Israel Defense Forces, as Amira Hass has reported, consider any Palestinian over the age of 12 to be a legitimate military target. Max Blumenthal’s new book, “The 51 Day War,” is a chilling chronicle of savage atrocities carried out by Israel in Gaza last summer. As horrible as the apartheid state in South Africa was, that nation never used its air force and heavy artillery to bomb and shell black townships.
A report by Action on Armed Violence (AOAV) found Israel killed and injured more civilians with explosive weapons in 2014 than any other country in the world. Hamas’ indiscriminate firing of wildly inaccurate missiles—Finkelstein correctly called them “enhanced fireworks”—into Israel was, as a U.N. report recently charged, a war crime, although the report failed to note that under international law Hamas had a right to use force to defend itself from attack.
The disparity of firepower in the 2014 conflict was vast: Israel dropped 20,000 tons of explosives on Gaza while Hamas used 20 to 40 tons of explosives to retaliate. Israel’s wholesale slaughter of civilians is on a scale equaled only by Islamic State and Boko Haram. Yet Israel, in our world of double standards, is exempted from condemnation in Washington and provided with weapons and billions in U.S. foreign aid to perpetuate the killing. This is not surprising. The United States uses indiscriminate deadly force in Iraq, Syria, Afghanistan, Pakistan, Yemen and Somalia that outdoes even Israel, leaving behind civilian victims, refugees and destroyed cities and villages in huge numbers.
Israeli Prime Minister Benjamin Netanyahu, who during his last election campaign received 90 percent of his money from U.S. oligarchs such as Sheldon Adelson, has internally mounted a campaign of state repression against human rights advocates, journalists and dissidents. He has stoked overt racism toward Palestinians and Arabs and the African migrant workers who live in the slums of Tel Aviv. “Death to Arabs” is a popular chant at Israeli soccer matches. Thugs from right-wing youth groups such as Im Tirtzu routinely beat up dissidents, Palestinians, Israeli Arabs and African immigrants in the streets of Tel Aviv. It is a species of Jewish fascism.
Israel is not an anomaly. It is a window into the dystopian, militarized world that is being prepared for all of us, a world with vast disparities of income and draconian systems of internal security. There will be no freedom for Palestine, or for those locked in our own internal colonies and terrorized by indiscriminate police violence, until we destroy corporate capitalism and the neoliberal ideology that sustains it. There will be no justice for Michael Brown until there is justice for Mohammed Abu Khdeir. The fight for the Palestinians is our fight. If the Palestinians are not liberated none of us will be liberated. We cannot pick and choose which of the oppressed are convenient or inconvenient to defend. We will stand with all of the oppressed or none of the oppressed. And when we stand with the oppressed we will be treated like the oppressed.
Sunday, July 26, 2015
Saturday, July 25, 2015
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Nine Reasons Why Low Oil Prices May “Morph” Into Something Much Worse
Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing.
It looks to me as though we are heading into a deflationary depression, because the prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening. Instead, Janet Yellen is talking about raising interest rates later this year, and we are seeing commodity prices fall further and further. Let me explain some pieces of what is happening.
1. We have been forcing economic growth upward since 1981 through the use of falling interest rates. Interest rates are now so low that it is hard to force rates down further, in order to encourage further economic growth.
Falling interest rates are hugely beneficial for the economy. If interest rates stop dropping, or worse yet, begin to rise, we will lose this very beneficial factor affecting the economy. The economy will tend to grow even less quickly, bringing down commodity prices further. The world economy may even start contracting, as it heads into a deflationary depression.
If we look at 10-year US treasury interest rates, there has been a steep fall in rates since 1981.
Figure 1. Chart prepared by St. Louis Fed using data through July 20, 2015.
Figure 1. Chart prepared by St. Louis Fed using data through July 20, 2015.
In fact, almost any kind of interest rates, including interest rates of shorter terms, mortgage interest rates, bank prime loan rates, and Moody’s Seasoned AAA Bonds, show a fairly similar pattern. There is more variability in very short-term interest rates, but the general direction has been down, to the point where interest rates can drop no further.
Declining interest rates stimulate the economy for many reasons:
•Would-be homeowners find monthly payments are lower, so more people can afford to purchase homes. People already owning homes can afford to “move up” to more expensive homes.
•Would-be auto owners find monthly payments lower, so more people can afford cars.
•Employment in the home and auto industries is stimulated, as is employment in home furnishing industries.
•Employment at colleges and universities grows, as lower interest rates encourage more students to borrow money to attend college.
•With lower interest rates, businesses can afford to build factories and stores, even when the anticipated rate of return is not very high. The higher demand for autos, homes, home furnishing, and colleges adds to the success of businesses.
•The low interest rates tend to raise asset prices, including prices of stocks, bonds, homes and farmland, making people feel richer.
•If housing prices rise sufficiently, homeowners can refinance their mortgages, often at a lower interest rate. With the funds from refinancing, they can remodel, or buy a car, or take a vacation.
•With low interest rates, the total amount that can be borrowed without interest payments becoming a huge burden rises greatly. This is especially important for governments, since they tend to borrow endlessly, without collateral for their loans.
While this very favorable trend in interest rates has been occurring for years, we don’t know precisely how much impact this stimulus is having on the economy. Instead, the situation is the “new normal.” In some ways, the benefit is like traveling down a hill on a skateboard, and not realizing how much the slope of the hill is affecting the speed of the skateboard. The situation goes on for so long that no one notices the benefit it confers.
If the economy is now moving too slowly, what do we expect to happen when interest rates start rising? Even level interest rates become a problem, if we have become accustomed to the economic boost we get from falling interest rates.
2. The cost of oil extraction tends to rise over time because the cheapest to extract oil is removed first. In fact, this is true for nearly all commodities, including metals.
If costs always remained the same, we could represent the production of a barrel of oil, or a pound of metal, using the following diagram.
Figure 2
Figure 2. Base Case
If production is becoming increasingly efficient, then we might represent the situation as follows, where the larger size “box” represents the larger output, using the same inputs.
Figure 3
Figure 3. Increased Efficiency
For oil and for many other commodities, we are experiencing the opposite situation. Instead of becoming increasingly efficient, we are becoming increasingly inefficient (Figure 4). This happens because deeper wells need to be dug, or because we need to use fracking equipment and fracking sand, or because we need to build special refineries to handle the pollution problems of a particular kind of oil. Thus we need more resources to produce the same amount of oil.
Figure 4. Growing inefficiency
Figure 4. Growing inefficiency (Notice how sizes of shapes differ in Figures 2, 3, and 4.)
Some people might call the situation “diminishing returns,” because the cheap oil has already been extracted, and we need to move on to the more difficult to extract oil. This adds extra steps, and thus extra costs. I have chosen to use the slightly broader term of “increasing inefficiency” because it indicates that the nature of these additional costs is not being restricted.
Very often, new steps need to be added to the process of extraction because wells are deeper, or because refining requires the removal of more pollutants. At times, the higher costs involve changing to a new process that is believed to be more environmentally sound.
Figure 5
Figure 5. An example of what may happen to make inputs in physical goods and services rise. (The triangle shape was chosen to match the shape of the “Inputs of Goods and Services” triangle in Figures 2, 3, and 4.)
The cost of extraction keeps rising, as the cheapest to extract resources become depleted, and as environmental pollution becomes more of a problem.
3. Using more inputs to create the same or smaller output pushes the world economy toward contraction.
Essentially, the problem is that the same quantity of inputs is yielding less and less of the desired final product. For a given quantity of inputs, we are getting more and more intermediate products (such as fracking sand, “scrubbers” for coal-fired power plants, desalination plants for fresh water, and administrators for colleges), but we are not getting as much output in the traditional sense, such as barrels of oil, kilowatts of electricity, gallons of fresh water, or educated young people, ready to join the work force.
We don’t have unlimited inputs. As more and more of our inputs are assigned to creating intermediate products to work around limits we are reaching (including pollution limits), fewer of our resources can go toward producing desired end products. The result is less economic growth. Because of this declining economic growth, there is less demand for commodities. So, prices for commodities tend to drop.
This outcome is to be expected, if increased efficiency is part of what creates economic growth, and what we are experiencing now is the opposite: increased inefficiency.
4. The way workers afford higher commodity costs is primarily through higher wages. At times, higher debt can also be a workaround. If neither of these is available, commodity prices can fall below the cost of production.
If there is a significant increase in the cost of products like houses and cars, this presents a huge challenge to workers. Usually, workers pay for these products using a combination of wages and debt. If costs rise, they either need higher wages, or a debt package that makes the product more affordable–perhaps lower rates, or a longer period for payment.
Commodity costs have been rising very rapidly in the last fifteen years or so. According to a chart prepared by Steven Kopits, some of the major costs of extracting oil began increasing by 10.9% per year, in about 1999.
Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is
Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is “Compound Annual Growth Rate.”
In fact, the inflation-adjusted prices of almost all energy and metal products tended to rise rapidly during the period 1999 to 2008 (Figure 7). This was a time period when the amount of mortgage debt was increasing rapidly as lenders began offering home loans with low initial interest rates to almost anyone, including those with low credit scores and irregular income. When debt levels began falling in mid-2008 (related in part to defaulting home loans), commodity prices of all types dropped.
Figure 6. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank
Figure 6. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank “Pink Sheet” data.
Prices then began to rise once Quantitative Easing (QE) was initiated (compare Figures 6 and 7). The use of QE brought down medium-term and long-term interest rates, making it easier for customers to afford homes and cars.
Figure 7. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.
Figure 7. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.
More recently, prices have fallen again. Thus, we have had two recent times when prices have fallen below the cost of production for many major commodities. Both of these drops occurred after prices had been high, when debt availability was contracting or failing to rise as much as in the past.
5. Part of the problem that we are experiencing is a slow-down in wage growth.
Figure 8 shows that in the United States, growth in per capita wages tends to disappear when oil prices rise above $40 barrel. (Of course, as noted in Point 1, interest rates have been falling since 1981. If it weren’t for this, the cut off for wage growth might even be lower–perhaps even $20 barrel!)
Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
There is also a logical reason why we should expect that wages would tend to fall as energy costs rise. How does a manufacturer respond to the much higher cost of one or more of its major inputs? If the manufacturer simply passes the higher cost along, many customers will no longer be able to afford the manufacturer’s or service-provider’s products. If businesses can simply reduce some other costs to offset the rise in the cost in energy products and metals, they might be able to keep most of their customers.
A major area where a manufacturer or service provider can cut costs is in wage expense. (Note the different types of expenses shown in Figure 5. Wages are a major type of expense for most businesses.)
There are several ways employment costs can be cut:
1.Shift jobs to lower wage countries overseas.
2.Use automation to shift some human labor to labor provided by electricity.
3.Pay workers less. Use “contract workers” or “adjunct faculty” or “interns” who will settle for lower wages.
If a manufacturer decides to shift jobs to China or India, this has the additional advantage of cutting energy costs, since these countries use a lot of coal in their energy mix, and coal is an inexpensive fuel.
Figure 9. United States Percentage of Labor Force Employed, in by St. Louis Federal Reserve.
Figure 9. United States Labor Force Participation Rate by St. Louis Federal Reserve. It is computed by dividing the number of people who are employed or are actively looking for work by the number of potential workers.
In fact, we see a drop in the US civilian labor force participation rate (Figure 9) starting at approximately the same time when energy costs and metal costs started to rise. Median inflation-adjusted wages have tended to fall as well in this period. Low wages can be a reason for dropping out of the labor force; it can become too expensive to commute to work and pay day care expenses out of meager wages.
Of course, if wages of workers are not growing and in many cases are actually shrinking, it becomes difficult to sell as many homes, cars, boats, and vacation cruises. These big-ticket items create a significant share of commodity “demand.” If workers are unable to purchase as many of these big-ticket items, demand tends to fall below the (now-inflated) cost of producing these big-ticket items, leading to the lower commodity prices we have seen recently.
6. We are headed in slow motion toward major defaults among commodity producers, including oil producers.
Quite a few people imagine that if oil prices drop, or if other commodity prices drop, there will be an immediate impact on the output of goods and services.
Figure 10.
Figure 10.
Instead, what happens is more of a time-lagged effect (Figure 11).
Figure 11.
Figure 11.
Part of the difference lies in the futures markets; companies hold contracts that hold sale prices up for a time, but eventually (often, end of 2015) run out. Part of the difference lies in wells that have already been drilled that keep on producing. Part of the difference lies in the need for businesses to maintain cash flow at all costs, if the price problem is only for a short period. Thus, they will keep parts of the business operating if those parts produce positive cash flow on a going-forward basis, even if they are not profitable considering all costs.
With debt, the big concern is that the oil reserves being used as collateral for loans will drop in value, due to the lower price of oil in the world market. The collateral value of reserves works out to be something like (barrels of oil in reserves x some expected price).
As long as oil is being valued at $100 barrel, the value of the collateral stays close to what was assumed when the loan was taken out. The problem comes when low oil prices gradually work their way through the system and bring down the value of the collateral. This may take a year or more from the initial price drop, because prices are averaged over as much as 12 months, to provide stability to the calculation.
Once the value of the collateral drops below the value of the outstanding loan, the borrowers are in big trouble. They may need to sell some of the other assets they own, to help pay down the loan. Or, they may end up in bankruptcy. The borrowers certainly can’t borrow the additional money they need to keep increasing their production.
When bankruptcy occurs, many follow-on effects can be expected. The banks that made the loans may find themselves in financial difficulty. The oil company may lay off large numbers of workers. The former workers’ lack of wages may affect other businesses in the area, such as car dealerships. The value of homes in the area may drop, causing home mortgages to become “underwater.” All of these effects contribute to still lower demand for commodities of all kinds, including oil.
Because of the time lag problem, the bankruptcy problem is hard to reverse. Oil prices need to stay high for an extended period before lenders will be willing to lend to oil companies again. If it takes, say, five years for oil prices to get up to a level high enough to encourage drilling again, it may take seven years before lenders are willing to lend again.
7. Because many “baby boomers” are retiring now, we are at the beginning of a demographic crunch that has the tendency to push demand down further.
Many workers born in the late 1940s and in the 1950s are retiring now. These workers tend to reduce their own spending, and depend on government programs to pay most of their income. Thus, the retirement of these workers tends to drive up governmental costs at the same time it reduces demand for commodities of all kinds.
Someone needs to pay for the goods and services used by the retirees. Government retirement plans are rarely pre-funded, except with the government’s own debt. Because of this, higher pension payments by governments tend to lead to higher taxes. With higher taxes, workers have less money left to buy homes and cars. Even with pensions, the elderly are never a big market for homes and cars. The overall result is that demand for homes and cars tends to stagnate or decline, holding down the demand for commodities.
8. We are running short of options for fixing our low commodity price problem.
The ideal solution to our low commodity price problem would be to find substitutes that are cheap enough, and could increase in quantity rapidly enough, to power the economy to economic growth. “Cheap enough” would probably mean approximately $20 per barrel for a liquid oil substitute. The price would need to be correspondingly inexpensive for other energy products. Cheap and abundant energy products are needed because oil consumption and energy consumption are highly correlated. If prices are not low, consumers cannot afford them. The economy would react as it does to inefficiency. In other words, it would react as if too much of the output is going into intermediate products, and too little is actually acting to expand the economy.
Figure 12. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).
Figure 12. World GDP in 2010$ (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014)
These substitutes would also need to be non-polluting, so that pollution workarounds do not add to costs. These substitutes would need to work in existing vehicles and machinery, so that we do not have to deal with the high cost of transition to new equipment.
Clearly, none of the potential substitutes we are looking at today come anywhere close to meeting cost and scalability requirements. Wind and solar PV can only be built on top of our existing fossil fuel system. All evidence is that they raise total costs, adding to our “Increased Inefficiency” problem, rather than fixing it.
Other solutions to our current problems seem to be debt based. If we look at recent past history, the story seems to be something such as the following:
Besides adopting QE starting in 2008, governments also ramped up their spending (and debt) during the 2008-2011 period. This spending included road building, which increased the demand for commodities directly, and unemployment insurance payments, which indirectly increased the demand for commodities by giving jobless people money, which they used for food and transportation. China also ramped up its use of debt in the 2008-2009 period, building more factories and homes. The combination of QE, China’s debt, and government debt together brought oil prices back up by 2011, although not to as high a level as in 2008 (Figure 7).
More recently, governments have slowed their growth in spending (and debt), realizing that they are reaching maximum prudent debt levels. China has slowed its debt growth, as pollution from coal has become an increasing problem, and as the need for new homes and new factories has become saturated. Its debt ratios are also becoming very high.
QE continues to be used by some countries, but its benefit seems to be waning, as interest rates are already as low as they can go, and as central banks buy up an increasing share of debt that might be used for loan collateral. The credit generated by QE has allowed questionable investments since the required rate of return on investments funded by low interest rate debt is so low. Some of this debt simply recirculates within the financial system, propping up stock prices and land prices. Some of it has gone toward stock buy-backs. Virtually none of it has added to commodity demand.
What we really need is more high wage jobs. Unfortunately, these jobs need to be supported by the availability of large amounts of very inexpensive energy. It is the lack of inexpensive energy, to match the $20 per barrel oil and very cheap coal upon which the economy has been built that is causing our problems. We don’t really have a way to fix this.
9. It is doubtful that the prices of energy products and metals can be raised again without causing recession.
We are not talking about simply raising oil prices. If the economy is to grow again, demand for all commodities needs to rise to the point where it makes sense to extract more of them. We use both energy products and metals in making all kinds of goods and services. If the price of these products rises, the cost of making virtually any kind of goods or services rises.
Raising the cost of energy products and metals leads to the problem represented by Growing Inefficiency (Figure 4). As we saw in Point 5, wages tend to go down, rather than up, when other costs of production rise because manufacturers try to find ways to hold total costs down.
Lower wages and higher prices are a huge problem. This is why we are headed back into recession if prices rise enough to enable rising long-term production of commodities, including oil.
Nine Reasons Why Low Oil Prices May “Morph” Into Something Much Worse
Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing.
It looks to me as though we are heading into a deflationary depression, because the prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening. Instead, Janet Yellen is talking about raising interest rates later this year, and we are seeing commodity prices fall further and further. Let me explain some pieces of what is happening.
1. We have been forcing economic growth upward since 1981 through the use of falling interest rates. Interest rates are now so low that it is hard to force rates down further, in order to encourage further economic growth.
Falling interest rates are hugely beneficial for the economy. If interest rates stop dropping, or worse yet, begin to rise, we will lose this very beneficial factor affecting the economy. The economy will tend to grow even less quickly, bringing down commodity prices further. The world economy may even start contracting, as it heads into a deflationary depression.
If we look at 10-year US treasury interest rates, there has been a steep fall in rates since 1981.
Figure 1. Chart prepared by St. Louis Fed using data through July 20, 2015.
Figure 1. Chart prepared by St. Louis Fed using data through July 20, 2015.
In fact, almost any kind of interest rates, including interest rates of shorter terms, mortgage interest rates, bank prime loan rates, and Moody’s Seasoned AAA Bonds, show a fairly similar pattern. There is more variability in very short-term interest rates, but the general direction has been down, to the point where interest rates can drop no further.
Declining interest rates stimulate the economy for many reasons:
•Would-be homeowners find monthly payments are lower, so more people can afford to purchase homes. People already owning homes can afford to “move up” to more expensive homes.
•Would-be auto owners find monthly payments lower, so more people can afford cars.
•Employment in the home and auto industries is stimulated, as is employment in home furnishing industries.
•Employment at colleges and universities grows, as lower interest rates encourage more students to borrow money to attend college.
•With lower interest rates, businesses can afford to build factories and stores, even when the anticipated rate of return is not very high. The higher demand for autos, homes, home furnishing, and colleges adds to the success of businesses.
•The low interest rates tend to raise asset prices, including prices of stocks, bonds, homes and farmland, making people feel richer.
•If housing prices rise sufficiently, homeowners can refinance their mortgages, often at a lower interest rate. With the funds from refinancing, they can remodel, or buy a car, or take a vacation.
•With low interest rates, the total amount that can be borrowed without interest payments becoming a huge burden rises greatly. This is especially important for governments, since they tend to borrow endlessly, without collateral for their loans.
While this very favorable trend in interest rates has been occurring for years, we don’t know precisely how much impact this stimulus is having on the economy. Instead, the situation is the “new normal.” In some ways, the benefit is like traveling down a hill on a skateboard, and not realizing how much the slope of the hill is affecting the speed of the skateboard. The situation goes on for so long that no one notices the benefit it confers.
If the economy is now moving too slowly, what do we expect to happen when interest rates start rising? Even level interest rates become a problem, if we have become accustomed to the economic boost we get from falling interest rates.
2. The cost of oil extraction tends to rise over time because the cheapest to extract oil is removed first. In fact, this is true for nearly all commodities, including metals.
If costs always remained the same, we could represent the production of a barrel of oil, or a pound of metal, using the following diagram.
Figure 2
Figure 2. Base Case
If production is becoming increasingly efficient, then we might represent the situation as follows, where the larger size “box” represents the larger output, using the same inputs.
Figure 3
Figure 3. Increased Efficiency
For oil and for many other commodities, we are experiencing the opposite situation. Instead of becoming increasingly efficient, we are becoming increasingly inefficient (Figure 4). This happens because deeper wells need to be dug, or because we need to use fracking equipment and fracking sand, or because we need to build special refineries to handle the pollution problems of a particular kind of oil. Thus we need more resources to produce the same amount of oil.
Figure 4. Growing inefficiency
Figure 4. Growing inefficiency (Notice how sizes of shapes differ in Figures 2, 3, and 4.)
Some people might call the situation “diminishing returns,” because the cheap oil has already been extracted, and we need to move on to the more difficult to extract oil. This adds extra steps, and thus extra costs. I have chosen to use the slightly broader term of “increasing inefficiency” because it indicates that the nature of these additional costs is not being restricted.
Very often, new steps need to be added to the process of extraction because wells are deeper, or because refining requires the removal of more pollutants. At times, the higher costs involve changing to a new process that is believed to be more environmentally sound.
Figure 5
Figure 5. An example of what may happen to make inputs in physical goods and services rise. (The triangle shape was chosen to match the shape of the “Inputs of Goods and Services” triangle in Figures 2, 3, and 4.)
The cost of extraction keeps rising, as the cheapest to extract resources become depleted, and as environmental pollution becomes more of a problem.
3. Using more inputs to create the same or smaller output pushes the world economy toward contraction.
Essentially, the problem is that the same quantity of inputs is yielding less and less of the desired final product. For a given quantity of inputs, we are getting more and more intermediate products (such as fracking sand, “scrubbers” for coal-fired power plants, desalination plants for fresh water, and administrators for colleges), but we are not getting as much output in the traditional sense, such as barrels of oil, kilowatts of electricity, gallons of fresh water, or educated young people, ready to join the work force.
We don’t have unlimited inputs. As more and more of our inputs are assigned to creating intermediate products to work around limits we are reaching (including pollution limits), fewer of our resources can go toward producing desired end products. The result is less economic growth. Because of this declining economic growth, there is less demand for commodities. So, prices for commodities tend to drop.
This outcome is to be expected, if increased efficiency is part of what creates economic growth, and what we are experiencing now is the opposite: increased inefficiency.
4. The way workers afford higher commodity costs is primarily through higher wages. At times, higher debt can also be a workaround. If neither of these is available, commodity prices can fall below the cost of production.
If there is a significant increase in the cost of products like houses and cars, this presents a huge challenge to workers. Usually, workers pay for these products using a combination of wages and debt. If costs rise, they either need higher wages, or a debt package that makes the product more affordable–perhaps lower rates, or a longer period for payment.
Commodity costs have been rising very rapidly in the last fifteen years or so. According to a chart prepared by Steven Kopits, some of the major costs of extracting oil began increasing by 10.9% per year, in about 1999.
Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is
Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is “Compound Annual Growth Rate.”
In fact, the inflation-adjusted prices of almost all energy and metal products tended to rise rapidly during the period 1999 to 2008 (Figure 7). This was a time period when the amount of mortgage debt was increasing rapidly as lenders began offering home loans with low initial interest rates to almost anyone, including those with low credit scores and irregular income. When debt levels began falling in mid-2008 (related in part to defaulting home loans), commodity prices of all types dropped.
Figure 6. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank
Figure 6. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank “Pink Sheet” data.
Prices then began to rise once Quantitative Easing (QE) was initiated (compare Figures 6 and 7). The use of QE brought down medium-term and long-term interest rates, making it easier for customers to afford homes and cars.
Figure 7. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.
Figure 7. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.
More recently, prices have fallen again. Thus, we have had two recent times when prices have fallen below the cost of production for many major commodities. Both of these drops occurred after prices had been high, when debt availability was contracting or failing to rise as much as in the past.
5. Part of the problem that we are experiencing is a slow-down in wage growth.
Figure 8 shows that in the United States, growth in per capita wages tends to disappear when oil prices rise above $40 barrel. (Of course, as noted in Point 1, interest rates have been falling since 1981. If it weren’t for this, the cut off for wage growth might even be lower–perhaps even $20 barrel!)
Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
There is also a logical reason why we should expect that wages would tend to fall as energy costs rise. How does a manufacturer respond to the much higher cost of one or more of its major inputs? If the manufacturer simply passes the higher cost along, many customers will no longer be able to afford the manufacturer’s or service-provider’s products. If businesses can simply reduce some other costs to offset the rise in the cost in energy products and metals, they might be able to keep most of their customers.
A major area where a manufacturer or service provider can cut costs is in wage expense. (Note the different types of expenses shown in Figure 5. Wages are a major type of expense for most businesses.)
There are several ways employment costs can be cut:
1.Shift jobs to lower wage countries overseas.
2.Use automation to shift some human labor to labor provided by electricity.
3.Pay workers less. Use “contract workers” or “adjunct faculty” or “interns” who will settle for lower wages.
If a manufacturer decides to shift jobs to China or India, this has the additional advantage of cutting energy costs, since these countries use a lot of coal in their energy mix, and coal is an inexpensive fuel.
Figure 9. United States Percentage of Labor Force Employed, in by St. Louis Federal Reserve.
Figure 9. United States Labor Force Participation Rate by St. Louis Federal Reserve. It is computed by dividing the number of people who are employed or are actively looking for work by the number of potential workers.
In fact, we see a drop in the US civilian labor force participation rate (Figure 9) starting at approximately the same time when energy costs and metal costs started to rise. Median inflation-adjusted wages have tended to fall as well in this period. Low wages can be a reason for dropping out of the labor force; it can become too expensive to commute to work and pay day care expenses out of meager wages.
Of course, if wages of workers are not growing and in many cases are actually shrinking, it becomes difficult to sell as many homes, cars, boats, and vacation cruises. These big-ticket items create a significant share of commodity “demand.” If workers are unable to purchase as many of these big-ticket items, demand tends to fall below the (now-inflated) cost of producing these big-ticket items, leading to the lower commodity prices we have seen recently.
6. We are headed in slow motion toward major defaults among commodity producers, including oil producers.
Quite a few people imagine that if oil prices drop, or if other commodity prices drop, there will be an immediate impact on the output of goods and services.
Figure 10.
Figure 10.
Instead, what happens is more of a time-lagged effect (Figure 11).
Figure 11.
Figure 11.
Part of the difference lies in the futures markets; companies hold contracts that hold sale prices up for a time, but eventually (often, end of 2015) run out. Part of the difference lies in wells that have already been drilled that keep on producing. Part of the difference lies in the need for businesses to maintain cash flow at all costs, if the price problem is only for a short period. Thus, they will keep parts of the business operating if those parts produce positive cash flow on a going-forward basis, even if they are not profitable considering all costs.
With debt, the big concern is that the oil reserves being used as collateral for loans will drop in value, due to the lower price of oil in the world market. The collateral value of reserves works out to be something like (barrels of oil in reserves x some expected price).
As long as oil is being valued at $100 barrel, the value of the collateral stays close to what was assumed when the loan was taken out. The problem comes when low oil prices gradually work their way through the system and bring down the value of the collateral. This may take a year or more from the initial price drop, because prices are averaged over as much as 12 months, to provide stability to the calculation.
Once the value of the collateral drops below the value of the outstanding loan, the borrowers are in big trouble. They may need to sell some of the other assets they own, to help pay down the loan. Or, they may end up in bankruptcy. The borrowers certainly can’t borrow the additional money they need to keep increasing their production.
When bankruptcy occurs, many follow-on effects can be expected. The banks that made the loans may find themselves in financial difficulty. The oil company may lay off large numbers of workers. The former workers’ lack of wages may affect other businesses in the area, such as car dealerships. The value of homes in the area may drop, causing home mortgages to become “underwater.” All of these effects contribute to still lower demand for commodities of all kinds, including oil.
Because of the time lag problem, the bankruptcy problem is hard to reverse. Oil prices need to stay high for an extended period before lenders will be willing to lend to oil companies again. If it takes, say, five years for oil prices to get up to a level high enough to encourage drilling again, it may take seven years before lenders are willing to lend again.
7. Because many “baby boomers” are retiring now, we are at the beginning of a demographic crunch that has the tendency to push demand down further.
Many workers born in the late 1940s and in the 1950s are retiring now. These workers tend to reduce their own spending, and depend on government programs to pay most of their income. Thus, the retirement of these workers tends to drive up governmental costs at the same time it reduces demand for commodities of all kinds.
Someone needs to pay for the goods and services used by the retirees. Government retirement plans are rarely pre-funded, except with the government’s own debt. Because of this, higher pension payments by governments tend to lead to higher taxes. With higher taxes, workers have less money left to buy homes and cars. Even with pensions, the elderly are never a big market for homes and cars. The overall result is that demand for homes and cars tends to stagnate or decline, holding down the demand for commodities.
8. We are running short of options for fixing our low commodity price problem.
The ideal solution to our low commodity price problem would be to find substitutes that are cheap enough, and could increase in quantity rapidly enough, to power the economy to economic growth. “Cheap enough” would probably mean approximately $20 per barrel for a liquid oil substitute. The price would need to be correspondingly inexpensive for other energy products. Cheap and abundant energy products are needed because oil consumption and energy consumption are highly correlated. If prices are not low, consumers cannot afford them. The economy would react as it does to inefficiency. In other words, it would react as if too much of the output is going into intermediate products, and too little is actually acting to expand the economy.
Figure 12. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).
Figure 12. World GDP in 2010$ (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014)
These substitutes would also need to be non-polluting, so that pollution workarounds do not add to costs. These substitutes would need to work in existing vehicles and machinery, so that we do not have to deal with the high cost of transition to new equipment.
Clearly, none of the potential substitutes we are looking at today come anywhere close to meeting cost and scalability requirements. Wind and solar PV can only be built on top of our existing fossil fuel system. All evidence is that they raise total costs, adding to our “Increased Inefficiency” problem, rather than fixing it.
Other solutions to our current problems seem to be debt based. If we look at recent past history, the story seems to be something such as the following:
Besides adopting QE starting in 2008, governments also ramped up their spending (and debt) during the 2008-2011 period. This spending included road building, which increased the demand for commodities directly, and unemployment insurance payments, which indirectly increased the demand for commodities by giving jobless people money, which they used for food and transportation. China also ramped up its use of debt in the 2008-2009 period, building more factories and homes. The combination of QE, China’s debt, and government debt together brought oil prices back up by 2011, although not to as high a level as in 2008 (Figure 7).
More recently, governments have slowed their growth in spending (and debt), realizing that they are reaching maximum prudent debt levels. China has slowed its debt growth, as pollution from coal has become an increasing problem, and as the need for new homes and new factories has become saturated. Its debt ratios are also becoming very high.
QE continues to be used by some countries, but its benefit seems to be waning, as interest rates are already as low as they can go, and as central banks buy up an increasing share of debt that might be used for loan collateral. The credit generated by QE has allowed questionable investments since the required rate of return on investments funded by low interest rate debt is so low. Some of this debt simply recirculates within the financial system, propping up stock prices and land prices. Some of it has gone toward stock buy-backs. Virtually none of it has added to commodity demand.
What we really need is more high wage jobs. Unfortunately, these jobs need to be supported by the availability of large amounts of very inexpensive energy. It is the lack of inexpensive energy, to match the $20 per barrel oil and very cheap coal upon which the economy has been built that is causing our problems. We don’t really have a way to fix this.
9. It is doubtful that the prices of energy products and metals can be raised again without causing recession.
We are not talking about simply raising oil prices. If the economy is to grow again, demand for all commodities needs to rise to the point where it makes sense to extract more of them. We use both energy products and metals in making all kinds of goods and services. If the price of these products rises, the cost of making virtually any kind of goods or services rises.
Raising the cost of energy products and metals leads to the problem represented by Growing Inefficiency (Figure 4). As we saw in Point 5, wages tend to go down, rather than up, when other costs of production rise because manufacturers try to find ways to hold total costs down.
Lower wages and higher prices are a huge problem. This is why we are headed back into recession if prices rise enough to enable rising long-term production of commodities, including oil.
Wednesday, July 22, 2015
SC129-12
http://guymcpherson.com/2015/07/near-term-habitat-loss-for-humans/
Near-term Habitat Loss for Humans
Fact: This planet has not harbored humans at 3.3 C or higher above baseline (i.e., the beginning of the industrial revolution). The number may be much lower. The jury is still out.
Fact: Humans are animals that depend on myriad other species for survival. As with all other animals, humans require clean air, potable water, healthy food, and the ability to maintain body temperature to sustain themselves.
Fact: Humans will die without a living planet that continuously supplies the elements listed above.
Fact: So far, all humans born into the physical realm have died. There is no rational basis for expecting any human to avoid this fate.
Fact: The Sixth Mass Extinction is under way.
Fact: All species have gone extinct or will go extinct. There is no rational basis for expecting Homo sapiens to avoid this fate.
Earth is officially at 0.85 C above baseline. The actual, unofficial global-average temperature is at least 0.1 C higher than the official figure. The ongoing El Niño will take Earth well beyond 1 C, the 1990 Rubicon from the United Nations Advisory Group on Greenhouse Gases. As David Spratt points out in this video from October 2014, 0.5 C is was a more reasonable target. But those days are long behind us.
The rate of evolution via natural selection trails the rate of climate change by a factor of 10,000, according to a paper in the August 2013 issue of Ecology Letters. Clever as we are, we will not evade the Sixth Mass Extinction in the absence of myriad non-human organisms to supply the necessities of human life.
“Dramatic emission reductions (35%–80%) in anthropogenic aerosols and their precursors projected by Representative Concentration Pathway (RCP) 4.5 result in ~1 °C of additional warming,” according to an analysis published in the 20 May 2013 issue of Journal of Geophysical Research: Atmospheres. Instead of taking the cherry-picking, conservative approach assumed by academic scientists and the International Panel on Climate Change’s RCP, I’ll use the upper end of the conservative projection: Reducing industrial activity by 35% results in ~1 C global-average temperature rise, and eliminating global industrial activity results in an attendant ~3 C global-average temperature rise.
In other words, the absence of solar dimming associated with reflective particles could cause an abrupt rise in global-average temperature beyond that which has supported the existence of humans in the past (about 4 C, the number at which this headline from 2008 in The Guardian conservatively concludes human extinction). A large majority of the rise in temperature will come much more rapidly than the initial 0.85 C. Assuming the least-conservative end of the very conservative spectrum offered by the journal literature and the International Panel on Climate Change takes Earth well beyond the temperature at which human life has been harbored on this planet. Earth only gets hotter from there.
On the other hand, nobody knows the global-average temperature at which humans will become extinct. We’ve not yet completed this trial. By the time we complete the trial, there will be nobody left to record it. The lesson will come after the exam.
The industrial economies of the world are inextricably linked. If Europe goes down the tubes because the derivatives bubble pops on that continent, then there will be consequences throughout the world. There’s a reason the Federal Reserve System of the United States gives money directly to foreign countries.
The rapid rise in global-average temperature I’ve described in this scenario occurs within days after collapse is complete. Sans methane and its exponential rise in Earth’s atmosphere. Sans 10-year “lag” in maximum heating from atmospheric carbon dioxide. Sans nuclear facilities melting down catastrophically.
I’m not suggesting all humans will die within days after the ongoing collapse of industrial civilization is complete. Rather, that process is likely to require months, or perhaps a few years. But it’s difficult for me to envision Earth with humans in 2030, notwithstanding the IPCC’s fantasy technology.
Contrary to conventional “wisdom,” we cannot sustain this unsustainable set of living arrangements indefinitely. Industrial civilization will end. Those of you believing somebody has the system under control are deluded. Nobody is in charge of the system. Only you are responsible for yourself.
Shortly after civilization reaches its overdue end, habitat for humans will disappear. Between now then, every year will be worse than the one before, except for the few who benefit from oppression abroad, obedience at home, and destruction of the living planet. Obedience at home is exemplified by thoughtless people still on their hamster wheels.
Preppers take heart: Bunkers of beans will see you through a few years if you avoid fires, floods, superstorms, bitter cold, infectious diseases, and numerous other hazards. After that, it’s microbes and bacteria for ten million years or so, assuming humans become the first animals to persist beyond seven generations despite lethal mutations associated with bathing in ionizing radiation.
Everybody take heart: We get to live. It’s quite an amazing deal. Let’s get on with it.
Near-term Habitat Loss for Humans
Fact: This planet has not harbored humans at 3.3 C or higher above baseline (i.e., the beginning of the industrial revolution). The number may be much lower. The jury is still out.
Fact: Humans are animals that depend on myriad other species for survival. As with all other animals, humans require clean air, potable water, healthy food, and the ability to maintain body temperature to sustain themselves.
Fact: Humans will die without a living planet that continuously supplies the elements listed above.
Fact: So far, all humans born into the physical realm have died. There is no rational basis for expecting any human to avoid this fate.
Fact: The Sixth Mass Extinction is under way.
Fact: All species have gone extinct or will go extinct. There is no rational basis for expecting Homo sapiens to avoid this fate.
Earth is officially at 0.85 C above baseline. The actual, unofficial global-average temperature is at least 0.1 C higher than the official figure. The ongoing El Niño will take Earth well beyond 1 C, the 1990 Rubicon from the United Nations Advisory Group on Greenhouse Gases. As David Spratt points out in this video from October 2014, 0.5 C is was a more reasonable target. But those days are long behind us.
The rate of evolution via natural selection trails the rate of climate change by a factor of 10,000, according to a paper in the August 2013 issue of Ecology Letters. Clever as we are, we will not evade the Sixth Mass Extinction in the absence of myriad non-human organisms to supply the necessities of human life.
“Dramatic emission reductions (35%–80%) in anthropogenic aerosols and their precursors projected by Representative Concentration Pathway (RCP) 4.5 result in ~1 °C of additional warming,” according to an analysis published in the 20 May 2013 issue of Journal of Geophysical Research: Atmospheres. Instead of taking the cherry-picking, conservative approach assumed by academic scientists and the International Panel on Climate Change’s RCP, I’ll use the upper end of the conservative projection: Reducing industrial activity by 35% results in ~1 C global-average temperature rise, and eliminating global industrial activity results in an attendant ~3 C global-average temperature rise.
In other words, the absence of solar dimming associated with reflective particles could cause an abrupt rise in global-average temperature beyond that which has supported the existence of humans in the past (about 4 C, the number at which this headline from 2008 in The Guardian conservatively concludes human extinction). A large majority of the rise in temperature will come much more rapidly than the initial 0.85 C. Assuming the least-conservative end of the very conservative spectrum offered by the journal literature and the International Panel on Climate Change takes Earth well beyond the temperature at which human life has been harbored on this planet. Earth only gets hotter from there.
On the other hand, nobody knows the global-average temperature at which humans will become extinct. We’ve not yet completed this trial. By the time we complete the trial, there will be nobody left to record it. The lesson will come after the exam.
The industrial economies of the world are inextricably linked. If Europe goes down the tubes because the derivatives bubble pops on that continent, then there will be consequences throughout the world. There’s a reason the Federal Reserve System of the United States gives money directly to foreign countries.
The rapid rise in global-average temperature I’ve described in this scenario occurs within days after collapse is complete. Sans methane and its exponential rise in Earth’s atmosphere. Sans 10-year “lag” in maximum heating from atmospheric carbon dioxide. Sans nuclear facilities melting down catastrophically.
I’m not suggesting all humans will die within days after the ongoing collapse of industrial civilization is complete. Rather, that process is likely to require months, or perhaps a few years. But it’s difficult for me to envision Earth with humans in 2030, notwithstanding the IPCC’s fantasy technology.
Contrary to conventional “wisdom,” we cannot sustain this unsustainable set of living arrangements indefinitely. Industrial civilization will end. Those of you believing somebody has the system under control are deluded. Nobody is in charge of the system. Only you are responsible for yourself.
Shortly after civilization reaches its overdue end, habitat for humans will disappear. Between now then, every year will be worse than the one before, except for the few who benefit from oppression abroad, obedience at home, and destruction of the living planet. Obedience at home is exemplified by thoughtless people still on their hamster wheels.
Preppers take heart: Bunkers of beans will see you through a few years if you avoid fires, floods, superstorms, bitter cold, infectious diseases, and numerous other hazards. After that, it’s microbes and bacteria for ten million years or so, assuming humans become the first animals to persist beyond seven generations despite lethal mutations associated with bathing in ionizing radiation.
Everybody take heart: We get to live. It’s quite an amazing deal. Let’s get on with it.
Wednesday, July 15, 2015
SC129-11
http://www.truthdig.com/report/item/we_are_all_greeks_now_20150712
We Are All Greeks Now
The poor and the working class in the United States know what it is to be Greek. They know underemployment and unemployment. They know life without a pension. They know existence on a few dollars a day. They know gas and electricity being turned off because of unpaid bills. They know the crippling weight of debt. They know being sick and unable to afford medical care. They know the state seizing their meager assets, a process known in the United States as “civil asset forfeiture,” which has permitted American police agencies to confiscate more than $3 billion in cash and property. They know the profound despair and abandonment that come when schools, libraries, neighborhood health clinics, day care services, roads, bridges, public buildings and assistance programs are neglected or closed. They know the financial elites’ hijacking of democratic institutions to impose widespread misery in the name of austerity. They, like the Greeks, know what it is to be abandoned.
The Greeks and the U.S. working poor endure the same deprivations because they are being assaulted by the same system—corporate capitalism. There are no internal constraints on corporate capitalism. And the few external constraints that existed have been removed. Corporate capitalism, manipulating the world’s most powerful financial institutions, including the Eurogroup, the World Bank, the International Monetary Fund and the Federal Reserve, does what it is designed to do: It turns everything, including human beings and the natural world, into commodities to be exploited until exhaustion or collapse. In the extraction process, labor unions are broken, regulatory agencies are gutted, laws are written by corporate lobbyists to legalize fraud and empower global monopolies, and public utilities are privatized. Secret trade agreements—which even elected officials who view the documents are not allowed to speak about—empower corporate oligarchs to amass even greater power and accrue even greater profits at the expense of workers. To swell its profits, corporate capitalism plunders, represses and drives into bankruptcy individuals, cities, states and governments. It ultimately demolishes the structures and markets that make capitalism possible. But this is of little consolation for those who endure its evil. By the time it slays itself it will have left untold human misery in its wake.
The Greek government kneels before the bankers of Europe begging for mercy because it knows that if it leaves the eurozone, the international banking system will do to Greece what it did to the socialist government of Salvador Allende in 1973 in Chile; it will, as Richard Nixon promised to do in Chile, “make the economy scream.” The bankers will destroy Greece. If this means the Greeks can no longer get medicine—Greece owes European drug makers 1 billion euros—so be it. If this means food shortages—Greece imports thousands of tons of food from Europe a year—so be it. If this means oil and gas shortages—Greece imports 99 percent of its oil and gas—so be it. The bankers will carry out economic warfare until the current Greek government is ousted and corporate political puppets are back in control.
Human life is of no concern to corporate capitalists. The suffering of the Greeks, like the suffering of ordinary Americans, is very good for the profit margins of financial institutions such as Goldman Sachs. It was, after all, Goldman Sachs—which shoved subprime mortgages down the throats of families it knew could never pay the loans back, sold the subprime mortgages as investments to pension funds and then bet against them—that orchestrated complex financial agreements with Greece, many of them secret. These agreements doubled the debt Greece owes under derivative deals and allowed the old Greek government to mask its real debt to keep borrowing. And when Greece imploded, Goldman Sachs headed out the door with suitcases full of cash.
The system of unfettered capitalism is designed to callously extract money from the most vulnerable and funnel it upward to the elites. This is seen in the mounting fines and fees used to cover shortfalls in city and state budgets. Corporate capitalism seeks to privatize all aspects of government service, from education to intelligence gathering. The U.S. Postal Service appears to be next. Parents already must pay hundreds of dollars for their public-school children to take school buses, go to music or art classes and participate in sports or other activities. Fire departments, ambulance services, the national parks system are all slated to become fodder for corporate profit. It is the death of the civil society.
Criminal justice is primarily about revenue streams for city and state governments in the United States rather than about justice or rehabilitation. The poor are arrested and fined for minor infractions in Ferguson, Mo., and elsewhere; for not mowing their lawns; for putting their feet on seats of New York City subway cars. If they cannot pay the fines, as many cannot, they go to jail. In jail they are often charged room and board. And if they can’t pay this new bill they go to jail again. It is a game of circular and never-ending extortion of the poor. Fines that are unpaid accrue interest and generate warrants for arrest. Poor people often end up owing thousands of dollars for parking or traffic violations.
Fascist and communist firing squads sometimes charged the victim’s family for the bullets used in the execution. In corporate capitalism, too, the abusers extract payment; often the money goes to private corporations that carry out probation services or prison and jail administration. The cost of being shot with a stun gun ($26) or of probation services ($35 to $100 a month) or of an electronic ankle bracelet ($11 a month) is vacuumed out of the pockets of the poor. And all this is happening in what will one day be seen as the good times. Wait until the financial house of cards collapses again—what is happening in China is not a good sign—and Wall Street runs for cover. Then America will become Greece on steroids.
“We are a nation that has turned its welfare system into a criminal system,” write Karen Dolan and Jodi L. Carr in an Institute for Policy Studies report titled “The Poor Get Prison.” “We criminalize life-sustaining activities of people too poor to afford shelter. We incarcerate more people than any other nation in the world. And we institute policies that virtually bar them for life from participating in society once they have done their time. We have allowed the resurgence of debtors’ prisons. We’ve created a second-tier public education system for poor children and black and Latino children that disproportionally criminalizes their behavior and sets them early onto the path of incarceration and lack of access to assistance and opportunity.”
The corporate dismantling of civil society is nearly complete in Greece. It is far advanced in the United States. We, like the Greeks, are undergoing a political war waged by the world’s oligarchs. No one elected them. They ignore public opinion. And, as in Greece, if a government defies the international banking community it is targeted for execution. The banks do not play by the rules of democracy.
Our politicians are corporate employees. And if you get dewy-eyed about the possibility of the U.S. having its first woman president, remember that it was Hillary Clinton’s husband who decimated manufacturing jobs with the 1994 North American Free Trade Agreement and then went on to destroy welfare with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which halted federal cash aid programs and imposed time-limited, restrictive state block grants. Under President Bill Clinton, most welfare recipients—and 70 percent of those recipients were children—were dropped from the rolls. The prison-industrial complex exploded in size as its private corporations swallowed up surplus, unemployed labor, making $40,000 or more a year from each person held in a cage. The population of federal and state prisons combined rose by 673,000 under Clinton. He, along with Ronald Reagan, set the foundations for the Greecification of the United States.
The destruction of Greece, like the destruction of America, by the big banks and financial firms is not, as the bankers claim, about austerity or imposing rational expenditures or balanced budgets. It is not about responsible or good government. It is a vicious form of class warfare. It is profoundly anti-democratic. It is about forming nations of impoverished, disempowered serfs and a rapacious elite of all-powerful corporate oligarchs, backed by the most sophisticated security and surveillance apparatus in human history and a militarized police that shoots unarmed citizens with reckless abandon. The laws and rules it imposes on the poor are, as Barbara Ehrenreich has written, little more than “organized sadism.”
Corporate profit is God. It does not matter who suffers. In Greece 40 percent of children live in poverty, there is a 25 percent unemployment rate and the unemployment figure for those between the ages of 15 and 24 is nearly 50 percent. And it will only get worse.
The economic and political ideology that convinced us that organized human behavior should be determined by the dictates of the global marketplace was a con game. We were the suckers. The promised prosperity from trickle-down economics and the free market instead concentrated wealth among a few and destroyed the working and the middle classes along with all vestiges of democracy. Corrupt governments, ignoring the common good and the consent of the governed, abetted this pillage. The fossil fuel industry was licensed to ravage the ecosystem, threatening the viability of the human species, while being handed lavish government subsidies. None of this makes sense.
The mandarins that maintain this system cannot respond rationally in our time of crisis. They are trained only to make the system of exploitation work. They are blinded by their insatiable greed and neoliberal ideology, which posits that controlling inflation, privatizing public assets and removing trade barriers are the sole economic priorities. They are steering us over a cliff.
We will not return to a rational economy or restore democracy until these global speculators are stripped of power. This will happen only if the streets of major cities in Europe and the United States are convulsed with mass protests. The tyranny of these financial elites knows no limits. They will impose ever greater suffering and repression until we submit or revolt. I prefer the latter. But we don’t have much time.
We Are All Greeks Now
The poor and the working class in the United States know what it is to be Greek. They know underemployment and unemployment. They know life without a pension. They know existence on a few dollars a day. They know gas and electricity being turned off because of unpaid bills. They know the crippling weight of debt. They know being sick and unable to afford medical care. They know the state seizing their meager assets, a process known in the United States as “civil asset forfeiture,” which has permitted American police agencies to confiscate more than $3 billion in cash and property. They know the profound despair and abandonment that come when schools, libraries, neighborhood health clinics, day care services, roads, bridges, public buildings and assistance programs are neglected or closed. They know the financial elites’ hijacking of democratic institutions to impose widespread misery in the name of austerity. They, like the Greeks, know what it is to be abandoned.
The Greeks and the U.S. working poor endure the same deprivations because they are being assaulted by the same system—corporate capitalism. There are no internal constraints on corporate capitalism. And the few external constraints that existed have been removed. Corporate capitalism, manipulating the world’s most powerful financial institutions, including the Eurogroup, the World Bank, the International Monetary Fund and the Federal Reserve, does what it is designed to do: It turns everything, including human beings and the natural world, into commodities to be exploited until exhaustion or collapse. In the extraction process, labor unions are broken, regulatory agencies are gutted, laws are written by corporate lobbyists to legalize fraud and empower global monopolies, and public utilities are privatized. Secret trade agreements—which even elected officials who view the documents are not allowed to speak about—empower corporate oligarchs to amass even greater power and accrue even greater profits at the expense of workers. To swell its profits, corporate capitalism plunders, represses and drives into bankruptcy individuals, cities, states and governments. It ultimately demolishes the structures and markets that make capitalism possible. But this is of little consolation for those who endure its evil. By the time it slays itself it will have left untold human misery in its wake.
The Greek government kneels before the bankers of Europe begging for mercy because it knows that if it leaves the eurozone, the international banking system will do to Greece what it did to the socialist government of Salvador Allende in 1973 in Chile; it will, as Richard Nixon promised to do in Chile, “make the economy scream.” The bankers will destroy Greece. If this means the Greeks can no longer get medicine—Greece owes European drug makers 1 billion euros—so be it. If this means food shortages—Greece imports thousands of tons of food from Europe a year—so be it. If this means oil and gas shortages—Greece imports 99 percent of its oil and gas—so be it. The bankers will carry out economic warfare until the current Greek government is ousted and corporate political puppets are back in control.
Human life is of no concern to corporate capitalists. The suffering of the Greeks, like the suffering of ordinary Americans, is very good for the profit margins of financial institutions such as Goldman Sachs. It was, after all, Goldman Sachs—which shoved subprime mortgages down the throats of families it knew could never pay the loans back, sold the subprime mortgages as investments to pension funds and then bet against them—that orchestrated complex financial agreements with Greece, many of them secret. These agreements doubled the debt Greece owes under derivative deals and allowed the old Greek government to mask its real debt to keep borrowing. And when Greece imploded, Goldman Sachs headed out the door with suitcases full of cash.
The system of unfettered capitalism is designed to callously extract money from the most vulnerable and funnel it upward to the elites. This is seen in the mounting fines and fees used to cover shortfalls in city and state budgets. Corporate capitalism seeks to privatize all aspects of government service, from education to intelligence gathering. The U.S. Postal Service appears to be next. Parents already must pay hundreds of dollars for their public-school children to take school buses, go to music or art classes and participate in sports or other activities. Fire departments, ambulance services, the national parks system are all slated to become fodder for corporate profit. It is the death of the civil society.
Criminal justice is primarily about revenue streams for city and state governments in the United States rather than about justice or rehabilitation. The poor are arrested and fined for minor infractions in Ferguson, Mo., and elsewhere; for not mowing their lawns; for putting their feet on seats of New York City subway cars. If they cannot pay the fines, as many cannot, they go to jail. In jail they are often charged room and board. And if they can’t pay this new bill they go to jail again. It is a game of circular and never-ending extortion of the poor. Fines that are unpaid accrue interest and generate warrants for arrest. Poor people often end up owing thousands of dollars for parking or traffic violations.
Fascist and communist firing squads sometimes charged the victim’s family for the bullets used in the execution. In corporate capitalism, too, the abusers extract payment; often the money goes to private corporations that carry out probation services or prison and jail administration. The cost of being shot with a stun gun ($26) or of probation services ($35 to $100 a month) or of an electronic ankle bracelet ($11 a month) is vacuumed out of the pockets of the poor. And all this is happening in what will one day be seen as the good times. Wait until the financial house of cards collapses again—what is happening in China is not a good sign—and Wall Street runs for cover. Then America will become Greece on steroids.
“We are a nation that has turned its welfare system into a criminal system,” write Karen Dolan and Jodi L. Carr in an Institute for Policy Studies report titled “The Poor Get Prison.” “We criminalize life-sustaining activities of people too poor to afford shelter. We incarcerate more people than any other nation in the world. And we institute policies that virtually bar them for life from participating in society once they have done their time. We have allowed the resurgence of debtors’ prisons. We’ve created a second-tier public education system for poor children and black and Latino children that disproportionally criminalizes their behavior and sets them early onto the path of incarceration and lack of access to assistance and opportunity.”
The corporate dismantling of civil society is nearly complete in Greece. It is far advanced in the United States. We, like the Greeks, are undergoing a political war waged by the world’s oligarchs. No one elected them. They ignore public opinion. And, as in Greece, if a government defies the international banking community it is targeted for execution. The banks do not play by the rules of democracy.
Our politicians are corporate employees. And if you get dewy-eyed about the possibility of the U.S. having its first woman president, remember that it was Hillary Clinton’s husband who decimated manufacturing jobs with the 1994 North American Free Trade Agreement and then went on to destroy welfare with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which halted federal cash aid programs and imposed time-limited, restrictive state block grants. Under President Bill Clinton, most welfare recipients—and 70 percent of those recipients were children—were dropped from the rolls. The prison-industrial complex exploded in size as its private corporations swallowed up surplus, unemployed labor, making $40,000 or more a year from each person held in a cage. The population of federal and state prisons combined rose by 673,000 under Clinton. He, along with Ronald Reagan, set the foundations for the Greecification of the United States.
The destruction of Greece, like the destruction of America, by the big banks and financial firms is not, as the bankers claim, about austerity or imposing rational expenditures or balanced budgets. It is not about responsible or good government. It is a vicious form of class warfare. It is profoundly anti-democratic. It is about forming nations of impoverished, disempowered serfs and a rapacious elite of all-powerful corporate oligarchs, backed by the most sophisticated security and surveillance apparatus in human history and a militarized police that shoots unarmed citizens with reckless abandon. The laws and rules it imposes on the poor are, as Barbara Ehrenreich has written, little more than “organized sadism.”
Corporate profit is God. It does not matter who suffers. In Greece 40 percent of children live in poverty, there is a 25 percent unemployment rate and the unemployment figure for those between the ages of 15 and 24 is nearly 50 percent. And it will only get worse.
The economic and political ideology that convinced us that organized human behavior should be determined by the dictates of the global marketplace was a con game. We were the suckers. The promised prosperity from trickle-down economics and the free market instead concentrated wealth among a few and destroyed the working and the middle classes along with all vestiges of democracy. Corrupt governments, ignoring the common good and the consent of the governed, abetted this pillage. The fossil fuel industry was licensed to ravage the ecosystem, threatening the viability of the human species, while being handed lavish government subsidies. None of this makes sense.
The mandarins that maintain this system cannot respond rationally in our time of crisis. They are trained only to make the system of exploitation work. They are blinded by their insatiable greed and neoliberal ideology, which posits that controlling inflation, privatizing public assets and removing trade barriers are the sole economic priorities. They are steering us over a cliff.
We will not return to a rational economy or restore democracy until these global speculators are stripped of power. This will happen only if the streets of major cities in Europe and the United States are convulsed with mass protests. The tyranny of these financial elites knows no limits. They will impose ever greater suffering and repression until we submit or revolt. I prefer the latter. But we don’t have much time.
Sunday, July 12, 2015
SC129-10
http://peakoil.com/publicpolicy/pentagon-concludes-america-not-safe-unless-it-conquers-the-world
Pentagon Concludes America Not Safe Unless It Conquers The World
The Pentagon has released its “National Military Strategy of the United States of America 2015,” June 2015. http://news.usni.org/2015/07/02/document-2015-u-s-national-military-strategy
The document announces a shift in focus from terrorists to “state actors” that “are challenging international norms.” It is important to understand what these words mean. Governments that challenge international norms are sovereign countries that pursue policies independently of Washington’s policies. These “revisionist states” are threats, not because they plan to attack the US, which the Pentagon admits neither Russia nor China intend, but because they are independent. In other words, the norm is dependence on Washington.
Be sure to grasp the point: The threat is the existence of sovereign states, whose independence of action makes them “revisionist states.” In other words, their independence is out of step with the neoconservative Uni-power doctrine that declares independence to be the right of Washington alone. Washington’s History-given hegemony precludes any other country being independent in its actions.
The Pentagon’s report defines the foremost “revisionist states” as Russia, China, North Korea, and Iran. The focus is primarily on Russia.Washington hopes to co-op China, despite the “tension to the Asia-Pacific region” that China’s defense of its sphere of influence, a defense “inconsistent with international law” (this from Washington, the great violator of international law), by turning over what remains of the American consumer market to China. It is not yet certain that Iran has escaped the fate that Washington imposed on Iraq, Afghanistan, Libya, Syria, Somalia, Yemen, Pakistan, Ukraine, and by complicity Palestine.
The Pentagon report is sufficiently audacious in its hypocrisy, as all statements from Washington are, to declare that Washington and its vassals “support the established institutions and processes dedicated to preventing conflict, respecting sovereignty, and furthering human rights.” This from the military of a government that has invaded, bombed, and overthrown 11 governments since the Clinton regime and is currently working to overthrow governments in Armenia, Kyrgyzstan, Ecuador, Venezuela, Bolivia, Brazil, and Argentina.
In the Pentagon document, Russia is under fire for not acting “in accordance with international norms,” which means Russia is not following Washington’s leadership.
In other words, this is a bullshit report written by neocons in order to foment war with Russia.
Nothing else can be said about the Pentagon report, which justifies war and more war. Without war and conquests, Americans are not safe.
Washington’s view toward Russia is the same as Cato the Elder’s view toward Carthage. Cato the Elder finished his every speech on any subject in the Roman Senate with the statement “Carthage must be destroyed.”
This report tells us that war with Russia is our future unless Russia agrees to become a vassal state like every country in Europe, and Canada, Australia, Ukraine, and Japan. Otherwise, the neoconservatives have decided that it is impossible for Americans to tolerate living with a country that makes decisions independently of Washington. If American cannot be The Uni-Power dictating to the world, better that we are all dead. At least that will show the Russians.
Pentagon Concludes America Not Safe Unless It Conquers The World
The Pentagon has released its “National Military Strategy of the United States of America 2015,” June 2015. http://news.usni.org/2015/07/02/document-2015-u-s-national-military-strategy
The document announces a shift in focus from terrorists to “state actors” that “are challenging international norms.” It is important to understand what these words mean. Governments that challenge international norms are sovereign countries that pursue policies independently of Washington’s policies. These “revisionist states” are threats, not because they plan to attack the US, which the Pentagon admits neither Russia nor China intend, but because they are independent. In other words, the norm is dependence on Washington.
Be sure to grasp the point: The threat is the existence of sovereign states, whose independence of action makes them “revisionist states.” In other words, their independence is out of step with the neoconservative Uni-power doctrine that declares independence to be the right of Washington alone. Washington’s History-given hegemony precludes any other country being independent in its actions.
The Pentagon’s report defines the foremost “revisionist states” as Russia, China, North Korea, and Iran. The focus is primarily on Russia.Washington hopes to co-op China, despite the “tension to the Asia-Pacific region” that China’s defense of its sphere of influence, a defense “inconsistent with international law” (this from Washington, the great violator of international law), by turning over what remains of the American consumer market to China. It is not yet certain that Iran has escaped the fate that Washington imposed on Iraq, Afghanistan, Libya, Syria, Somalia, Yemen, Pakistan, Ukraine, and by complicity Palestine.
The Pentagon report is sufficiently audacious in its hypocrisy, as all statements from Washington are, to declare that Washington and its vassals “support the established institutions and processes dedicated to preventing conflict, respecting sovereignty, and furthering human rights.” This from the military of a government that has invaded, bombed, and overthrown 11 governments since the Clinton regime and is currently working to overthrow governments in Armenia, Kyrgyzstan, Ecuador, Venezuela, Bolivia, Brazil, and Argentina.
In the Pentagon document, Russia is under fire for not acting “in accordance with international norms,” which means Russia is not following Washington’s leadership.
In other words, this is a bullshit report written by neocons in order to foment war with Russia.
Nothing else can be said about the Pentagon report, which justifies war and more war. Without war and conquests, Americans are not safe.
Washington’s view toward Russia is the same as Cato the Elder’s view toward Carthage. Cato the Elder finished his every speech on any subject in the Roman Senate with the statement “Carthage must be destroyed.”
This report tells us that war with Russia is our future unless Russia agrees to become a vassal state like every country in Europe, and Canada, Australia, Ukraine, and Japan. Otherwise, the neoconservatives have decided that it is impossible for Americans to tolerate living with a country that makes decisions independently of Washington. If American cannot be The Uni-Power dictating to the world, better that we are all dead. At least that will show the Russians.
Monday, July 6, 2015
SC129-9
http://kunstler.com/clusterfuck-nation/welcome-to-blackswansville/
Welcome to Blackswansville
While the folks clogging the US tattoo parlors may not have noticed, things are beginning to look a little World War one-ish out there. Except the current blossoming world conflict is being fought not with massed troops and tanks but with interest rates and repayment schedules. Germany now dawdles in reply to the gauntlet slammed down Sunday in the Greek referendum (hell) “no” vote. Germany’s immediate strategy, it appears, is to apply some good old fashioned Teutonic todesfurcht — let the Greeks simmer in their own juices for a few days while depositors suck the dwindling cash reserves from the banks and the grocery store shelves empty out. Then what?
Nobody knows. And anything can happen.
One thing we ought to know: both sides in the current skirmish are fighting reality. The Germans foolishly insist that the Greek’s meet their debt obligations. The German’s are just pissing into the wind on that one, a hazardous business for a nation of beer drinkers. The Greeks insist on living the 20th century deluxe industrial age lifestyle, complete with 24/7 electricity, cheap groceries, cushy office jobs, early retirement, and plenty of walking-around money. They’ll be lucky if they land back in the 1800s, comfort-wise.
The Greeks may not recognize this, but they are in the vanguard of a movement that is wrenching the techno-industrial nations back to much older, more local, and simpler living arrangements. The Euro, by contrast, represents the trend that is over: centralization and bigness. The big questions are whether the latter still has enough mojo left to drag out the transition process, and for how long, and how painfully.
World affairs suffer from the disease of terminal excessive complexity. To make matters worse, much of the late-phase complexity operates in the service of accounting fraud of one kind or another. The world’s banking system is mired in the unreality of so many unmeetable obligations, cooked books, three-card-monte swap gimmicks, interest rate euchres, secret arbitrages, market manipulation monkeyshines, and countless other cons, swindles, and hornswoggles that all the auditors ever born could not produce a coherent record of what has been wreaked in the life of this universe (or several parallel universes). Remember Long Term Capital Management? That’s what the world has become.
What happens in the case of untenable complexity is that it tends to unravel fast and furiously. That’s exactly why avalanches and earthquakes happen all at once, not stretched out over a six week period. The global financial scene not so different. It’s just another matrix of linked mutually-supporting relationships that can implode if a few members weaken.
One question worth reflecting on is whether the implosion is actually well underway on-the-ground in real economies, with just the scrim of illusion to make the surface appear intact. That surely seems to be the case in the USA, where the so-called economy has already avalanched into a rubble heap of part-time scut jobs, defaulted college loans, underwater mortgages, and groaning pension funds — with an overlay of pointless and endless motoring.
Over in Euroland, the Greek “no” also implies that every other sovereign nation wallowing in deep financial shit will demand a haircut (and a disinfectant shower). Italy, Spain, Portugal, Ireland, and even France cannot possibly meet their debt obligations. Their citizens are being taunted with currency controls, too, and they have every bit as much potential to go ape-y as the Greeks. Notice you haven’t heard much from their leaders and financial ministers in recent weeks. They are all standing on the sidelines watching the Greeks go through the wringer — but you can be sure they are all making plans of their own.
The failure of the European experiment will be extremely demoralizing to the hopeful citizens of that continent, who emerged from the bloodbath of the early 20th century to become the world’s premier peaceful tourist theme park. I don’t know that they necessarily have to go back to fighting each other on battlefields with things that blow up and destroy human flesh, but they surely have to decentralize and re-fashion some kind of simpler, local way-of-life if they expect to remain civilized.
It’ll happen everywhere. The Japanese are next, of course, and they may be the most fortunate, since they retain more than a few shreds of memory for exactly that mode of life: the Tokugawa shogunate (the Edo period, 1600 – 1853), a manner of high pre-industrial economy and culture that might have persisted indefinitely had not Commodore Perry come knocking on their door, so to speak, in his “black ships.”
Ukraine is about halfway back to being medieval with excellent potential to overshoot even that. The Euroland PIIG(F) nations don’t have the energy resources to extend Modernity, even if the banking system wasn’t terminally ill, and then on top of that they have the ethno-demographic quandary of creeping Muslimization — plus the additional flotillas of desperate boat people arriving daily.
America, count your blessings. Tattoos, obesity, drug use, and shiftlessness are all basically behavioral choices. You don’t need a finance minister or a central banker to overcome those problems.
Welcome to Blackswansville
While the folks clogging the US tattoo parlors may not have noticed, things are beginning to look a little World War one-ish out there. Except the current blossoming world conflict is being fought not with massed troops and tanks but with interest rates and repayment schedules. Germany now dawdles in reply to the gauntlet slammed down Sunday in the Greek referendum (hell) “no” vote. Germany’s immediate strategy, it appears, is to apply some good old fashioned Teutonic todesfurcht — let the Greeks simmer in their own juices for a few days while depositors suck the dwindling cash reserves from the banks and the grocery store shelves empty out. Then what?
Nobody knows. And anything can happen.
One thing we ought to know: both sides in the current skirmish are fighting reality. The Germans foolishly insist that the Greek’s meet their debt obligations. The German’s are just pissing into the wind on that one, a hazardous business for a nation of beer drinkers. The Greeks insist on living the 20th century deluxe industrial age lifestyle, complete with 24/7 electricity, cheap groceries, cushy office jobs, early retirement, and plenty of walking-around money. They’ll be lucky if they land back in the 1800s, comfort-wise.
The Greeks may not recognize this, but they are in the vanguard of a movement that is wrenching the techno-industrial nations back to much older, more local, and simpler living arrangements. The Euro, by contrast, represents the trend that is over: centralization and bigness. The big questions are whether the latter still has enough mojo left to drag out the transition process, and for how long, and how painfully.
World affairs suffer from the disease of terminal excessive complexity. To make matters worse, much of the late-phase complexity operates in the service of accounting fraud of one kind or another. The world’s banking system is mired in the unreality of so many unmeetable obligations, cooked books, three-card-monte swap gimmicks, interest rate euchres, secret arbitrages, market manipulation monkeyshines, and countless other cons, swindles, and hornswoggles that all the auditors ever born could not produce a coherent record of what has been wreaked in the life of this universe (or several parallel universes). Remember Long Term Capital Management? That’s what the world has become.
What happens in the case of untenable complexity is that it tends to unravel fast and furiously. That’s exactly why avalanches and earthquakes happen all at once, not stretched out over a six week period. The global financial scene not so different. It’s just another matrix of linked mutually-supporting relationships that can implode if a few members weaken.
One question worth reflecting on is whether the implosion is actually well underway on-the-ground in real economies, with just the scrim of illusion to make the surface appear intact. That surely seems to be the case in the USA, where the so-called economy has already avalanched into a rubble heap of part-time scut jobs, defaulted college loans, underwater mortgages, and groaning pension funds — with an overlay of pointless and endless motoring.
Over in Euroland, the Greek “no” also implies that every other sovereign nation wallowing in deep financial shit will demand a haircut (and a disinfectant shower). Italy, Spain, Portugal, Ireland, and even France cannot possibly meet their debt obligations. Their citizens are being taunted with currency controls, too, and they have every bit as much potential to go ape-y as the Greeks. Notice you haven’t heard much from their leaders and financial ministers in recent weeks. They are all standing on the sidelines watching the Greeks go through the wringer — but you can be sure they are all making plans of their own.
The failure of the European experiment will be extremely demoralizing to the hopeful citizens of that continent, who emerged from the bloodbath of the early 20th century to become the world’s premier peaceful tourist theme park. I don’t know that they necessarily have to go back to fighting each other on battlefields with things that blow up and destroy human flesh, but they surely have to decentralize and re-fashion some kind of simpler, local way-of-life if they expect to remain civilized.
It’ll happen everywhere. The Japanese are next, of course, and they may be the most fortunate, since they retain more than a few shreds of memory for exactly that mode of life: the Tokugawa shogunate (the Edo period, 1600 – 1853), a manner of high pre-industrial economy and culture that might have persisted indefinitely had not Commodore Perry come knocking on their door, so to speak, in his “black ships.”
Ukraine is about halfway back to being medieval with excellent potential to overshoot even that. The Euroland PIIG(F) nations don’t have the energy resources to extend Modernity, even if the banking system wasn’t terminally ill, and then on top of that they have the ethno-demographic quandary of creeping Muslimization — plus the additional flotillas of desperate boat people arriving daily.
America, count your blessings. Tattoos, obesity, drug use, and shiftlessness are all basically behavioral choices. You don’t need a finance minister or a central banker to overcome those problems.
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